During this webinar, the Board Leadership Center was joined by Mike Boonen, Head of Sustainability at KPMG in Belgium, who set the scene for today’s conversation about ESG in the boardroom, including a look at the forces driving sustainability and corporate value, sustainability reporting and ESG ratings and considerations for board members. We then welcomed Jean-Louis de Cartier, Chairman of Etex, and Caroline Thijssen, Board Member of Etex and Head of Sustainable and Responsible Development at Retail & Private Banking at BNP Paribas Fortis, who shared their insights into Etex’s sustainability journey. This article is a summary of the key takeaways.
The topic of sustainability is everywhere – or at least it seems to be – including most boardrooms in Belgium and abroad. However, it is not just something you do some of the time – you need to live your values, and they need to be in everything you do. It’s what you should be doing to contribute to the sustainability of our collective future, because no business can succeed in a society that fails.
Yet, the countries that have developed socially and economically have not done so within our planetary bounds, and those which operate within our planetary bounds are still “developing” according to the UN’s Human Development Index.[i] This is the sustainable development gap.
In order to address this gap, the UN set 17 Sustainable Development Goals (SDGs) – clear economic, social and environmental goals – to achieve by 2030. However, no individual company can achieve all of these goals, at once, on their own. Many businesses, therefore, unite to achieve goal 17, Partnerships for Goals, and/or focus on just one or several of the other goals.
KPMG’s Survey of Sustainability Reporting 2020 identified the three most prioritized SDGs – goals 8 (Decent Work and Economic Growth), 12 (Responsible Consumption and Production) and 13 (Climate Action) – and the three least prioritized SDGs – goals 2 (Zero Hunger), 14 (Life Below Water) and 15 (Life on Land).
This leads to the risk of certain goals being left behind. One issue with the SDGs is that they are non-binding; this is something that recent initiatives, such as the European Union’s Green Deal, hopes to address. For companies though, it’s not only the legislation and regulation that matter – there are financial risks to societal and climate change, which are increasing in both likelihood and impact.[ii] Furthermore, there is an increasing expectation, from a growing number of stakeholders – including shareholders, customers, employees, investors, etc. – for companies to operate in a sustainable way.
People look to the board and ask whether we want to focus on sustainability or profitability. We need to express the equation in a different way and say that we want to be a profitable company by being sustainable. It will be positive for the employees, stakeholders, clients, and the growth will follow eventually.
There’s no one-size-fits all ESG journey. Your journey needs to start with your business, your purpose, and your stakeholders. The example needs to be set by the Board and embedded within the organization.
We created a CSR committee on the Board because the example comes from above – from the Board. The Board needs to be highly keen on the strategy and they need to be aligned. Then, together with management and with your stakeholders, you can implement your strategy.
For Etex, their CSR strategy started with their purpose, “Inspiring ways of living” and with their focus on health and safety – particularly considering their past connection with asbestos. From there, they held internal workshops to define their stakeholders – internal, connected (shareholders, users) and external (communities, NGOs) – and the 20 most relevant materiality topics. Then they tested these topics with their stakeholders to create their materiality matrix.
ESG is embedded top-down throughout the organization and every decision takes sustainability into account. Three key milestones helped them implement their strategy:
At one point, we came to the realization that inside the organization, our initiatives at Board level were not being recognized. And that’s a problem – you can have fantastic ideas at Board level, but you need to bring them into the organization. So we looked at this. Now, every decision we take, every discussion we have – from investments to learning and development – has a CSR aspect. Today, CSR is clearly understood throughout the business, not only as a cost item but from a profit aspect, as well.
To monitor their performance, the Board created a CSR Committee (one of four formal Board Committees), which meets four times per year and reports to the Board on all important sustainability topics, including materiality metrics, SDG selection process, ESG rating, sustainability reporting, social and environmental projects, as well as sustainability and environmental risks.
In terms of monitoring, we are also looking to include it in Etex’s remuneration philosophy. For us, it’s important that our remuneration policy really translates our deepest ambitions and convictions regarding our strategy and sustainability.
As a non-listed company, they are not obliged to publish a sustainability report. However, they decided, with their shareholders, to behave as if they were on the stock market and include sustainability reporting in their annual report. Their goal is to be more and more transparent, and each year they aim to improve their reporting. One important part of reporting is defining consistent KPIs across the group, which can be beneficial for benchmarking, and eventually for remuneration.
The impact of living the strategy from the top-down and throughout the organization goes beyond KPIs and reporting. It impacts the company culture and employee engagement, has a positive impact on finding talent, and brings people together. For example, during the pandemic, Etex guaranteed three months’ salary to their employees all over the world, thereby creating a sense of belonging.
We will get out of this pandemic, and we will be a much stronger organization.
Also see our Boardroom Questions on Sustainable Development and Human Rights.
The Board Leadership Center offers non-executive and executive board members and those working closely with them (including CROs and Heads of Internal Audit) a place within a community of board-level peers. It also offers access to topical seminars and more technical Board Academy sessions, invaluable resources, thought leadership and lively and engaging networking opportunities.