Is the best way to gostill your way?

Measuring the issue and the issue of measurement

Every challenge begins at the foot of a wall. You look at it, trying to figure out how to get over it, and you measure what is at stake. So when it comes to the challenge of the century, this is measured by international bodies: a 1.5°C target for the COP, a target of carbon neutrality by 2050 for the EU, and a far-reaching but achievable objective for businesses. How can they reduce their emissions yet continue to grow?

To find out, companies first take stock: they analyse their carbon footprint. “We need to know where we stand in order to take action,” says Schneider Electric’s Rafael Segrera. “And to do that, you have to measure. These measurements are used to establish a baseline. And then you come up with a strategy”. But measuring “is no easy task”, says Caroline Riffaud, Head of Environment at CGI Western and Southern Europe. “We’re a large organisation, so it’s very complex.” At Leroy Merlin, Agathe Ruckebusch feels the same way: “It involves a lot of work to structure the data and the IT, and it’s very costly”.

The call for action stations has gone out everywhere. At Leroy Merlin, “we created a post for a performance leader dedicated to positive impact, who creates indicators and dashboards.” New jobs and new skills are emerging. But what are they measuring? “We’re still looking for the right KPIs,” says Moët-Hennessy CSO Sandrine Sommer, who takes inspiration from those who know what they’re doing. “We work very closely with the Finance teams.” Financial data are so robust that I’d like them to help us develop the same data culture in the non-financial sphere.”

Numerous indicators have been set up. For 2024, Accor has pinpointed three main priorities: the continued elimination of single-use plastic in its hotels and head offices; water conservation, and the elimination of food waste. “Every month, we ask each of our experts in plastics, food waste and diversity to report on their KPIs, and we produce presentation dashboards that are then examined by the group’s CEOs. It’s the best way to move forward”, says the SKEMA alumnus. That… and financial incentives. Accor indexes certain pay mechanisms to the targets set. “In one year, we eliminated 46 single-use plastic products in 84% of our hotels. In particular, this operation did away with 30 million small 30-centilitre bottles.

To achieve these results, the HR lever is also brought into play. “Raising awareness is essential,” says Caroline Riffaud. “Knowing where we stand is all well and good, but we need to be credible through our actions too. What does ‘2 metric tons’ or ’10 metric tons’ mean? You don’t really know unless you’ve been trained. We need to inform people so they can understand the impact and what it will bring us.

At Schneider Electric, the biggest emphasis is on technology and collaboration. “We can now measure the carbon impact of each of our 200 factories and 120 distribution centres,”says Rafael Segrera. “When we say today that a factory emits zero carbon, it’s because we have proof. Thanks to the technology we’ve introduced, we’ve achieved energy savings of 30% on average in our plants.” The French group is also helping its suppliers to measure their own impact.

Measuring their non-financial performance has become strategic for companies, and more and more are publishing integrated reports combining financial and non-financial information. “My aim,” says Sandrine Sommer, “vis to measure a company’s overall performance without reducing it to euros and dollars. That’s what’s really at stake.”

We work very closely with the Finance teams. Financial data are so robust that I’d like them to help us develop the same data culture in the non-financial sphere.

Sandrine Sommer, Moët-Hennessy

The individuality of worlds

“Our solutions cannot be applied across the board.” That’s the gist of what several companies told us. With ESG, there are as many levers as there are situations. For example, the clients of Audrey Pineau, Director and ESG Manager at CGI Business Consulting, come from all walks of life. They “challenge her” on the impact of her proposals, all adapted to their own particular circumstances. And if there are hares and tortoises, everyone is on the path at different points.

Apart from finance, the transport and energy sectors – the first to feel the weight of political pressure – are perhaps the most advanced. “The retail sector has begun to take this on board with the AGEC (anti-waste) Act,” but even the luxury industry, long seen as the poor relation in terms of ESG, is “starting to want to catch up”.

At Moët-Hennessy, Sandrine Sommer would agree: “I’m convinced that luxury has more than one role to play in these issues.” The CSO of the LVMH group Wines and Spirits branch is well aware of this: “We need to speed things up and get the whole industry on board. We create not only products but also experiences. So we need to encourage our customers and consumers to take a different approach to our products and how they are tasted.” “Our first business is hospitality and the art of tasting. Our products are precious, so we want them to be consumed in moderation and appreciated for their quality. Within the company, we train our staff to be truly effective ambassadors. Outside the company, we get our messages across.”

Victor Genin is also faced with this new mindset. Since the pandemic and the rise of new technologies, business trips have dwindled somewhat, but thanks to the rise of “bleisure” (business and leisure), a new trend that has developed rapidly alongside teleworking, people will often prolong a trip to enjoy some sightseeing Accor raises its guests’ awareness about the least polluting means of transport. “Customers also have a key role to play, and it’s part of our approach to provide them with services that make their experience just as enjoyable but with a smaller impact, or even more enjoyable in the long term.”

The same is happening with retailers. Lagardère Travel Retail operates shops and restaurants available in stations and airports. So Arnaud Rolland is “trying to lead consumers towards a more plant-based diet.” It also means giving more or less space to the print press, for example. “This is typically the kind of product that is on the decline. If you see an 18-year-old buying a newspaper, let me know. People are behaving differently now.”

Other sectors are taking longer to transform due to their structure. “We’re tackling the issue head on, but it can only be one step at a time,” says Emmanuelle Broustet, Linky Deployment Head at Enedis. “It will take us 20 or 30 years to change an entire industrial sector.” The energy transmission company is very much in touch with the territories it links up. And the situation is not all rosy: “Small businesses are being left behind. And most of our suppliers are small businesses. Try telling them they need to start thinking about their CSR, and they’ll give you a blank look. Our own time scale is out of step with the scale of a producer and the energy transition.”

It’s going to take us 20 or 30 years to change an entire industrial sector.

Emmanuelle Broustet, Enedis

What tools can be used throughout the organisation?

Our research shows that there are two main avenues, both involving management as the driving force: (1) a formal, structured way rolled out by management to the entire organisation; and (2) a more informal way, essentially based on discussions involving different departments and different levels of management, where they compare viewpoints and reflect together on how the organisation creates value.

Novo Nordisk, a Danish company specialising in diabetes treatment, is a good example of the first approach. The group employs some 45,000 people in 80 countries and markets its products in over 170 countries. In 2004, the group’s management incorporated Integrated Thinking into its organisation through two structuring actions: formalising the principle of integrated management in the company’s articles of association and introducing a governance model, the “Novo Nordisk Way of Management”. Here Mads Øvlisen, the group’s then CEO, included a clause in the articles of association stipulating that the company would “endeavour to carry out its financial, ecological and social activities in a responsible manner.” As a result, management had to think holistically about its value creation process and report on the performance of environmental and social aspects as well as the financial side. The Novo Nordisk Way of Management is based on 10 principles rooted in sustainable development, and guides management’s actions internally. It underpins the running of the organisation and its managerial pay policies. In line with the development of Integrated Thinking within the organisation, Novo Nordisk has been publishing an integrated report according to the IIRC framework since 2014. The group illustrates an Integrated Thinking model deployed top-down that has proved its worth: commercial activities based on sustainability (100% of production using renewable energy; easily accessed, affordable medicines, etc.), and one of the highest levels of profitability in the pharmaceutical industry.

There is, however, a second, much less structured and much less formalised approach. SANFORD is New Zealand’s largest and oldest seafood company, listed on the New Zealand Stock Exchange. Volker Kuntz, appointed head of the group in 2013, wanted to make a radical strategic shift from a volume-centric strategy to one focused on value creation, in particular by dropping frozen products and concentrating on fresh produce. In his view, developing human capital and making the best use of natural capital are the “foundations” for the long-term growth of financial capital. To win his employee’s support, he fostered meetings and direct exchanges at all levels of the organisation, not only sitting down with his management teams to discuss the value creation process, but also travelling to the various fishing sites to make contact with operational staff and explain his new strategic vision to them. Kuntz says this was how he successfully championed his belief in sustainability and the long-term view with his staff and investors alike. When he left, seven years after his decision to develop Integrated Thinking in his organisation, and despite the difficult Covid years, Sanford had become an innovative, profitable company that was both environmentally sound and developed its human resources. Unlike Novo Nordisk, Integrated Thinking at Snaford is the result of collective questioning within the company and discussions involving various perspectives and different organisational levels. Since 2014, the firm has been producing an integrated report in which it transparently “tells its story” to its stakeholders.

Sabrina Roszak,
Associate Dean of the Digitalisation Academy
SKEMA Business School

Carrying on with what you have

How do you say ESG in Dubai or Gabon? Differently than in Europe. ESG poses a major problem for international businesses: it is supposed to be disseminated to all the stakeholders of a group, but regulations are not the same everywhere. From this point of view, Europe is far “ahead” of other parts of the world, but regardless of the geographical zone, ESG raises problems and offers, or could offer, solutions.

“In Brazil, we are incredibly lucky,” says Rafael Segrera in his Sao Paulo office. “Two-thirds of the energy produced here is renewable. Nature has given us water, and thanks to the determination of Brazilians to turn that water into electricity…” Not only is the energy relatively clean, it is also inexpensive. For Schneider Electric’s South America Zone President, there is a downside to these advantages: “Stakeholders think they will be tackling tackle problems other than the energy efficiency of their processes. And as Brazil is not the world’s biggest carbon emitter [12th in the list of countries with the highest CO2 emissions, according to Statista – Ed.], they feel it is up to others to take action. This is my big battle: just because we are responsible for ‘relatively few’ emissions doesn’t mean we shouldn’t tackle them. I say to Brazilian manufacturers: ‘be smart: convince the rest of the world to come and produce in Brazil. Their products will be green, and they can go and conquer other markets.’ It’s just common sense!”

Not all countries are equal when it comes to the impact of industry on their environment. Romain Didier has held senior positions in Gabon’s forestry industry. As you might guess, this is fairly destructive… But if it is, it is not that trees are being felled so much as an inability to fully exploit this raw material: “The transformation rate of logs is around 35%. This means that 65% of trees go to waste,” says the Frenchman sadly. As Gabon is lagging behind in its development, this waste is generally burnt. So as well as not using the material, we generate even more emissions…”. In his capstone course in SKEMA’s Global Executive MBA programme, Romain Didier looked at how these negative externalities can be transformed into opportunities. “The situation of road networks is very interesting. A large number of them are created to transport cut timber. But a lack of political will means they only exist for a very short time, even though they could be used for many other activities in the future.”

Even within French groups, business units (BUs) approach ESG issues in very different ways. “Some countries will place more emphasis on the social or environmental aspects,” says Amélie Auquière, HR Development Manager at CGI France. “There’s the group strategy, and then there’s its adaptation to local conditions.” At Accor, “the work we have to do with the hotel complex in Dubai is not the same as with the Novotel in Sophia-Antipolis,” says Victor Genin. “Nor are we equal in terms of the energy available in each country. In France, we are lucky to have a very low-carbon energy source.”

“In France, we have the most favourable regulations and an energy mix that has a lot to do with environmental issues,” says Agathe Ruckebusch, Head of CSR Strategy Management at Leroy Merlin. She sees France as a “pioneer”, a “trailblazer” that “serves” the group’s 11 other BUs. “If France can’t do it, no one can.”

Outside the company, we are still told that investing in sustainability is expensive, cumbersome and ‘not good business’

Rafael Segrera, Schneider Electric

When heavyweight companies say certain things…

There are some offers you just can’t refuse. “We made a list of our 1,000 most important suppliers and told them: ‘This is what we have done; this is what we are doing with our customers – now you complete the value chain. If you don’t have a carbon reduction plan, it means looking for other customers,” says Rafael Segrera, Schneider Electric’s South America Zone President. The result? 99% got on board. “We help them to measure their impact, and the impact as a company is felt throughout the value chain.” This is also the view of Dutchman Tjeerd Krumpelman, Global Head of Reporting, Regulation and Stakeholder Management at ABN AMRO: “As a bank, we have an influence on our customers. We can help them by making it more attractive for them to act in favour of sustainability.”

This is in stark contrast to the way companies are portrayed in the media. They are said not to be involved enough, and reluctant to change the way they do things. But actually the major groups are driving change among all their stakeholders, and this is part of the same movement leading them to transform themselves. At CGI Business Consulting, Audrey Pineau has witnessed a rapid change: “Five or six years ago, nobody asked us these questions. When we went out to tender, all that mattered was the quality and price of our service. Today, 10% to 15% of our final score is based on ESG.”

But not everyone is convinced. “Outside the company, we are still told that investing in sustainability is expensive, cumbersome and ‘not good business’. It’s a belief that’s still all too prevalent,” says Rafael Segrera. This lack of commitment highlights the importance of governance in bringing about change. Romain Didier has seen this first-hand in Gabon’s forestry industry: “The companies there are often small; they work on a B2B basis, and they don’t have a public image. So they’re doing things properly, but they’re not trying to create a truly virtuous system. They are not looking to form partnerships. There’s a lack of willpower.”