Xylem’s Patrick Decker: Purpose, focus - and effective communication

This transcript, generated from speech recognition technology, has been edited for web readers, condensed for clarity, and may differ slightly from the audio.

Meet The Leader, Linda Lacina: Welcome to Meet the Leader, a podcast where top leaders share how they're tackling the world's toughest challenges.

Ahead of this month's historic UN Water conference, I talked to Patrick Decker, CEO of leading water technology company Xylem, and he'll talk to us about what's really involved. In solving the water crisis,

Subscribe to Meet the Leader on Apple, Spotify, and wherever you get your favorite podcasts. And please take a moment to rate and review us. I'm Linda Lacina from the World Economic Forum, and this is Meet the Leader.

Patrick Decker, Xylem: Solutions exist right here, right now. When you put those facts of what is possible in front of people that care, that actually give a damn, frankly, it's amazing what can be accomplished.

Meet The Leader, Linda Lacina: Water has helped us build cities and communities and the world as we know it, but as our population has exploded and we've overused and mismanaged this resource, Water has fallen into crisis. In fact, the World Meteorological Organization estimates that 3.6 billion people currently struggle to get the water they need for a month a year. 5 billion could face that fate by 2050.

An historic event this March could help bring solutions: The UN 2023 Water Conference, seen by some as the ‘Paris Climate Accords of water,’ dedicated to better protecting water, better dealing with floods and droughts, and putting together game changing solutions for the future.

In the spirit of this week, I bring you, Patrick Decker, the CEO of Xylem, a company committed to solving water -- tackling challenges from water scarcity, to the resilience of water infrastructure, to climate change.

I sat down with Patrick during New York's UN Week last September. He talked to me about special sustainability accounts, ESG demand deposit accounts, the first of their kind, that link the yield clients earn on their deposits to the achievement of their own sustainability targets. Such accounts can create much needed investing incentives for businesses and business leaders.

He also shared how a range of technologies are helping to slash emissions created by the water sector. And most importantly, he shared the role that purpose plays in keeping teams aligned with big goals. And the practical question he asks at the top of some meetings to make sure that teams are on track with what really matters.

He'll talk about all of this, but first, I'll let Patrick kick us off with more on understanding the water crisis.

Xylem CEO, Patrick Decker: As we look at the great water challenge or challenges facing the world, we bucket them into three broad themes. First is the scarcity of water. The second is the resilience of our infrastructure -- most notably water infrastructure to climate change. And the third is how do we help communities around the world, whether it be at a macro level or at an individual level, do this in a more affordable way.

And so scarcity, it's resilience and its affordability. And we are, optimistic. I'm frustrated. It should be happening faster than it is. And so we are aiming to take great strides to help create awareness -- not just of the challenges that the world faces from a water perspective and how interdependent every other aspect of life is to water, but also to create awareness of the opportunities that already exist to address those great water challenges. Because the technologies and solutions do exist. They just aren't necessarily being applied consistently around the world.

Meet The Leader, Linda Lacina: Xylem has some really interesting initiatives, including demand deposit accounts that help incentivize sustainability progress. Can you talk a little bit about those and how they work?

Xylem, Patrick Decker: It's one of the first of its kind where we have now entered into an investment fund whereby we've made very explicit commitments around very measurable auditable KPIs -- or metrics -- around our own environmental footprint. In this case it's an investment fund that we can actually tap into and get access to borrowing if need to (Although we're a very strong balance sheet, so that really was not the motivation behind this). It was really to create even further motivation within our own organization, but also to business at large to say: ‘Take advantage of these funds and these financing tools’ whereby we actually get incrementally higher yields as we deliver on our specific sustainability metrics.

One of those key metrics is that within 22 of our largest major production facilities around the world, we've committed that we would get to a 100% recycling of our own water. And as we make progress against that, we get increased yields on that investment.

Meet the Leader, Linda Lacina: So the KPIs Are looking at planet first, not profit first.

Xylem, Patrick Decker: That's correct. This is very much tied to the societal impact that business can have, and needs to have. And ties to very specific metrics in that area as opposed to traditional financing metrics of, you know, return on investment or what our kind of debt rating is, what our borrowing levels are. It has nothing to do with that. It's all about what our impact is on the environment.

Meet The Leader, Linda Lacina: And how are those metrics developed? What kind of framework or approach is used?

Xylem, Patrick Decker: So we've got a small dedicated team that we put in place, back in 2015. We've been at this now for several years, and we are in the second generation of laying out our own sustainability commitments.

We publish an annual report that lays out what our goals are for the next five years. We delivered our first set of goals about a year in advance, and then we said, ‘Well, those were ambitious.’ They were largely internal focused more on what we call our own footprint of Xylem. And what became more and more clear to me and our leadership team and our board was, especially given the role that we have in the water sector, why don't we establish KPIs or metrics around sustainability that also go take our own internal, make that more aggressive.

But now let's talk about what our hand print is. How do we help the community better address some of its societal challenges? So whether that be -- we measure things likethe millions of gallons or litres of water that are treated every year. We measure things like how many households have been possibly affected, especially in rural or developing communities.

There's a list of those metrics that we have in our sustainability report, and I would encourage your viewers to go online to Xylem.com. It's very prominent there, and you'll see. How what we've laid out there, we believe is quite unique and compelling relative to what many companies are doing, which is more of the traditional, their own operational footprint.

Very important. That always needs to be table stakes, but I would challenge other companies and CEOs to think about what is their own societal impact.

Meet The Leader, Linda Lacina: You mentioned that Xylem is the first to do this. Why is that? Why is this so difficult to put into place?

Xylem, Patrick Decker: You know, at Xylem, we believe that innovation, which is so vitally important to making a company truly sustainable, and I mean sustainable in that every company needs to have a clear purpose. You know, what is the purpose of that organization? That purpose is your true north. And the decisions that you make around that true north is what motivates people to decide to either join your team.

Because we hire very talented people. They can choose to work in a lot of places around the world. A lot of companies, we want to be one of those most attractive places to work. And in doing so, that purpose needs to inspire them. But that purpose needs to be grounded on things beyond purely economic value.

Economic value is critically important. You know, we are a publicly traded company. We have shareholders and investors, and they expect, as I do, for us to deliver a very attractive growth and financial return as a company. Without that support, we will not be sustainable because we will not be around.

But at the same time, other stakeholders are looking for us to create social value, and so we talk all the time about the importance of creating both economic and social value.

Key to that is having an innovative mindset. And innovation in our view goes beyond research and development technologies. Those are critically important. But it's also business model innovation. We just view this as another way to, to put the message out that we can create both the economic profit and the social profit, so to speak, through these kind of innovative ways.

There needs to be a growing awareness that these tools and opportunities exist. And so I do believe, and I'm confident over time, that there will be a faster rate of adoption of these kind of financing tools.

Meet The Leader, Linda Lacina: And when we talk about these demand deposit accounts what sort of impact have you seen more broadly? Is there a before or after that you can share?

Xylem, Patrick Decker: Our overall ESG -- or our sustainability efforts -- have really, I think, spearheaded a motivated action within our own enterprise and with our customers. One example is right now, just a bit more than 80 of the largest water utilities around the world have signed up for carbon neutrality. You know, the race to zero. That's a big move. I mean, that's a big statement. And they're looking for companies, not just Xylem, but certainly we as one of the leads to help them lay out that roadmap.

You know, what really is going to matter most? Then you bring that back into our own enterprise. And that motivates our own commercial teams, along with our own research and development teams, our marketing teams. How can we work together in a partnership to make a difference that matters? Most people don't realize that the, the water utility sector generates anywhere between 2 to 3% of the world's greenhouse gas emissions.

That's equal to the entire shipping industry. And the good news is the technologies and the solutions exist already today to abate or eliminate those greenhouse gas emissions by 50% at a negative, meaning a positive return to the utility, or neutral cost. These opportunities exist. the UK already, those utilities were the first ones that signed up years ago to drive towards greenhouse gas emission reduction, and they've achieved, again, nearly a 50% reduction in their emissions over the last 10 years.

When you put those facts of what is possible in front of people that care, that actually give a damn, frankly, it's amazing what can be accomplished. These solutions exist right here, right now.

Meet The Leader, Linda Lacina: I think a lot of people don't think about water's carbon footprint. Can you tell us a little bit about what that is?

Xylem, Patrick Decker: So you know a few areas. First of all, water utilities are fairly complex set of operations. They're largely misunderstood because they're oftentimes behind the scenes. Very few people have ever walked through a wastewater treatment plant or gone into an underground sewer system, or been in a clean water treatment facility.

They've never really seen metrology happening other than maybe the meter in front of their home or in a building. That's just one small piece. There's a lot of work that utilities do on taking water from its source -- a lake, a river, a dam, or a stream. Initially treating that and turning that into potable or usable water before it's distributed.

One of the big challenges that utilities face is as that water is moving from the treatment plant to its point of use. There are large losses that occur around the world. An average of 30% or more of that water is not generating the tariff or the revenue that the utility needs to continue its operations.

So they're doing a lot of break and fix repair work on leaks. Pipeline rehab. So it's a lot of things going on. All of those create some level of emission of carbon. The most intensive typically would be within the operations of the treatment plant. Very energy intensive. But also, as they're moving wastewater through that redistribution path, back to a treatment plant, the pumping stations along the way, those pumps themselves can be quite energy intensive. And so there are a number of technologies and tools that we and others bring to utility that can help them abate those emissions just by more energy efficient equipment, but also through the use of digital. And that's the big next phase for the utility sector is the adoption of digital solutions. Just being aware of the data within their operations.

Meet The Leader, Linda Lacina: Can you tell us about what those technological and data-driven solutions might be and what impact we could see?

Xylem, Patrick Decker: You can see upwards of a 40 to 50% reduction in energy consumption of a wastewater pump, for example, that we launched a few years ago that is now rapidly being adopted. I mean, our previous pumps were also driving energy efficiency. But now we're able to transmit data real time off of any one pump, but also across an entire pumping network that the utility operators are able to now see which of the pumps are operating at suboptimal performance. So they can know where to spend their precious resources to keep the entire network operating more efficiently. And that can lead up to a 50% reduction in their energy consumption. That's just one example.

Another is huge challenges right now around the world, especially given the intersection of climate change with aging water infrastructure, storm water overflow, you know, major flooding during storm events is a massive issue.

It's usually what's most visible to the community. Because things look broken at that point. And a lot of that is because the infrastructure is underground. And in many cases, the utilities don't always even know where that infrastructure is because it was built 75 years ago. And they have physical drawings that are assembled in locations.

So basic things like building them a digital twin, gathering data real time, using AI and machine learning to predictively, indicate during a live storm event, how is the water going to be dispersed around their communities and therefore where should they go target their investment in upgrading parts of the water system.

And we've got a number of examples where we've been able to significantly reduce the capital investment that a utility or a city works department has to make to meet things like an EPA [U.S. Environmental Protection Agency] consent decree. So the reason I bring it up is because one of the things we're trying to educate folks to…people throw around big numbers around how much money has to be spent on water infrastructure upgrade in the US, trillion dollars. We don't believe that because we believe that technology exists now to be able to address these challenges at a much lower price tag than that. But it requires action.

Meet The Leader, Linda Lacina: What does it take to scale a program like this?

Xylem, Patrick Decker: It depends on the size of the utility. You know, within the US alone, there are 52,000 water utilities. That tends to boggle people's minds. And they, you know, there are really only a few hundred of them that we would consider to be large utilities. And those are typically in the larger metropolitan areas and maybe, you know, mid-tier cities.

But the large majority of other utilities are smaller, rural, oftentimes managing multi counties in a certain state. And so scaling these for a larger utility -- it's not easy. It really is more a matter of prioritizing it, making sure that they've got the human resources to deploy against that while they're still maintaining the day-to-day operations because they can't afford breakdowns in that.

So they have to be cautious around what they take on when. So they're trying to manage that tough transition. For small utilities, it oftentimes is resource constraints at an absolute level. They just don't have large teams to be able to work on these things. And that's where we aim to come in by not just helping them from a funding standpoint. Although these technologies are not expensive and they have great paybacks. But also helping them from a resource standpoint in these initial pilots that are being deployed.

So it's a multifaceted challenge, but again, many success stories and utilities oftentimes take their lead from what they see other utilities doing, not what a technology company is trying to sell them. They can be sceptical at times on that, understandably, but they will take the lead from other utilities that they see being successful.

Meet The Leader, Linda Lacina: You were talking about purpose. Do you think if companies and leaders think purpose first, they'll be more nimble, that it's easier to sort of bob and weave when you aren't fixed to a two-year or a five-year plan?

Xylem, Patrick Decker: Absolutely. And I think that this terribly unfortunate past couple years of the pandemic have really shone a light on that. When I think about the incredible pressures that have been put on any one of our colleagues, on their family members, on their friends, their loved ones, their communities, it's unprecedented.

And I truly believe that companies that have a true north and their purpose and that that purpose matters. I believe that everybody wants to be a part of something larger than themselves. They want to enjoy the team, that they're a part. They want to be part of a winning team.

When you combine those attributes together with talented people, that purpose keeps them focused. It keeps them together. It's a high bar. Because I, as a CEO, my leadership team, everything I say or don't say do or don't do, whether somebody's looking or not looking.

You're put through a different lens and people want to believe, but they've been let down in the past by many leaders. And I'm not a robot, I'm human. I have my own frailties like anybody else. But it keeps me thinking about a higher standard. And I just think it elevates everybody's performance when they're aligned around something that really matters.

Meet The Leader, Linda Lacina: Is there a tactical or practical way to make sure that even in a meeting or a conversation, that people keep this purpose at the forefront of their minds?

Xylem, Patrick Decker: I think it's not an easy task because there's so many distractions, including communications from senior executives.

You know, we all want to get our message out. But I'm part of a broader leadership team, and each one of those leaders have a message they want to get out. So first of all is to make sure our messages are aligned, not scripted, they can all be delivered with an individual touch, nuance for a certain geography or culture or business. But you know, it needs to be very aligned. So it's not confusing and it's not creating competition, for mind share of not just our own colleagues. We spend a lot of time talking with our channel partners, our distributors, our people that we have commercial arrangements with because we are in this as part of a larger team sport.

And so keeping them aligned or motivated by what our purpose is and why there is a positive affiliation by working with us in terms of what our purpose and cause is it's very important that we are communicating with them, but also with our communities, with our other stakeholders.

But consistent simple communications is one, Frequency, you know, repetition matters. Because, these communications left alone have a pretty short half-life of people remembering. And so you have to continually bring it back to what are we solving for here? And, we start, not every one of our meetings, but it's a common action for me to take in a meeting to say, ‘before we start, Where are we in the shopping mall map?’ You know, ‘You are here.’ Like where, what are we talking about and why are we spending time on this?

And how does it tie back to our greater purpose and our objectives as an organization? It's not perfect. I'm far from perfect, but it's one disciplined approach that we certainly take along the way.

And I just think, being visible externally - It's really important as a leader at any level of the organization that you are out. On a regular basis. You're in touch with the world, with what's going on. You're bringing that back into your team, but also that your team sees that you're visible, where are you spending your time as a leader at any level of the enterprise. It forces all of us to just up the game.

Meet The Leader, Linda Lacina: And what is the role of youth across these sectors?

Xylem, Patrick Decker: It’s a terrific question, and I think it is, in my personal view, at the very heart of what is going to lead us around the world. In my view it's one of the best investments that we can make as a company and society.

Creating community activism amongst youth to say, ‘We're not going to take it anymore. We're not going to buy the hype that the water challenges, you know, climate change is not real. The water challenges we have, they happen every now and then, but as long as I have enough water today, I'm fine for the rest of my life.’ It's a false narrative.

They're not going to be stuck in the fear of, 'but we can't afford it'. So this whole notion of youth movement that says 'we're not going to take it anymore' is a big part of that.

The second piece is motivating younger generation to get engaged in the water sector. Whether it be engineers, finance people, technology, marketing, whatever it happens to be, this is a sector that is on the move and it's only going to get bigger. And boy, if you want to be a part of a sector where you can really feel good about the societal impact that you're having. There aren't a lot of others out there that I think can hold a candle to working in the water space.

Meet The Leader, Linda Lacina: That was Patrick Decker. Thanks to him and thanks so much to you for listening. A transcript of this episode and my colleague's episodes, Radio Davos and the Book Club Podcast is available at wef.ch/podcasts.

If you liked that episode, check out Radio Davos, and an episode from last November - How can innovation help solve the freshwater crisis. On it, Roshni Nadar Malhotra, chairperson of HCL Technologies, talked to my colleague, Emanuela Orsini from our innovation platform Uplink. They talked about a range of cool solutions and the impacts they could bring.

This episode of Meet the Leader was presented and produced by me with Juan Toran as studio engineer and Gareth Nolan driving studio production.

That's it for now. I'm Linda Lacina with the World Economic Forum. Have a great day.