Ep. 07 - What investors think about trade & tariff risk in your supply chain.

Justin Dillon (00:04.984)
Phyllis, good to hear you and see you. Where am I finding you today?

Phyllis Kurlander Costanza (00:09.458)
I'm in Colorado.

Justin Dillon (00:11.49)
Really? What part?

Phyllis Kurlander Costanza (00:14.159)
Aspen, beautiful sunny, actually it's snowing.

Justin Dillon (00:16.002)
There. I know. Boy, that's perfect. A friend took me to Aspen last year and it's magic. It's absolutely magic there. Good for you. That makes a lot of sense. Are you able to get out? Are you going to get out on the mountain at all or?

Phyllis Kurlander Costanza (00:28.442)
Yes it is.

Phyllis Kurlander Costanza (00:36.172)
I do on the weekends for sure.

Justin Dillon (00:37.998)
Okay, okay, cool. That's how you do it in Aspen. Well, we're here to talk about finance and finance and connections to supply chains. You've had a celebrated career in finance at institutions like UBS, where you were the global head of social impact for like a decade, right? Something like that, over 11 years.

Phyllis Kurlander Costanza (01:00.242)
Yeah, I was there for 11 years.

Justin Dillon (01:02.152)
And we want to get into that. also want to hear about what you're doing now. Maybe we can start with what you're doing at Advanced Portfolio Management. Maybe tell us what that is and what it is you're trying to build there through the social investment solutions.

Phyllis Kurlander Costanza (01:14.802)
Great. Well, I'm honored to be here. So thanks for having me. And you have inspired a lot of the work that we're doing in advanced portfolio management. So APM is a fund and asset management firm that's been around for about 23 years. And they specialize in building customized portfolios and solutions for institutions. And

About six months ago, I was talking to the founder, Robert Kiernan, his experience working in ESG. And we ended up talking about how social factors are really misunderstood. And there is an opportunity there to develop products that look at critical social factors. And when we think about what are social factors in ESG, those are really things that affect humans, stakeholders, like your customers, like your employees, like...

supply to people working in the supply chains. And these have a really big impact on on companies financial performance, their stock performance. And so what we're doing is building a customized social factor index, looking at what are the critical metrics around social factors that drive corporate performance.

Justin Dillon (02:34.072)
So, okay, that's super interesting, especially in a time right now where terms like ESG and DEI are all getting, become political footballs. What it, maybe give us a little bit more about the sales pitch around a fund like this or a solution like this is for institutions to your customers.

Phyllis Kurlander Costanza (02:49.906)
It is a funny time to be starting a business called Social Investment Solutions. However, if we look at who has traditionally invested in ESG products or impact investing solutions, they are primarily foundations, endowments, multifamily offices, and we're really not seeing right now a decline in their interest, although...

Justin Dillon (02:54.871)
Yeah.

Phyllis Kurlander Costanza (03:18.876)
they are hesitant to use the phrases ESG. So what you might be seeing is a lot of renaming of funds that might be ESG funds, but they're calling them something else. know, but they do the same thing.

Justin Dillon (03:22.616)
Interesting.

Justin Dillon (03:37.1)
Yeah, are we seeing that in general? Like, it just, is it a pullback from vernacular? Not necessarily a pullback from the work that's being done around here? Because we're seeing these terms like being thrown around, but at the same time, I think a lot of companies are like, yeah, this is just what we're doing. And it's so locked into, you can call it whatever you want. We're doing social investment. We're cleaning up our supply chains. We're making life better for people and planet. Call it what you want. Are you seeing?

us just kind of turning the phrases. Sorry, are you seeing out in the marketplace just to change a phrase and that the work continues?

Phyllis Kurlander Costanza (04:14.332)
Yeah, yes, indeed. We already know that environmental, social, and governance factors play a really big role in a company's financial and stock performance. And we've proven that thesis time and time again. Now, it doesn't mean that all ESG funds outperform the market because they're looking at these risks, but we know that they are material to the financial performance.

And there's all sorts of academic research that proves this. There's a lot of funds that have proven this. And in fact, we've had an ESG fund operational for about three years now, and it outperforms the market. And when you take out the ESG screen, it underperforms. And this is just a typical, it's a long only fund. And so you're seeing people pull away from using the name because in places like Europe and the UK, if you're gonna

if you're going to call your fund sustainable or impact, you've got to fulfill a number of criteria, whether it's in the UK or in Europe. you know, funds are starting to pull back from calling themselves this. You know, our fund, ESG Plus Fund, could be called a Quant Plus Fund because it's Quant Fund. And it does the same thing.

Justin Dillon (05:32.014)
Why not call it that? I mean, if the whole point of it is better performance, have we just emotionalized and politicized these terms for a while? mean, it used to be corporate social responsibility, then it became social impact, then it became ESG. I mean, I've seen that just in my time. I've been paying attention to it. They're just words. No one's going to do something if it's not going to work. I like quant. Call it quant.

Phyllis Kurlander Costanza (05:55.442)
Exactly. And yeah, you know, it's, it's, and what we're also seeing is that superficial, like a, you know, take your hat off to something kind of approach to CSR, ESG from a company doesn't work. I mean, it's not going to affect their performance. So if they're out there just talking about, you know, how nice this is, it doesn't work. They have to actually do something meaningful.

Justin Dillon (06:07.086)
Yeah.

Justin Dillon (06:13.239)
Hmm

Phyllis Kurlander Costanza (06:22.46)
to mitigate risks associated with E, S or G factors. And so, you're seeing a lot less rhetoric because, what's really interesting about these issues, particularly the social, is that they're incredibly dynamic. three years ago, talking about racial injustice and inequality overall,

Justin Dillon (06:32.427)
Yeah, virtue signaling.

Justin Dillon (06:42.894)
Hmm.

Phyllis Kurlander Costanza (06:52.678)
was a must. know, CEOs, every CEO came out and started talking about it. If you didn't, you were boycotted. And then fast forward, you see what happened with Bud Light. You know, they used a very well known transgender influencer to launch, you know, to advertise Bud Light and it backfired. And so, you know, things, yeah, things that would have driven financial performance three years ago are now.

Justin Dillon (06:55.769)
yeah, yeah, yep.

Justin Dillon (07:15.928)
They took a risk. Yep. Yep.

Phyllis Kurlander Costanza (07:22.086)
very out of favor and will actually harm you. the critical thing is to understand the dynamic nature of these factors so that your fund can adjust accordingly.

Justin Dillon (07:34.23)
Now, okay, I have so many questions. It feels like we're in an age of authenticity. And I almost want to throw up in my mouth as I say that because it feels like we're in an age where the virtue signaling and the veneer of doing good for marketing purposes has just burnt up. It just burned on reentry, it doesn't work anymore.

So are we moving more towards an era or a time of authenticity, loaded air quotes around that, that says, hey, these things that we're talking about, whether it's in a commercial or in a sustainability statement, they actually do matter and they need to show up and they need to just be part of business and they need to get boring. And that's when I always tell people, you know you're making a difference when it's boring, not when it's exciting.

When it's exciting, everyone's talking about it. When it's boring, it's just what you do. And we laud the brands that are so, these things are so locked into them like Patagonia and others, but it's just standard operating procedure for them. there's so, brands like that are not using the virtue signal to try to get a little bit more market share. They're just like, this is what we do. Is it possible from where you're sitting that the markets are going to react more favorably to the brands that

didn't do the virtue signaling and are just, I say brands, companies that made it more about, this is about the core of the business and less as a marketing tactic.

Phyllis Kurlander Costanza (09:10.098)
Absolutely, I think you hit the nail on the head. And I love that you threw up a little bit in your mouth when you said the word authentic. I actually went to a yoga class recently and the woman said, the instructor said, I hope you brought your authentic self to class. And I just want to raise my hand and say, what do you mean? I don't understand what you mean by that. I didn't, but in supply chain management, it is so important.

Justin Dillon (09:17.262)
you

Justin Dillon (09:24.014)
What the hell's that?

Phyllis Kurlander Costanza (09:36.932)
investors are starting to take notice and they're asking really tough questions. And so from an investor perspective, they want to make sure that it's not just a bunch of BS and you're seeing things like pre-due diligence going up substantially.

Justin Dillon (09:49.752)
Yeah.

Justin Dillon (09:56.142)
Pre-due diligence on supply chains before investment.

Phyllis Kurlander Costanza (09:59.418)
Yeah, yeah, yeah, a lot of due diligence now. So in light, for example, in light of the trade and tariff events, especially those that have been recently triggered by the Trump administration, investors are looking for a lot more granular and sophisticated analysis of a company's supply chain. so, you know, they want to, and that includes things just, you know, not only looking at whether or not they're overly dependent on particular regions or countries, but also looking at

How are they conducting their due diligence? What tools do they have to conduct? And are they really rigorous tools or are they simply looking to see if they got a particular check, you know, for, yeah, exactly.

Justin Dillon (10:39.534)
Mmm.

Yeah, check the box. Yeah. Well, supply chains are certainly dominating our headlines right now. From your perspective, how rattled is the investor community about, I mean, we just entered World War trade this week. The first shot across was shot this week with tariffs and every day it's on again, off again. How rattled our investors community and what is likely going to be a

in what's likely going to be a long tariff war. Are investors doubling down into supply chains now and like really focused and pushing in their part codes to make sure that they are doing their due diligence? And by the way, and on top of that, what does good due diligence for a company look like when it comes to supply chains?

Phyllis Kurlander Costanza (11:32.882)
Well, for sure, the financial world is rattled by the tariffs. You know, they're on, they're off, they're on again, now they're off again. And you can see what's happening in the market volatility this week, last week. Absolutely. Now, it's not really related to supply chains though. However, what we will see and what I'm seeing from investors also is that technology is gonna be really a game changer.

Justin Dillon (11:52.258)
Mm-hmm.

Phyllis Kurlander Costanza (12:01.276)
for supply chains and investors wanna see that companies that rely on supply chains. So they're looking at supply chains from manufacturing companies and technology companies that really rely on these supply chains that have been known for human, that have been the subject of human rights abuses, let's just say. So the kinds of things that they're looking for are.

Are you using blockchain for traceability? Are you using artificial intelligence for predictive analytics, IoT devices for real time monitoring of goods in transit? And that's the kind of thing. know, blockchain is can provide an immutable record of a product's journey through its supply chain. And so that's what people want to see. And using technology to map their whole supply chain, including sub suppliers,

Justin Dillon (12:56.974)
Mm-hmm.

Phyllis Kurlander Costanza (12:57.052)
Those companies are much better positioned to identify the risks and also secure investments. And companies that don't have this are really at a disadvantage, especially in this new world where geopolitical risks and tariffs and even climate events are becoming a lot more frequently. it's, technology is not just a good to have now, it's essential.

Justin Dillon (13:18.766)
Sure.

Justin Dillon (13:22.83)
And so how does investment community, you know, when it came to supply chain due diligence, the tools that most companies have been using for the last, I don't know, 20 years has been questionnaires and side audits, which are arguably lagging indicators. If a fund is doing due diligence on a company that demonstrates that that is the tip of the arrow of their technology,

How is the investment funds looking at those companies? Is that a risk?

Phyllis Kurlander Costanza (13:56.754)
Yeah, so they're really, so what companies are now, you know, the best ones are segmenting suppliers based on risk levels, focusing more resources on those high risk suppliers in regions that are really prone to human rights violations and environmental degradation. And this is what you do so well, an increased focus on traceability and transparency. So do you have those systems in place?

Justin Dillon (14:05.197)
Hmm.

Phyllis Kurlander Costanza (14:25.542)
before you engage with a particular supplier. And best practices include mapping the supply chains right down to the raw material level, conducting supplier audits, which I know is controversial because when you go to a supplier, they're not gonna show you if there's human rights violations. So you really have to do that in a way. There's tools, there's technology that you can use, automated tools for real-time monitoring.

And those are types of tools that people want to see. Investors want to know where materials are sourced, how the goods are transported, if the business has really good risk mitigation strategies in place, such as inventory buffers or dual sourcing. companies that perform well in those areas are seen as lower risk from an investment perspective.

Justin Dillon (15:19.182)
Got it, got it. So I mean, as we mentioned, the headlines right now are tariffs and geopolitical. When it comes to geopolitical risk in supply chains, what types of due diligence are investors looking at from an investment perspective? Is the investment community looking into whether or not a company has any types of measurements of geopolitical risk in their supply chain?

I'm just curious because it's hard to measure that. It's hard to know what's truly a risk, how many tiers up in the supply chain. Is that going to impact goods and all the rest of it? Do you have any perspective on that?

Phyllis Kurlander Costanza (16:02.618)
You know, think the so here in the United States, Trump's America first policies is a geopolitical risk. And particularly when it comes to the trade war with China. And it's really prompting a reevaluation of global supply chain landscape. And companies are being forced now to reconsider the stability of their supply chains in the face of these potential restrictions and geopolitical issues.

Justin Dillon (16:20.856)
Mm.

Phyllis Kurlander Costanza (16:31.574)
And so in response, investors are becoming a lot more cautious. They're asking for a lot more detailed assessments of how companies are managing these risks and seeing a shift. Like you said, we were looking at supply chains. The indicators were all lagging indicators. It's too late by the time we saw them. So now we're seeing a shift towards a lot more comprehensive and proactive approaches.

Justin Dillon (16:43.352)
Mm-hmm.

Justin Dillon (16:53.484)
Yeah, sure. Yeah.

Justin Dillon (17:00.483)
Hmm.

Phyllis Kurlander Costanza (17:00.594)
And companies are being asked to demonstrate if they have contingencies in place for both global and regional disruptions and, you know, from tariffs to geopolitical conflicts to natural disasters. So it's really broadened the risks that companies with supply chains have to manage.

Justin Dillon (17:23.39)
Wow. companies are, investment community is increasingly wanting companies to have a replacement economy, backup suppliers, which, you know, for anyone listening to the show that works in sourcing, finding alternative suppliers is like doing your homework twice. It is so hard to do. And I know those technology companies out there, and we play with this a little bit, we call it the replacement economy. It's like, go with this supplier, but

We don't sit in the seat of sourcing managers and all of the decisions. mean, the switching costs for suppliers is incredibly high. But essentially, you're saying the investment community is wanting to see that their lease companies are investing into understanding if they need to switch.

Phyllis Kurlander Costanza (18:13.34)
Yeah, and yes, absolutely. And you see now I was reading something in the paper today that was talking to auto manufacturers who want to move their manufacturing here and their supply chains here. And it's going to take them years to do that. And who knows what the world is going to look like? Every investor knows that tariffs result in inflation.

Justin Dillon (18:32.247)
Yeah, yeah.

Phyllis Kurlander Costanza (18:42.192)
I mean, prices go up. The higher the tariffs for the United States, the increase in prices. So that is something that Trump has made a promise in his campaign, that prices were going to come down. So the two don't really sit comfortably together. something has to give.

Justin Dillon (18:44.76)
Sure.

Justin Dillon (18:58.572)
I understood. Well, you just said, I want to go back to something you said a little bit earlier. You said United States is a geopolitical risk. What from a trade standpoint, can you say a little bit more of what you mean by that?

Phyllis Kurlander Costanza (19:12.986)
Yeah, well, so if you look at, you know, right now what's happening is very political. And you so, for example, you know, mean, look at what's happened in Ukraine. One day, Ukraine is a very close ally and Russia is the enemy. Today, that's completely changed. Like in a moment. Now, Russia is our friend and Ukraine is our enemy.

And that has huge implications. Look at now what's happening in Europe. They're scrambling. because they have relied on the United States to support them all these years, especially when it comes to defense. But when it comes to issues like supply chain management, you're looking at areas

Justin Dillon (19:51.918)
Mm.

Justin Dillon (19:56.855)
Right.

Phyllis Kurlander Costanza (20:10.898)
you know, places that were once friends that are really going to going, we're going to get into a war with them. And I don't mean like a physical war necessarily, but whether it's a trade war or a cold war, and this is going to influence where people want to source their supplies from. And it's going to have a huge impact on markets as we're seeing.

Justin Dillon (20:18.346)
Yeah, great one.

Justin Dillon (20:32.556)
Yeah, clearly. you're looking at, you know, so US focused when we talk about finance, but the reality is, you know, defense companies in Europe just had a run. I mean, just a massive run for an increase in value because of geopolitical events. we're in an era where there's actually wins to be found in this chaos.

Phyllis Kurlander Costanza (20:51.931)
Exactly.

Justin Dillon (21:02.318)
How are you, mean, am I correct? that?

Phyllis Kurlander Costanza (21:04.783)
You know what, that is a big point. That is really important point when it comes to also supply chain is companies have to, when they're talking to investors, position this as an opportunity. You know, we may not like what we're seeing or we may like what we're seeing geopolitically. Regardless of our political point of view, companies need to position and see this as an opportunity for them.

Justin Dillon (21:16.056)
Yeah, yeah.

Phyllis Kurlander Costanza (21:33.554)
to have more transparency or to more ethically supply, to bring suppliers in-house, to diversify suppliers. And I think that's really important that companies start to position this as an opportunity, not as a impending disaster.

Justin Dillon (21:42.157)
Yeah.

Justin Dillon (21:50.124)
Yeah, we always say, you know, turn the headwinds into tailwinds. how do you turn? I think I'd be interested to hear how you would advise management teams who are now needing to explain how they're managing their supply chains to investors. What guidance would you give management teams when it comes to opacity in their supply chain, switching costs, all the rest of it? What do investors want to hear from management teams?

Phyllis Kurlander Costanza (22:18.61)
So if I'm a management team, I would start by framing all our vulnerabilities as opportunities for improvement and innovation. So such as adopting sustainable practices, manager management can align investor priorities with long-term value creation. And I think that's really important. It's really crucial to outline the potential impact of these geopolitical risks and climate change. So be really upfront about it.

So how do these risks impact supply chain? How have we developed a really clear roadmap for addressing these challenges? And I think by showing investors that companies are prepared for a wide range of disruptions and are really actively managing these risks, companies can build confidence and really foster stronger relationships with investors. can also...

demonstrate how they're leveraging technology right now to improve visibility and risk management, explaining how their approach using technology to sustainability, to ethical sourcing. And then I mentioned it before, but showing that they have diversified supply chains and that they really built resilience into their operations. And I think you'll see the word resilience replacing ESG.

Justin Dillon (23:16.632)
Mm-hmm. Mm-hmm.

Justin Dillon (23:42.254)
no. gosh. I know.

Phyllis Kurlander Costanza (23:42.456)
the future it's not politically charged you know resilience is always a good thing you know maybe use like the word authentic though it might be like wait what does that mean i thought you brought i hope you brought your resilient self to yoga class today

Justin Dillon (23:57.426)
man, my true self, my whole self, my resilient self, my transparent self. We are just the word salad that we put out. And that's my question here is like, know, management teams are gonna be tempted to put word salads out to their investors that say everything and mean nothing. What are the core things? What are the like tactics, the brass tacks that you're looking for to hear from them? Because you're gonna be hearing a lot of noise from management teams about

resilience, authenticity, sustainability, whatever it is. How do you cut through the cruff and know that they're doing something?

Phyllis Kurlander Costanza (24:34.534)
Yeah, think, so I would say there's probably like four phrases that have become meaningless, but are really important and company needs to how they're doing it. So those phrases are transparency, data-driven insights, compliance readiness, scenario planning, stakeholder engagement, know, these are words that we've used for a while. And so for transparency, if companies can really demonstrate that they have clearly outlined.

all of their identified risk and they have a really clear mitigation strategy for all of that, that's being transparent. data-driven insights. If a company can explain how are they using technology to provide very quantifiable metrics on their supply chain resilience and really showing what are they doing, you know.

Justin Dillon (25:10.926)
Hmm.

Justin Dillon (25:23.459)
Mmm.

Phyllis Kurlander Costanza (25:26.14)
whether it's blockchain, whether it's using AI for predictive analysis, which also brings me to scenario planning. So preparing responses for potential disruptions caused by geopolitical events or climate change and being able to show investors how you're doing that scenario planning. Are you using AI for that? AI is a perfect tool for that. Compliance readiness.

Justin Dillon (25:29.838)
Mm-hmm.

Justin Dillon (25:49.292)
Yep. Yep.

Phyllis Kurlander Costanza (25:53.072)
demonstrating how you're adhering to regulations, mainly in the EU, but also there's the Uyghur Forced Labor Act here. And then the last one is stakeholder engagement. how are companies meaningfully collaborating with the suppliers, with local NGOs can be very helpful in this regard. And government to address systemic

Justin Dillon (26:01.976)
Of

Justin Dillon (26:17.196)
Mmm.

Phyllis Kurlander Costanza (26:21.902)
issues like forced labor or even climate risk like deforestation. local, like really actively and meaningfully engaging with local NGOs that are focused in these areas could be a really important strategy.

Justin Dillon (26:23.852)
Yeah.

Justin Dillon (26:37.966)
Do you think, I mean, the typical supplier engagement over the last 20 years has been, I'm gonna come around once a year, beat you up with a 400 question questionnaire, you're gonna answer those, I'm gonna put them in a report and I'll see you next year. And that just doesn't seem to be the right recipe for the world that we're living in now, which requires a lot more like real collaboration.

not air quotes collaboration, like buyers helping suppliers with their own supply chain. Is that something that you're looking for as well? Is that something that investors value when they say supplier engagement? That's a big term. What do they mean? Do they mean buyers helping suppliers or just talking to them or beating them up with questionnaires?

Phyllis Kurlander Costanza (27:27.834)
Yeah. No, I think it's really engaging. And if you look at, know, know, Ben Skinner, who founded Transparentum, and I think that's a really good example of this. So he was a reporter. He would go out in name and shame manufacturing companies and others who had forced or child labor in their supply chains. He'd write a big article about it. Maybe their stock would go down for a little while, but it comes back. People forget.

Justin Dillon (27:34.584)
Great.

Justin Dillon (27:47.404)
Right.

Justin Dillon (27:54.71)
Hmm. Yeah.

Phyllis Kurlander Costanza (27:57.114)
And he'd walk away and nothing was changed. So he found a transparent to actually work with these companies to improve their supply chains and make sure that they didn't have these risks in them. And so I think you will see companies taking that same approach. They'll be working that it's the only way to do it because and for you know, and you've got to do things like spot audits to add.

Justin Dillon (28:15.426)
Mm. Okay.

Phyllis Kurlander Costanza (28:26.13)
And that doesn't mean just sitting in a conference room and believing whatever the management of that company tells you. You know, it means really getting out there and looking around and seeing and talking with employees.

Justin Dillon (28:39.822)
Well, I know even for myself running a business, we're still a small business, but obviously very, very busy and have a lot going on. And I can only focus on a few things any one day. And I have to believe that the plates that I'm running around and spinning are doing well. I can't run it. I can't see everything. can't look at everything all the time. What advice can you give to management teams to be able to understand

What is enough when it comes to, let's call it supply chain resilience? What advice can you give them to not just check the boxes when it comes to investment, but actually check the boxes to actually improve their business over time, given what you're seeing happening in the supply chain space and whether it's geopolitical or human rights.

Phyllis Kurlander Costanza (29:33.106)
I think probably the most important thing is to basically it's enhancing supply chain management. so implementing a lot more robust management systems is going to be critical. So really sophisticated tracking and tracing technologies to prove things like the country of origin and compliance with certain tariff rules. So I think you'll see a lot

Justin Dillon (29:41.742)
Mm.

Justin Dillon (29:48.334)
Yeah.

Justin Dillon (29:54.851)
Mm-hmm.

Justin Dillon (30:00.846)
Hmm.

Phyllis Kurlander Costanza (30:02.622)
or new technology being used to do this. So I think that's a really great use of AI. I mean, we're going to see a shift towards nearshoring or reshoring of production, mainly as a result of tariffs. So that's going to make managing these suppliers much easier.

Justin Dillon (30:09.879)
Yeah.

Phyllis Kurlander Costanza (30:27.868)
but it's going to, I think we're gonna see some new suppliers, a lot of new suppliers emerging as a result of the tariffs in particular.

Justin Dillon (30:36.512)
Yeah, I mean, we're seeing some of that in Vietnam and Thailand, people talking about moving production to... But now you've got infrastructure risks, right? mean, China's got all the highways, they've got it locked in. Thailand does not, Vietnam does not. And so, or we can talk about making things in America. The reality is you can't make it that cheap here. So it just feels like we're missing so many pieces when we talk.

about how we have to change things. just feels like we're not, we're just not being intellectually honest about what change takes. And it seems like we have to have a consolidation of goals, meaning solving for geopolitical risk in your supply chain, solving for human rights risk, it's the same actions. It's transparency, engagement, and working with your suppliers to build out better supply chains. It's not.

It's not as confusing as if we look at all of these different things we need to do in our supply chains as discrete actions, discrete things that we have to perform and not consolidate them into a more transparent supply chain is more sustainable and more ethical and more prone to be able to avoid geopolitics. Like it seems like we should be able to do all of that in the same place.

Because otherwise if companies, if management teams are trying to attack every one of these supply chain regulations, geopolitical, it just seems like they'll get stuck in a paralysis of analysis. Do you have any guidance for companies that are just honestly just feeling overwhelmed with all of this?

Phyllis Kurlander Costanza (32:09.882)
we're all feeling overwhelmed. And what I'm going to say is trite. When you think about the massive disruption and this shift towards protectionism, which is exemplified by tariffs and trade restrictions, forcing companies to re-accept their global sourcing strategies, the administration wants us to reshore manufacturing and reduce

Justin Dillon (32:19.234)
Yeah.

Justin Dillon (32:23.182)
Yeah.

Phyllis Kurlander Costanza (32:38.726)
reduced dependence on foreign suppliers, particularly from China, that's clear. Forcing companies to explore alternatives, more localized manufacturing options. These all sound really, they sound fine, sure, we'll do that. But the reality, like I mentioned, a car manufacturer said, it's gonna take at least two years to do this. And in the meantime, it's gonna crush the automobile industry here.

Justin Dillon (33:08.214)
and

Phyllis Kurlander Costanza (33:09.752)
So it's, you know, I think that adopting more sophisticated supply chain management tools is really, and doing it quickly, that's something that can be done quickly, but using your service, for example, using Freedom, it's...

Justin Dillon (33:24.854)
Yeah.

Justin Dillon (33:28.942)
Right. You know, I mean, if you choose, if you must, but the, but I agree. I just think that it's, it's tough when you've been doing things a certain way for so long to all of a sudden, you know, try to, you know, try to shift. We try to tell our customers and people that come to us, Hey, it's baby steps. Don't, we're about to show you data. We're about to show you your supply chain in a way you've never seen it before. It's like opening up another dimension.

You have to take time and learn as you go, learn what you can do with the data and start to change systems iteratively, not change it all overnight. I wanna ask one last question. We don't know each other really well. We've talked a couple of times, but based on the times we have talked and also just kind of what you focused on in your career, it seems like you have a close relationship with hope. Am I accurate there?

Phyllis Kurlander Costanza (34:26.898)
Absolutely, yes I do.

Justin Dillon (34:28.67)
So, okay, so if that's the case, how's your hope doing these days?

Phyllis Kurlander Costanza (34:33.362)
You know, there are, you know, we all experience this moments of deep despair. I tend to be very optimistic. So no matter what is going on, you know, the chaos around us, there's always going to be an opportunity. And so right now, I think we're all just trying to figure out what is that opportunity? And the thing about it is that

Justin Dillon (34:39.0)
Sure.

Justin Dillon (34:50.755)
Yeah.

Justin Dillon (34:55.214)
Mm.

Phyllis Kurlander Costanza (34:58.438)
the implications of what's happening now with tariffs, geopolitical issues, even climate change. These are going to have really lasting effects on all of us who are trying to do business. And so what we don't want to do is make a rash decision about our business right now, because this is what the president and his administration wants to see, because who knows, in four years it may be totally different.

So I think we have to adapt in ways that get us through, you know, these, they're pretty uncertain times. We don't know what's going to happen one day. We've got tariffs the next day they're delayed. So I think we just, we have to be really smart. and so my approach is I'm not going to do anything dramatic. You know, if I have to change the name of a fund from ESG to something else, I'll do that. That's okay. You know, as long as I know what this is all about.

Justin Dillon (35:36.654)
Mm. Mm.

Justin Dillon (35:53.166)
to resilient.

Phyllis Kurlander Costanza (35:56.658)
And, you know, we have to remember that there's still, there are still companies, a lot of companies and a lot of people out there who care deeply about these issues. And so we are not the only ones pushing sustainability in a time where that's become really politically unattractive.

Justin Dillon (36:16.13)
Well, that's inspired and it sounds authentic. You brought your authentic yoga self to this interview. Thank you so much. Well, thank you for coming on and I hope you'll come back on soon because we're going to continue to have lots more questions for you.

Phyllis Kurlander Costanza (36:27.826)
Thank Thank you. Thank you for explaining that to me.

Phyllis Kurlander Costanza (36:38.108)
Thanks so much for having me, Justin.

Justin Dillon (36:41.07)
And we're out. Thank you so much. That worked great. yeah, awesome. And this was so poignant as we're going through it. like, man, we got to plug with this one next because it just seems like it's what everyone's talking about, but in the supply chain space, it just feels like people are drinking from a straw and they just don't know where to go.

Phyllis Kurlander Costanza (36:43.122)
You're great. Thanks.

Phyllis Kurlander Costanza (37:05.852)
mean, this is just a massive change for people. How is that affecting your business?

Justin Dillon (37:11.118)
Yeah.

Justin Dillon (37:15.48)
good. I mean, yeah, it is. It's I think that, our our ICP is let me stop recording here.

Phyllis Kurlander Costanza (37:20.506)
It is, okay. I would think that it would actually be good for you.

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