Mike Roman:
John and Jeff, it’s a pleasure to be here today. Thanks for having me.

John Eichberger:
I think back to the times when you and I first got to know each other. I was a lobbyist on Capitol Hill, you were managing some of the government relations advocacy for ExxonMobil. How things have changed in the last 20 years.

Mike Roman:
Things have changed, things have evolved, we’re in a new world. I think the one thing that is important for us to understand is that the fuels and convenience retailers in this country play one of the most significant roles in terms of the evolution of transportation and carbon reduction initiatives. Through that evolution, it’s being woven into ESG—environmental, social and governance for anybody who may not be familiar with it yet—and that is going to be amplified by the Securities and Exchange Commission’s (SEC) proposed rule on climate. It is going to bring to the front the importance of relationships between suppliers and the retailers at a level that we haven’t seen before.

Jeff Lenard:
I think a lot of people didn’t have any concept or hear about ESG a year or so ago, and now it’s gained so much traction. It is now getting codified to a certain extent in various pieces of is it legislation, regulation—what is going on Mike?

Mike Roman:
Well, let’s look at it this way. If I go back to, as far as I can go back, there was an economist called Milton Friedman and he argued that a company has no social responsibility to public or society. Its only responsibility is to the shareholders. He said that in 1970. So what was that? 52 years ago? I was studying economics at the time. I’m not sure where Milton Friedman would be today. I think he would’ve evolved along the way, there’s some who disagree with that. And the fact of the matter is what’s happened is that in the eighties, we talked about environmental health and safety. The nineties became more of a focus towards sustainability and we began to see the beginning of this ESG movement, although it didn’t have that name. We got into corporate social responsibility, which is bringing in that social and governance piece. And now here we are with ESG. The ‘E’ for anybody who needs to know, is all about conservation, climate, natural resources. ‘S’ is all about social, it’s about how you treat people, the recognition of diversity inside companies and outside the companies. And the ‘G’ is all about company leadership: How do you run your internal controls, your shareholder rights? Again, all this now starts to get amplified. And if I’m an international company, I not only have to deal with what’s going on in the U.S., but as a responsible organization, I have to look at what’s going on in other parts of the world. And quite frankly, we are behind in the U.S. where they are, for example, in the EU at this particular point in time.

John Eichberger:
Jeff, you mentioned the rise of attention in the last year and a half. I think a lot of that’s driven by the fact that a couple years ago, BlackRock, who controls $10 trillion of investment assets made the announcement that this has to be a critical element. After the Glasgow meeting last year on climate, the leading financial institutions came together and formed a new entity controlling $130 trillion of assets. One of their principles was we want to make sure climate is included in every investment decision going forward. From a fuel retailer, convenience retailer perspective that’s not publicly traded and says I don’t really care, that’s a dangerous position because banks are now starting to condition underwriting and loan terms based upon your ESG plan. So it’s affecting everybody, and Mike, to your point, the SEC proposal is going to bring in so many other people because of the way it’s structured for the big publicly traded companies.

Mike Roman:
That is exactly right, John. I can tell you unequivocally, at this point, I’ve had discussions with banks. They are being asked by their shareholders, where are you investing your money and who are you financing? In terms of financing, the discussions around the fuels and convenience retailers becomes critically important because banks are being asked that question. And we know, and we have to be able to effectively communicate, that those retailers are going to be needed for decades, which means that they are going to buy new sites and they’re probably going to introduce electric vehicle service equipment along the way and other types of fuels. But they’re also going to have to maintain and upgrade their existing facilities. And to do that, they’re going to have to borrow money and have to explain to a bank so a bank can explain to its shareholders where that money is going. That’s a challenge, and it’s a new one that they haven’t had to face.

Jeff Lenard:
Does it make it more challenging with the rise in fuel prices? How does that play a role in all of this?

Mike Roman:
I think at this stage we want to aim for being complimentary as best we possibly can. I think the sooner that retailers realize they have that obligation and under the SEC guidance, if in fact we do get scope 3 where retailers are going to have to report back to their suppliers the types of fuels they’re using, how they’re being sold and utilizing the great work the Fuels Institute has done with its ESG integrity program, hopefully that will be made easier. But I think part of all this is that you need to be able to explain to the public in a way that they understand that the road to net zero is not a one-lane road. It’s a multi-lane highway. It’s going to take a lot of fuels, and it’s gonna take a lot of thinking about the realities of technology and the availability of resources to let us continue to be able to utilize fuels in an efficient way and in an environmentally sound way that allows our economies to continue to be able to grow so that we can continue to pave this road to net zero.

John Eichberger:
There are some brilliant people, brilliant organizations working diligently to find solutions that will reduce carbon, reduce criteria pollutants, benefit the transportation space, benefit people as well as the environment. There’s so much opportunity out there, but on the flip side, I’m really concerned because we seem to be going down politically a one-way road where simplicity is the enemy of effectiveness. Decarbonization equals electric vehicles in their mind. And they’re not opening up the opportunities for these innovations from these brilliant people, much smarter than I can ever pretend to be, to bring solutions to market. And if we cut off our nose to spite our face, and we say we’re going to go in one direction and we don’t allow this innovation investment to flourish, we’re going to wake up 20 years and go, ‘Wow, we are in real big trouble because we haven’t taken advantage of the opportunities in front of us.’

Mike Roman:
I agree with you 100%, John, and going back to Jeff’s point, when you look at where we are with fuel prices, it’s a wake up call at this particular point in time and it’s a terrible wake up call because it’s going to be conflated with higher prices in a number of different areas, including food. When you look at that and say to yourself, what do I need to know about where I’m going? You need to realize that you have to make investments in this business. The suppliers have got to continue to be able to do the things that they’re doing to provide the products. And our retailers are going to have to be able to sustain their models for decades. And they will change along the way, and they will evolve, but they will need to be able to retain—because customers will demand them—their ability to sell the fuels they sell today.

John Eichberger:
You’ve got the pressure from the government. You have the pressure from the financial institutions, whether you’re publicly traded or privately held, but you also have an evolving demographic of the population that is much more attuned with environmental stewardship and they’re making decisions about who they want to work for and who they want to shop with and do business with based on do they share my values. I think back to when I was growing up, it didn’t matter if a company shared my values. I never thought about does this company that I’m going to buy this product from share my values. I could care less. That’s evolving, that’s changing. And so the pressure from financial institutions, governments, your customers, your employees, your communities is just growing. And any organization that doesn’t pay attention to this is doing so at their own peril.

Mike Roman:
You’re absolutely right, John. On advocacy, there’s an opportunity here for the suppliers, the retailers and groups like NACS, the Fuels Institute and the organization I’m with to be able to educate what the realities and what the technical limitations are at this point in time and to be able to make smart decisions about the directions we go. Look at the automobile companies right now. They are still developing advanced internal combustion engines and they do it because they know that even though they may be forced to stop selling those engines, at some point, they’ve got to continue to develop along the way because of the restrictions and the limitations we’re seeing on the other side, such as the electric vehicle development. We have an opportunity to educate and we’ve got to continue to be able to do that.

Mike Roman:
The SEC rule is positioning us in, in a strange way to be able to get more information out. I have spent the last four weeks looking at comments coming in on the SEC rule and I can tell you unequivocally everybody wants to do good, but they think when they look at what’s going on right now the SEC rule is very burdensome, very expensive to work with, and not clear about the materiality of the information that’s going to come out and how shareholders and investors will look at that information. It needs to be worked. It needs time. There needs to be delays. And particularly for our retailers on the Scope 3 piece, hopefully there’s enough of a pause for us to look at how can you best develop information that is going to really be meaningful and helpful to investors who are going to be buried in information and are going to have to sort through what’s important. And again, what’s material to the decisions that they’re making.

Jeff Lenard:
When you look at our fueling infrastructure, 100 hundred million barrels of oil a day is used worldwide. And then you add in electricity. What advice is there for a three-store retailer out there who’s listening to this and saying, well, I occasionally need a loan, but maybe I don’t need a loan. What are a couple things they need to do in terms of education, and then secondarily, in terms of planning for the next few years?

Mike Roman:
Excellent question. First thing I would say is make sure you really know who your lenders are and make sure you’re talking to them about the business. One of the things that the Fuel Institute and NACS do really well is they try to get information out. Take the information that’s available to you and share it with your lenders, share it with your customers. And one of the things I’ve always proposed is that our retailers are the best advocates for this business. They know their markets, they know their communities. They have the best connections with local lawmakers, state lawmakers, and many at the federal level. You’ve got to get them to understand what your needs are going to be, and not only their needs as suppliers but what their customers are going to need, who are the constituents that are the ones who are going to be voting for their representatives.

Mike Roman:
It’s a hard thing to get through, but again, I look at the SED rule as a way to begin to amplify the discussion. Some of these comment letters that are coming in are 75 to a 100 pages long. So I’m not sure what the SEC is going do with all that, but they’re going to learn a lot about the business and what can and can’t be done and how we can build a realistic path going forward. We all want to get to this net zero objective in 2050, we just have to be able to sustain the businesses along the way to help us get there.

John Eichberger:
Mike, you mentioned that you’re reading these comments and everybody wants to be part of the solution. Yet you look at the rhetoric and if you are not in one camp, then you’re evil. I saw a post the other day that there’s an auto company that’s not committed to all EVs. And they’re being blasted for being in the pockets of lobbyists and all this stuff. The animosity and the rhetoric going on out there, it’s not constructive. It’s not helpful. You look at the organization you worked at for so long, they’re focused on reducing carbon. They produce hydrocarbon fuels. We have to look all the way upstream from the time you extract oil to the time it’s consumed in a vehicle where the opportunities are to have a meaningful impact.

John Eichberger:
And let’s explore them, but we’ve got this is all or nothing mindset and that’s very dangerous. And the financial institutions, my perspective is they’re a little bit more pragmatic than that, but they are shifting resources away from traditional energy. And I think that’s contributing to some of the price dislocations we’re seeing. The energy companies are no longer being encouraged to produce. They’re being discouraged to produce from governments and from investors. And that is really why we’re in the situation we’re in. There’s a big disconnect between where we’re going and how we’re taking care of people. And we need to raise a level and the interest of people to the same level as the environment, or we’re going to find ourselves in this quandary repeatedly as we go through this rocky transition.

Jeff Lenard:
I want to go back to a point that Mike had mentioned earlier about how our industry is close to the consumers. We have connections. I spent the better part of a day with a retailer with two stores yesterday and just watching him, he knew the customers. There was a real connection with the community and they know the community. So it strikes me that there’s a real opportunity. They have these conversations every day with their customers that they can continue and to have more of a conversation with people developing policy. Any suggestions for how they can get started?

Mike Roman:
I certainly encourage that individuals take advantage of opportunities where you can come to Washington and have real discussions. People have to realize, and John you know this really well, you get about five or 10 minutes if you’re lucky with a legislator and you may not get it with a legislator—you may get it with a staffer. But you’ve got to be able to go in and do that. I’ve always said that customers know those companies best through the brand that they represent. There is an opportunity going forward for every one of those major suppliers to be able to show the progress that they’re going to make on this road from now until 2050—and actually show the customers what are we doing to solve these problems. And again, take advantage of every opportunity that you possibly can to talk locally at a state level and at a federal level with representatives to help them understand your business. And I’ll reemphasize not just your business, but understand what it means to the customers who are their constituents.

John Eichberger:
Retailers don’t have to go at it alone. They can go to listening posts with their legislators. They can go to town halls and we encourage them to do that. But your local association, your state association, NACS, SIGMA, NATSO—they all do fly-ins. They all do events and have programs set up to facilitate that engagement. And I’ll add this: As a former congressional staffer, we need resources. Congress needs people in the district who they can call to get honest input. When you engage with your legislator, don’t always go with hat in hand. Don’t always go asking for something and don’t have a combative stance to it. Even if you disagree with a legislator you’re meeting with, present yourself as a resource, as a part of the community, as somebody who can help them understand the implications of the policies they’re thinking. That’s going to go so much further than going in and calling them names and challenging everything they stand for.

Mike Roman:
Bring solutions.

Jeff Lenard:
For those who are not familiar with the Fuels Institute, its fuelsinstitute.org and check out all the information there. Thank you both for joining us today. If you are not a subscriber, please do so and thank you for listening to Convenience Matters.

Outro:
Convenience Matters is brought to you by NACS and produced in partnership with Human Factor. For more information, visit convenience.org.

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