337 - Carbon Offsets and the Future: Why Every Business Should Care with ClimeCo's Bill Flederbach

Welcome to Listening with Leaders. I'm Doug Noll, lawyer turned peacemaker. I teach executive leaders how to listen to emotions rather than words so that they can become the leaders everyone wants to follow. And I teach those same leaders how to be authentically present, available, and connected to their families despite being insanely busy. I have learned that we are 98% emotional and only 2% rational. Learning how to listen to emotions is, in my experience, the foundational skill of life. Stick around to the end of the show, and I'll reveal how you can be on our next guest in 15 to 20 minutes. So let's get started. Bill Foederbach, welcome to Listening with Leaders. You're the CEO and president of Quimco. And you've been in carbon offset business for a long time. I know a little bit about carbon offset, but I'm a lawyer, so I don't— I know just enough to be dangerous. So tell us a little bit about your backstory. How did you ultimately arrive at where you are today?

Yeah, in this career. My backstory educationally, Doug, was meteorology and climate science, so climatology and meteorology. So I've always enjoyed the climate. I've always enjoyed the atmosphere and studying it. For 16 years of my professional career, I was really practicing air quality in the United States, but the United States really didn't regulate greenhouse gases. They regulated particulate, volatile organic compounds, things that we see and breathe under the Clean Air Act, but they didn't regulate greenhouse gases. And to date myself a little bit after this long career, I did get an MBA, so I was thinking about how do I price an externality and create real change by putting a price on it. So if I can emit everything to the atmosphere and I'm not regulated, I've got no price, I've got no incentive. It's hard to really create change. And I saw that the world was doing it, Doug, under the Kyoto Protocol. So this is a really a core document for climate back in 2005, the United States didn't actually ratify it. So we were one of a few countries that did not ratify, which meant that the United States didn't want to participate in this global accord around reducing greenhouse gases under the Bush administration. And at that point I said, with 16 years of air quality, with a meteorology degree and an MBA degree, I said, I want to go work in a country that is actually a signature of the Kyoto Protocol. I want to learn what other countries are doing. So I left a really comfy career to, to go to a startup who later went bankrupt. And, and I learned how the mechanism worked. I, I learned how the United Nations was regulating it. I learned how you could take a technology and bring it to a developing country to reduce greenhouse gases. They had no mandate to do that, but if I were gonna use that as a technology transfer mechanism, I could reduce emissions in Guatemala or Mexico or 189 countries that ratified it. And then I could transfer the environmental credits or that value to the regulated community in Western Europe. That was a classic cap and trade program. Got it. So it was cool. It got me thinking about developing projects, technology. How can we accelerate developing countries to get to mitigate emissions? Where can I mitigate emissions at the lowest marginal cost?

Wow.

And that's what got me in. And then, like my friend said, who started that business, Bill, you're leaving a 15-and-a-half-year career. It's comfortable. You have a wife, you have a family. You're going into no man's land. And, uh, 18 months, we're either— 2 months, 2 years, we're going to either succeed or we're going to fail. And he was right. 18 months, they went bankrupt. And then I started Climco soon after. That was my entrance into that space.

So you started with a startup. And then you started your own startup.

I did. I started consulting for an established company and then I got into the— I felt the entrepreneurial bug, right? I was working for an engineering company that didn't take risks. They were engineers, right? They wrote ISO manuals.

They know how to do that.

Fast forward, these think tankers under the United Nations program that I went to work for, they did an IPO on the London Stock Exchange. They were selling carbon credits that didn't exist before.

Wow.

They were risk takers. So I, here I am living in a world of no risk. I am a bit of a risk taker. I liked what they were doing and they, but they went bankrupt. So Climco, I always say, is in the middle of the road. We're risk takers, but we hedge, right? We take risk, but we also keep the lights on with just recurring project revenue.

So tell us a little bit about what Climco does these days.

Yeah. So Climco is really a vertically integrated company where we consult around climate. Imagine, Doug, if your firm, you're a leader of an industrial company and you're wondering how you're going to reduce your carbon footprint. But first of all, what is your carbon footprint? Some of the basics. What's your carbon intensity of the products that you're creating? How much CO2 equivalent is being produced in your operations? That's part of our advisory group, Doug, is just understanding how to do the calculations, how to do the footprint, how to navigate the pathway of reaching their goals. I may have a company that says, I want to reduce my emission, my greenhouse gas emissions by 50%, but do they even understand the marginal abatement of that? Do they understand how to get there? So a lot of that is early pathway identification, working with them. We also have an investment arm and a development arm. That means that if we see an opportunity to reduce your carbon footprint, your carbon, we want to use the markets to be able to help you achieve that goal. So we want to invest—

That's the investment arm.

That's the investment arm.

So you can buy their carbon, you can buy the carbon offset and sell it or do something with it somewhere else.

Yeah, that'd be a great example. One of our biggest projects in, in, in the United States reduces 6 million metric tons annually.

Wow.

We essentially underwrote it by saying we'll develop a methodology so we could work with the registry to issue serialized carbon credits, but we're going to use that stream of serialized carbon credits to invest in your project. So as an investor, the carbon revenue would come to us plus our return, and then we would share proceeds.

Wow.

But it's always using that externality as the investment vehicle. That's the thesis.

I am— that sounds like a really great model. And unfortunately, we live under a political administration that doesn't believe in that stuff anymore. But what you're doing is absolutely crucial to the survival of the planet, at least in my opinion. And the nice thing is it's always been the tragedy of the commons, right? When you have a free resource like water or air, people feel like they can exploit it without consequence. And it's, and to the point you've also made, there is a cost associated with that. It's just not a cost that's borne by a business. That's correct. And ultimately the cost is borne by everybody in a whole bunch of different ways, as we see now with climate change.

As we see, yeah. It's pretty obvious, right? If you're just watching the news, the, the dramatic events. I always say, I was on council once in my life and I got the opportunity to oversee our watershed in a small community in Pennsylvania. And we had to redesign the dams and the reservoirs because the 1,000 or the 500-year storm event was now happening every 100 years, or now it's every 50 years. So just think about the infrastructure of the United States alone and how that's being modified to adapt to climate change. Climate change.

Yeah. I grew up in Southern California and I was down in Malibu teaching at Pepperdine, my graduate class at Pepperdine when the Palisades fire broke out. And then 24 hours later, the Altadena fire broke up. I grew up in San Marino right next to Altadena. I know the area like the back of my hand. Devastation. Yep. And who would ever think that you'd have these raging winds coming down off the desert, down out of the mountains that would devastate these communities?

Yeah, it's, and it's, and it's only the, it's only more dynamic now.

Yeah, exactly.

I just look at it as more fuel in the atmosphere when you've got in temperature rise, you can't argue this pre-industrial, post-industrial as a climate scientist, you can certainly see our impacts.

So you've been doing this, how long has Climco been around for what, 10, 15 years?

Actually, a little over 16. So we had the great timing, one would say, to start the business in 2009. So you and I know what happened.

Good. Sorry.

Not intentional, but I can't say— I'm always looking at the bright side.

There you go.

I can't say that we didn't have any competition because they were all running to save their businesses. So we had— we almost had an open landscape where nobody was creating a new business then. And but the challenge part was if we wanted to raise capital, it didn't happen. The benefit to that was we didn't sell early equity. So I didn't bring in my first equity until 10 years after I started the firm.

Wow.

So the good news is I always say we struggled.

I bet. Those were tough years.

Those were tough years. And well, we got it done.

Yeah. Good for you. So you've been doing this for now for 16 years. What is it that gets you up in the morning and to go to work and work on the business?

The people. I always say. The impacts that we're making across the globe are phenomenal. We're at, I think, 45 million metric tons removed or avoided from the atmosphere from our technologies around the globe. And that's the United States, that's Asia, it's China, it's India, it's Southeast Asia. So our group is really spread out. So the impacts we make are amazing, but the impacts on our people and the team and the culture, and I'll talk why it's so important to me as a leader. But we have shared ownership in the company. We have what we call a shadow program, a shadow share program, where we have— we're out, we're externally valued every year for share price, and we issue ownership. And it doesn't convolute the cap table, but it's a mirrored ownership. So our share price is the team share price. It's called— it's under 409 under the IRS guideline, but we can issue these instruments and What if the share price is X, you're getting an, you're getting instruments at X as a member of the team where the value is created is they mature in 3 years. In fact, Ownership Works, KKR featured us in Ownership Works under this novel program because ownership does work. We have ownership across the company, but our instruments are unique in the fact that they mature in 3 years. So every issuance I give leaders, I give every, everybody is an owner at ClimbCo. They're getting these instruments in 3 years, it's the delta that they can achieve. So whatever the share price change in that 3-year becomes the value at maturity date.

So what happens? Do they get, they get converted into real shares or do they get—

they get cashed out or kept. It's always going to mirror our share price. So when I had Warburg Pincus come in as a minority investor in the firm, the share price that they offered for our common shares That became the share price for all of our shadow shares then.

Okay.

Um, so it's either an external valuation or the external valuation could be a new investor coming in and their willingness to pay becomes the share price for everybody.

So how do you, how do you account for that? I've never heard of this before. This is pretty interesting.

Yeah, painfully. But you have to have the, you have to always forecast that we have a goal when we have an event, when we were perhaps we sell the company or we bring in another investor, how much of that value do we want to give out to the team? My view is we really want to define that because if it's not for the team, we wouldn't be where we are. But I think the challenge of it is you're always accruing one-third of what you issue in a given year because they mature in 3 years. I don't want to get too much into accounting here, but essentially you're incurring a liability.

That's what it sounds like. And it's a future liability and you really don't know what the future liability is going to be.

Because you don't know life events, you don't know. So I would say in general, the team is so tight and bullish that the amount of liquidity that— or the liability or payouts on an annual basis have been very manageable within our projections.

Oh, okay, good.

And we're always forecasting when we're issuing these every year what we believe the value of these could be and how much we're willing to pay as real shareholders out to the entire company when the event occurs. But I think—

because this is obviously coming out of shareholder value. It is. The value return is that you've got intense loyalty and buy-in.

And buy-in. And I say all this, Doug, it's not— the financial part's great. I was so pleased when I would say that the ownership in shares is greater than our 401 value, because it really shows that I just held an ownership meeting, but that's just part of the culture, like the culture of When others may have been running from diversity, equity, inclusion, and belonging, I'm running towards it because we've always been there. It's like the DNA of the firm, right?

Yeah.

You know, it's so, it's so critical to us.

It is. I think I mentioned to you before we got on the show, my fifth book's coming out next year on leadership empathy. And I talk about DEI and I tell this to business leaders all the time. If you sit in your room, you're having a meeting, look around. If everybody looks like you, You're in deep shit.

Deep shit.

Deep shit. You better have diversity these days because you don't know it all and your perspective is not the perspective of everybody else.

Doug, if I could give you my epiphany in this.

Sure.

When I started the firm, I would say initially you're hiring in your tribe, I called it. So my immediate tribe at that time was, at least in the folks that I was working with, was really white middle-aged men. So when I looked at the company about 3 years in, I saw almost 10 white middle-aged men. And I went to my COO at the time and I said, Derek, this— there's an issue here. And one of the issues to me that why this is so important to me is, you know, I'm a global Rotarian and I've hosted 10 wonderful international students in our house. My family is diverse as heck, religiously, culturally, ethnically. My family is across the globe. My, my goddaughter's French. I've walked down the aisle of my Turkish daughter next to her real dad as her exchange dad in Mersin, Turkey. So I've got Muslim in my family. I've got all the religions. So when I'm looking at this 10 middle-aged white guys, I don't, I mean, that I created it based on the best experts that I knew at the time. But I said to myself and to Derek, we've got to change the paradigm. I want the company to look like my family. I want the company to look like the world because it's diversity that creates diverse thought, creates more challenge for the company.

Right.

And imagine if you're the best talent out there and you're looking at a company that's homogeneous, that homogeneous company doesn't fit your background.

That's right.

You're not going to feel comfortable coming into a company like ours.

That's right.

Whereas now, fast forward, we have about 100 people. And if you take a look at our photo of the company, it looks like a stock photo of diversity. Because we have more women in leadership roles. We have 50% women in the company. We have members from across the world. We have grassroots initiatives within the company that we have open-door DEI meetings. They're open-door where you can come in and talk about topics. It's grassroots. It's bottom-up. It's top-down.

And it works, and it works well.

It works amazingly well. We wouldn't be the leaders we are without it.

I know. And this is why I can't understand why there's much resistance to this idea.

I agree.

It's just, it's mind-boggling to me. I'm curious if you reflect on your life, what is it about you personally, Bill, that, that you think makes you unique and successful?

Yeah, Doug, I thought about this in preparation.

I ask this question every time.

You ask this question every time. So I'm gonna get a little bit more I'm gonna take this a slightly different path than I do other calls. Um, just for transparency. And so you really know who I'm about, what makes Bill tick. So when I was a younger guy, I had my troubles. I mean, when I was 17 years old, my parents made one of the biggest decisions of their life, which was to send me to, to a rehab when I was 17, 1985, 1985. And so I actually met First Lady Reagan. And Princess Diana. That was during the Just Say No to Drugs days. And they came and visited our rehab. And that was when I actually got to meet Nancy Reagan and Princess Diana at the time during a 1985 tour. But I was in rehab and my life was a wreck. My parents had the foresight to get me early help. And if I fast forward now, I've been 40 years, 40 years sober and clean. And so that, those are, that was such a lesson for me, Doug. And it's so ingrained. When we talk about rigorous honesty, just drive, get it done, empathy, self-reflection, all of these things are who I am because I had to do that. I had to do that when I was 17 years old.

And learning to be vulnerable without being weak, which then makes you authentic and become the leader that everybody wants to follow.

Yeah, and it's been— so for me, I give back. I help other people. I'm as comfortable talking to somebody on the streets that needs help as I am to a CEO of an organization. I'm comfortable in my shoes, and a lot of that comes from that rigorous adherence drive to— if I make a mistake, I own it. I own it because I have to. I've been living this life for 40 years and it's ingrained in me. And so I think bringing that culture into the firm of It's okay to be wrong. Let's just talk about it. And let's, and if I can use that background of, of the tough times that I went through 40 years ago and where I am today, and then combine that with Rotary. And if you ever heard, if you ever knew about Rotary, there's something that we call a 4-way test in Rotary and it matches my life. Is it the truth? Is it fair to all concerned? Will it build goodwill and better friendship? Will it be beneficial to all concerned? So I talk about Rotary principles. I talk about the principles that have made me successful in my personal life and in work life. And I always say that two faces don't work. You're going to get the transparent Bill. Right. All the time. Good thing. I don't have a face outside of work and I don't change it inside of work. And I wear my emotions on my sleeve. And that's the culture that we created. It's let's be honest, let's share what we're thinking and we're gonna be better as a result. So I think you asked me a question like what makes me tick? And I can't tell you what makes me tick without being honest with you about my core DNA.

Wow. Good for you.

In 1985.

That's a, you know, we need more leaders like you. I've been, as I've listened to you and I get the sense that you have, you are probably a very good listener. The show's called Listening with Leaders. Because I think listening is a foundational skill of life that most people don't know how to do. I'm curious, how do you learn how to listen?

This is a great question too, because I love to tell people, and I tell it to them in business as well, I date for a while. I don't jump into partnerships right away. I get to know you. But partnerships last a long time for me. And a great analogy is I've been married for 33 years. I met my wife when she was 19. So she never saw that 17-year-old me. She met me, she was waiting tables while she was in college and I was at a different university. And that's how we met. She was my waitress. And now she's been, I've been with her for almost 38 years in total, but we dated for 5. So during that time we were dating and I was always into self-reflection. And I realized that even in those early days, it's okay to get a coach. It's okay. To go to a counselor, right? There's nothing wrong with that. So 4 years into our dating, and I'm thinking about getting engaged, and I'm thinking to myself, God, there's a lot of tension, right? We're living together. I'm not sure if this is right. So we went to a counselor, and this is the first time I've heard of active listening. Ah, we were not active listening at all. So I would say over 33 years ago, I learned active listening, and then And again, I think it's such a skill and you're the master. What I learned is, what was really helpful for me though, is that I was always thinking about my rebuttal. As soon as somebody would start to talk, I would be thinking, I'm defensive now. What I learned is shut it down. Because, and I act, if I have to summarize what you said, Linda or Doug or anybody, can I really summarize it? Or am I thinking so defensively that I'm not even listening to you? And I never pare it back. Like a parrot, because that's—

that, that is done improperly. It's patronizing.

It's very patronizing. But I reflect enough to acknowledge that I really understood or understand. And I started that with Linda so many years ago. And now it's an exercise. And I certainly— emotional intelligence in business school, you learn a lot about that. But I've actually held active listening seminar to my company as part of our team builder once.

Wow.

So tell me, I'd like to learn more. I'm just as— I'm learning all the time, but I learned it through counseling initially, through marriage counseling, pre-marriage counseling.

Good for you. Yeah, we can talk more about that later because what I teach— what you did a really good job of describing two kinds of listening. Type 1 listening is the defensive listening where you're— it's the agenda is on you, the listener. What am I going to say next? I want to be heard. What information can I gather from this person? What decisions do I have to make? And you really don't care about the speaker. The type of listening that's most important is Type 2 listening, where the only agenda you have when you're listening is to make sure that the speaker feels heard and validated from the speaker's frame of reference. And when you do that, everything changes. And you don't have— your agenda is not important. What's important is making sure the speaker feels heard. Yep. That's the secret.

That's the secret. Yeah, that's the secret.

Wow.

Secret sauce.

I know. That's, that's what I teach. Yeah. And I, you know a little bit about me and I worked in prisons for 10 years training murderers how to stop prison violence.

Yeah.

That was, that was intense.

That is intense. I've never had to deal with that. I, my mind are a lot more easier, but I can say the confidence that it builds knowing that you can go into any environment. And, and sometimes I, I like to say too, to I like to learn more about de-escalation and all of your work of bringing somebody down when they're really intense. But I just experienced that more recently with another leader of another organization who was intense. You know, they were emotional.

I mean, this happens in everyday life because we are emotional beings, not rational beings.

That's right. And how can I— I would say too, my father would always say— now I have to reflect on what he would tell me. He would always say when I was a young guy, "Bill, be presidential." Now I think we have to put a footnote to that.

I absolutely agree with that.

Act presidential. Well, my father would always say that whatever you do, just stay above the fray. You know, take the high road. Take the high road. And I do like to say the one motto that I have within the company is my father would always say, we used to watch 60 Minutes together. My father is in a dementia clinic now, and I love him so much. But he's taught me so much. And one of the things that he taught me when I was a young guy is the 60-minute test. He said, Bill, if you just live your life like you're being filmed on 60 Minutes, ask yourself, if I'm being filmed now, would I be comfortable with my actions on 60 Minutes?

There you go.

And if I can live in a manner that the answer is yes, then I'm doing okay.

I love that.

Yeah, it's kind of a simple 60-minute test.

One more, one more question. I'll let you go. What's one thing about yourself, Bill, that we would never know about? Unless you revealed it to us. Okay.

Love of the outdoors. I talked to you about one of my passions before.

We're both pilots.

So I got to come back to the piloting, but maybe come back to also the outdoors and tying it into why I'm in the climate business. Because I love Mother Earth. I've hiked some great mountains in my day, glaciated mountains. My wife and I live in Lake Placid some of the year.

Did I see that you're an alpine skier?

I do some alpine skiing.

Yeah.

Cross, cross country as well. Mountain skiing, trail skiing. My, my wife and I summited all 46 peaks in the high end. So we're called 46ers. So we, we do that. And why do I do it? I enjoy health, but I enjoy serenity.

Yeah.

And so when I go into the mountains, everybody has their space, right? Some people's space might be the water. Mine isn't. I tried that. Then I moved to the mountains. And when I go into the mountains, Doug, it's spiritual. I can have a ton going on. I can go on a 20-mile hike and I can tell you at the end of that hike, what did I think about? My surroundings, the avian world, the mountain, the maybe the challenge of the peak ahead of us. But I'm never thinking about troubles. I'm never thinking about business stresses. So I think that, so that's that, that's where my serenity and my meditation comes from.

Good for you.

And also piloting.

Flying an airplane.

Flying an airplane. Some people would say, isn't that dangerous? And I would say it can be, but as you're more of a seasoned pilot than I am, it's the, it's sticking with the protocols. Follow the rules. That's right.

Don't break the rules.

Don't break the rules.

Really simple. Don't break the rules. They're there for a reason.

They're for the reason and respect Mother Nature, right?

That's right. And that's one of the rules that you don't wanna break.

That's one of the rules. And I think, and I like to joke with folks, 'cause I fly a single-engine plane. Mm-hmm. And they'll say, you only have one engine. And I said, okay, how many times in your life have you been driving your car and your engine blew? Most people say never.

Right.

I said, okay, in my single engine, every 100 hours I'm getting maintenance on it. Every year I'm getting a full audit of it. I check my oil for metallic content. My engine is such incredible working order. And by the way, my glide ratio is almost 6 or 7 to 1. So I always say if I lose my engine at altitude, I can glide for a long time.

I got 20 miles.

I got 20 miles to glide. Now my wife doesn't buy that as much, Doug. So when I say that to her, she's I'm not sure I'm comfortable during the glide scenario, but as you and I know, we can set it up for ultimate slope. Right.

Well, and that's what I, People don't understand if we took care of our automobiles the way we take care of our airplanes, we'd never buy new automobiles.

Exactly.

And that's why there are airplanes that are flying out there that are 60, 70 years old.

Yeah.

Because they, they're, they gotta, you gotta maintain 'em and take care of 'em. And if you take care of 'em, they don't break.

Yeah. So we'll have to have a separate call sometime on piloting, 'cause I, I, there you go. About that.

Well, we've come to the end of our conversation here. I want to really thank you a lot. It's been a great conversation and I've certainly enjoyed it.

Yeah, I did too, Doug, so much. Thank you. Thank you so much for the invite. Absolutely. All right.

Doug Noll here. Thank you so much for listening to Listening with Leaders. If you are a successful executive leader who would like to be on this program, please visit podcast.dougnoell.com.

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