Don’t be a mixed-up chameleon! How to prioritize your ESG issues

Speed: Challenges in Execution 

Another challenge for firms is dealing with the fast-changing topics that affect the business environment. According to the World Economic Forum, the top four global risks in 2020 are environmental and climate related. At the same time, technological risks such as data fraud and cyber-attacks are increasing and follow behind the environmental risks in terms of likelihood. The accelerating pace of biodiversity loss is a particular concern, with species abundance down by 60% since 1970 

By including the ‘inside-out’ view into our materiality assessments, DSM realized we can have a far greater impact than if we focused on just our own business by highlighting the food system challenges the world faces. As a result, our materiality matrix has changed with food security and healthy diets and nutritious food being ranked far higher than six years ago because they have both a strong business and societal impact. We have also upgraded the topic of biodiversity. Since we are active in food systems, we have become more dependent on the way these bio-based raw materials are produced 

Furthermore, water stewardship has become a more material for us since our stakeholders are increasingly expecting us to answer the question of how we manage the water in our supply chain. Since we are not a major consumer of water, we didn’t previously view it as material, but by taking steps to reduce the consumption of our factories we have gained credibility with our stakeholders, including local communities and clients. 

Delivery: Creating value from sustainability 

In 1963, Freddy Heineken, the founder of the eponymous beer company was shocked to discover his firm’s beer bottles littering beaches in the Dutch Antilles. In response, he asked an architect to design a reusable beer bottle that could be used to construct houses. The idea was to turn a material topic – beach littering – into product design. Unfortunately, the bottle – which was shaped like a brick – never got past the prototype stage since it was too heavy for customers to transport home. Nevertheless, the concept was an early example of a company thinking about re-cycling. 

When firms today think about creating value from sustainability, they should ensure their strategy is Authentic, has a Business case behind it, is executed Consistently and is Distinctive. We call this the ABCD approach. 

At DSM, our materiality assessments have helped us to create value in three ways. 

First, it has helped us become the preferred supplier for many of our customers who are increasingly being expected to take responsibility for the sustainability of their supply chains. For many companies, Scope 3 emissions account for around 90% of their greenhouse gas emissions. Therefore, by reducing our carbon footprint, we are helping them. 

Secondly, it has helped us to innovate and design new products to address sustainability challenges.  

Thirdly, having a good ESG performance, rewards us also financially by giving us access to cheaper credit, attracting sustainability-minded investors and making our assets more resilient to climate shocks in the long-term.  

While there may be some resistance to making huge investments to reduce greenhouse emissions, it is important to bear the long-term benefits in mind. Companies that invested in generating 100% of their electricity from renewable sources, will not be exposed to the rising oil and gas prices we are seeing today, making them more profitable than peers.  

Equally, there are many intangible effects. With workers increasingly wanting to work for organizations that have a positive impact on society, making your business model more sustainable is a way to attract and retain skilled labour, also saving the cost of high turnover rates.  

In summary, the heart of sustainability is making more out of less and this is also good business practice.