Sustainable Transformation Strategy: Casebook on Corporate Sustainability in Practice 3031266951, 9783031266959

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Springer Business Cases

Paolo Taticchi · Melissa Demartini  Melina Corvaglia-Charrey 

Sustainable Transformation Strategy Casebook on Corporate Sustainability in Practice

Springer Business Cases Editorial Board Mehtap Aldogan Eklund, Department of CBA - Accountancy University of Wisconsin–La Crosse La Crosse, WI, USA Karuna Jain, Shailesh J Mehta School of Management Indian Institute of Technology Bombay Mumbai, India Dilip S. Mutum, School of Business Monash University Malaysia Subang Jaya, Malaysia Henry Shi, Faculty of Arts, Business, Law and Economics University of Adelaide Adelaide, Australia Marianna Sigala, Department of Business Administration University of Piraeus Athens, Greece

Springer Business Cases is a book series featuring the latest case studies in all areas of business, management, and finance, from around the world. The well-curated case collections in each of the books represent insights and lessons that can be used both in the classroom as well as in professional contexts. The books also place a focus on regional and topical diversity as well as encouraging alternative viewpoints which bring the knowledge forward. Both teaching cases as well as research cases are welcome.

Paolo Taticchi • Melissa Demartini •  Melina Corvaglia-Charrey

Sustainable Transformation Strategy Casebook on Corporate Sustainability in Practice

Paolo Taticchi UCL School of Management University College London London, UK

Melissa Demartini Department of Technology and Innovation University of Southern Denmark Odense, Denmark

Melina Corvaglia-Charrey UCL School of Management University College London London, UK

ISSN 2662-5431     ISSN 2662-544X (electronic) Springer Business Cases ISBN 978-3-031-26695-9    ISBN 978-3-031-26696-6 (eBook) https://doi.org/10.1007/978-3-031-26696-6 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To Manuela, William, Derek & Jackson I LOVE YOU TO THE MOON AND BACK Paolo To my grandparents and Rudi for the love and pride they show me every day. Melissa To Fabien and our children Chloé and Amélie and to the next generation. May the future be green and shine bright! Melina

Acknowledgements

We would like to gratefully acknowledge all the companies involved in this book for the quality of their work and purpose-driven leadership. Without you, this book would simply not exist. Tjeerd Krumpelman (ABN AMRO); Natalie Deacon (Avon); Klaus Kunz (Bayer AG); Karen Pulley (Consilient Health); Ernesto Ciorra, Giulia Genuardi, and Emanuele Polimanti (Enel); Julia Pallé (Formula E); Tim Brooks, Therese Noorlander, and Tobias Dinnesen (The LEGO Group); Renata Mele, Riccardo Angelini Rota, Pierpaolo Vezzani, and Daniele Mattei (Leonardo); Andrea Rasca and Louisa Bullard (Mercato Metropolitano); Elisa Moscolin (Sage); Emmanuel Normant (Saint-Gobain) and Barbara Cimmino (Yamamay). Finally, we would like to thank Nitza Jones-Sepulveda at Springer; thanks to whom this project was brought to fruition.

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Contents

1

 The Way to a Sustainable Transformation of Business��������������������������   1 References��������������������������������������������������������������������������������������������������    5

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ABN AMRO������������������������������������������������������������������������������������������������   7 Company Overview ����������������������������������������������������������������������������������    7 Purpose and Values������������������������������������������������������������������������������������    8 Approach to Developing ABN AMRO’s Integrated Strategy��������������������    8 Three Key Pillars Guiding ABN AMRO’s Strategy����������������������������������    9 Sustainability as a Competitive Strategy���������������������������������������������������    9 Approach to Reporting and the Triple Bottom Line����������������������������������   10 ABN AMRO Strategy and the United Nations Sustainable Development Goals��������������������������������������������������������������������������������������������������   10 Engaging the Bank’s Partners and Suppliers ��������������������������������������������   11 Performing a Stakeholder Analysis������������������������������������������������������������   11 The Evolution of ABN AMRO’s Sustainability Profile and Strategy��������   12 Approach to Education and Training ��������������������������������������������������������   13 Incentives Linked to Sustainability Performance and Targets ������������������   13 Recognising Sustainability Champions ����������������������������������������������������   14 Industry Awards and Recognition��������������������������������������������������������������   14 Approach to Communicating and Sharing the Bank’s Strategy and Journey����������������������������������������������������������������������������������������������   14 Challenges Along the Way and a Look Ahead������������������������������������������   15 Sustainability Team Structure at ABN AMRO������������������������������������������   16

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 von������������������������������������������������������������������������������������������������������������  17 A Company Overview ����������������������������������������������������������������������������������   17 A Company Driven by Its Purpose and Vision������������������������������������������   18 Developing a Sustainability Strategy for the Future That Is Inspired by the Past����������������������������������������������������������������������������������������������������   18 Sustainability and Competitive Strategy����������������������������������������������������   19 The Evolution of Avon’s Sustainability Profile and Mindset��������������������   22 Engaging the Supply Chain ����������������������������������������������������������������������   22 Approach to Engaging Stakeholders����������������������������������������������������������   23 The Importance of Innovation��������������������������������������������������������������������   24

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A Sustainability Strategy Built on Two Key Pillars����������������������������������   24 Frameworks Used to Build Avon’s Sustainability Strategy ����������������������   25 Approach to Training and Managing Sustainable Transformation������������   25 Approach to Reporting and Disclosure������������������������������������������������������   27 Implementation and Management Incentives��������������������������������������������   28 Awards and Industry Recognition��������������������������������������������������������������   28 Approach to Marketing and Communications������������������������������������������   29 Sustainability Team Structure and Continuing Avon’s Legacy������������������   29 4

Bayer AG����������������������������������������������������������������������������������������������������  31 Company Overview ����������������������������������������������������������������������������������   31 Purpose and Values������������������������������������������������������������������������������������   31 The Beginning of Bayer AG’s Sustainability Journey ������������������������������   32 Identifying and Addressing Challenges Along the Way����������������������������   33 Approach to Implementing and Measuring Its Sustainability Strategy������������������������������������������������������������������   35 Approach to Engaging Stakeholders and Identifying Key SDGs with a Materiality Assessment ����������������������������������������������������������   37 Building a Competitive Advantage Through Sustainability����������������������   38 Bringing Suppliers Along on the Journey��������������������������������������������������   39 Identifying Key Risks and Opportunities��������������������������������������������������   40 A Top-Down and Bottom-Up Approach to Sustainable Transformation��   41 Bayer AG’s Approach to Sustainability Reporting and Disclosure ����������   42 How the Strategy Has Been Received So Far – And the Road Ahead������   43 Sustainability Team Structure��������������������������������������������������������������������   44

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Consilient Health����������������������������������������������������������������������������������������  45 Company Overview ����������������������������������������������������������������������������������   45 The Company’s Vision and Values������������������������������������������������������������   45 The Beginning of Consilient Health’s Sustainable Transformation Journey����������������������������������������������������������������������������������������������   46 Building the Business Case for a Sustainability Strategy��������������������������   47 Consilient Health’s Approach to Sustainability Reporting and the Triple Bottom Line����������������������������������������������������������������   47 Engaging the Supply Chain ����������������������������������������������������������������������   48 Performing a Stakeholder and Industry Analysis��������������������������������������   48 Identifying Risks and Opportunities����������������������������������������������������������   49 The Importance of Purpose-Driven Leadership to Guide the Way Forward����������������������������������������������������������������������������������������������   49 Framework and Foundation Used to Build the Strategy����������������������������   50 Approach to Training and Engaging Employees ��������������������������������������   51 Awarding Sustainability Efforts and Achievements����������������������������������   52 Sharing Their Journey with Stakeholders��������������������������������������������������   53 Time-Limited Challenges That Were Met Along the Way������������������������   53 Approach to Communications and Sharing Their Journey with Stakeholders��������������������������������������������������������������������������������������   54

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How the Journey Is Going ������������������������������������������������������������������������   54 Sustainability Team Structure��������������������������������������������������������������������   55 6

Enel��������������������������������������������������������������������������������������������������������������  57 Company Overview ����������������������������������������������������������������������������������   57 An Energy Company Powered by Purpose������������������������������������������������   58 Sustainability-Driven Leadership and Organisational Structure����������������   58 The Sustainability Structure and ESG Management at Enel ��������������������   59 An Open Invitation to Address the SDGs Through Innovation and Collaboration��������������������������������������������������������������������������������������   60 Enel’s Approach to Developing Its Sustainability Strategy ����������������������   61 Conducting a Materiality Assessment with Key Stakeholders������������������   64 Engaging and Supporting Suppliers and Local Communities Through Sustainable Transformation ��������������������������������������������������������������   68 The Evolution of Enel’s Sustainability Journey So Far ����������������������������   70

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Formula E ��������������������������������������������������������������������������������������������������  71 Company Overview ����������������������������������������������������������������������������������   71 Formula E’s Vision and Purpose����������������������������������������������������������������   71 A Championship’s Approach to Developing a Sustainability Strategy ����   72 The Evolution of Formula E’s Sustainability Strategy (Then and Now) ��   73 Inviting Stakeholders to Join the Race������������������������������������������������������   74 Engaging a Complex Supply Chain and Network ������������������������������������   74 Leading the Industry with a Sustainability Strategy Built on Four Key Pillars ������������������������������������������������������������������������������������������������   75 Environmental Excellence ��������������������������������������������������������������������   75 Social Progress��������������������������������������������������������������������������������������   77 Leadership and Innovation��������������������������������������������������������������������   77 Creating Value Through Values��������������������������������������������������������������   78 Building Purpose-Driven Partnerships������������������������������������������������������   79 Engaging and Inspiring a New Generation of Motorsport Fans����������������   79 Fostering a Family Culture and Environment��������������������������������������������   80 Sustainability Reporting and Disclosure����������������������������������������������������   81 Approach to Training and Educating ��������������������������������������������������������   81 How the Strategy Has Been Received So Far��������������������������������������������   82 Industry Awards and Recognition��������������������������������������������������������������   82 Approach to Marketing and Communications������������������������������������������   83 Formula E’s Sustainability Champions Team��������������������������������������������   83

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The LEGO Group��������������������������������������������������������������������������������������  85 Company Overview ����������������������������������������������������������������������������������   85 LEGO’s Purpose and Vision����������������������������������������������������������������������   85 The Company’s Four Purpose-Driven Promises����������������������������������������   86 Approach to Building a Sustainability Strategy One LEGO Brick at a Time ��������������������������������������������������������������������������������������������������   87 Sustainability as a Competitive Strategy���������������������������������������������������   88

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The Evolution of the LEGO Group’s Sustainability Strategy and Journey  89 Approach to Reporting and the Triple Bottom Line����������������������������������   90 Engaging the Supply Chain ����������������������������������������������������������������������   91 Approach to Identifying Risks and Opportunities ������������������������������������   93 Engaging the Company’s Most Important Stakeholder – Children ����������   93 Purpose-Driven Leadership and a Cultural Shift Towards Sustainability��   94 Frameworks Leveraged to Build Its Sustainability Strategy����������������������   95 Training and Communicating the Company’s Sustainability Strategy to Employees������������������������������������������������������������������������������������������   96 Sustainability Challenges and Steps Taken to Accelerate Change������������   96 Incentives and Industry Recognition����������������������������������������������������������   97 Sustainability-Focused Communications and Organisational Structure��������������������������������������������������������������   98 Building a More Creative and Resilient Society (and Business) for the Future��������������������������������������������������������������������������������������   99 9

Leonardo���������������������������������������������������������������������������������������������������� 101 Company Overview ����������������������������������������������������������������������������������  101 Leonardo’s Purpose and Vision������������������������������������������������������������������  101 Approach to Developing Leonardo’s Sustainability Strategy��������������������  102 Sustainability-Driven Leadership and Competitive Strategy��������������������  102 The Evolution of Leonardo’s Sustainability Profile and Journey��������������  103 Leonardo Sustainability Objectives and Pillars ����������������������������������������  103 Leonardo’s Sustainability Plan������������������������������������������������������������������  105 The Importance of Partnerships and Engaging Stakeholders��������������������  106 Incentives for Management Linked to Sustainability Performance����������  107 Industry Recognition and Positioning as a Sustainability Leader ������������  107 Transparent Approach to Reporting and Communications������������������������  108 Engaging Employees and Fostering a Culture of Sustainability����������������  109 Sustainability Team, Organisational Structure and a Look Ahead������������  110

10 Mercato Metropolitano������������������������������������������������������������������������������ 113 Company Overview ����������������������������������������������������������������������������������  113 The Mercato Metropolitano MMovement ������������������������������������������������  114 Built on a Foundation of Sustainability ����������������������������������������������������  115 A Company Driven by Its Values��������������������������������������������������������������  115 Mercato Metropolitano’s Sustainability-Focused Principles ��������������������  117 Sustainability as a Competitive Strategy���������������������������������������������������  117 The Triple Bottom Line and Measurements of Success����������������������������  118 Engaging the Value Chain��������������������������������������������������������������������������  118 Performing a Stakeholder Analysis������������������������������������������������������������  119 Risks and Opportunities����������������������������������������������������������������������������  119 Frameworks and Assessments Used to Guide the Company’s Approach to Sustainability����������������������������������������������������������������  119 The Importance of Sustainable Partnerships����������������������������������������������  120

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Engaging and Empowering Employees to Be Part of the MMovement����������������������������������������������������������������������������  120 Purpose-Driven Leadership������������������������������������������������������������������������  121 Sustainability-Driven Incentives����������������������������������������������������������������  121 Industry Recognition and Rewards������������������������������������������������������������  122 Reporting and Sharing Its Journey with Stakeholders ������������������������������  122 Approach to Marketing and Communications������������������������������������������  123 Implementing the Company’s Sustainability Agenda and Policies ����������  123 A Sustainable Organisational Structure ����������������������������������������������������  124 Community Events Aimed at Educating and Engaging Stakeholders on This Journey����������������������������������������������������������������������������������  124 11 Sage�������������������������������������������������������������������������������������������������������������� 125 Company Overview ����������������������������������������������������������������������������������  125 Purpose and Values������������������������������������������������������������������������������������  125 Sage’s Sustainability Journey��������������������������������������������������������������������  126 Conducting a Materiality Matrix Assessment��������������������������������������������  127 Assessing Risks and Opportunities������������������������������������������������������������  127 Sustainability as a Competitive Strategy���������������������������������������������������  128 Approach to Reporting and the Triple Bottom Line����������������������������������  129 Engaging the Supply Chain ����������������������������������������������������������������������  130 A Strategy Built on a Foundation of Purpose and Values��������������������������  131 Purpose-Driven Leadership������������������������������������������������������������������������  132 Defining and Designing Key Sustainability Pillars and Initiatives������������  132 Approach to Training and Education ��������������������������������������������������������  134 Frameworks Used to Develop Sage’s Sustainability Report����������������������  135 Approach to Non-financial Disclosure and Communications ������������������  136 Sage’s Purpose-Driven Foundation and Initiatives������������������������������������  137 Sustainability Team Structure��������������������������������������������������������������������  137 Sage’s Sustainability Journey So Far and a Look Ahead��������������������������  138 12 Saint-Gobain���������������������������������������������������������������������������������������������� 139 Company Overview ����������������������������������������������������������������������������������  139 Saint-Gobain’s Purpose, Vision, and Values����������������������������������������������  140 Approaching and Designing a Sustainability Strategy������������������������������  140 Sustainability as Part of Saint-Gobain’s Competitive Strategy������������������  142 Saint-Gobain’s Sustainability Profile (Before Developing a Sustainability Strategy) ������������������������������������������������������������������  143 Reporting and the Triple Bottom Line ������������������������������������������������������  143 Engaging the Supply Chain ����������������������������������������������������������������������  144 Defining What Matters – Performing a Materiality Analysis��������������������  144 Implementation and Training��������������������������������������������������������������������  146 A Warm Reception – How the Strategy Was Received by Key Stakeholders��������������������������������������������������������������������������������������  146 Challenges to Developing and Introducing a Sustainability Strategy��������  147 Approach to Communication and Disclosure��������������������������������������������  147

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Sustainability-Driven Incentives and Awards��������������������������������������������  148 Sustainability Team Structure��������������������������������������������������������������������  148 13 Yamamay���������������������������������������������������������������������������������������������������� 149 Company Overview ����������������������������������������������������������������������������������  149 Yamamay’s Purpose and Values����������������������������������������������������������������  150 Developing a Sustainability Strategy and Report��������������������������������������  150 Yamamay’s Sustainability Profile��������������������������������������������������������������  151 Engaging the Supply Chain ����������������������������������������������������������������������  152 Approach to Developing the Company’s Sustainability Reports��������������  153 Evolving Towards Social Sustainability����������������������������������������������������  154 The Importance of Measuring and Reporting Progress ����������������������������  155 Certifications����������������������������������������������������������������������������������������������  155 Approach to Education and Training ��������������������������������������������������������  156 Yamamay’s Partnership with the Diana ODV Luisa Romano Association��������������������������������������������������������������������������  156 Steering and Governing the Company’s Sustainability Agenda����������������  157 Committed to Producing Quality and Sustainable Products����������������������  158 Approach to Marketing and Communications������������������������������������������  158 Frameworks Used to Develop Its Sustainability Strategy and Agenda������  160 Yamamay’s Sustainability Team Structure������������������������������������������������  160 14 10  Golden Rules to Lead the Sustainable Transformation of Business�������������������������������������������������������������������������������������������������� 163 Rule 1 – Monetise Your Sustainability Strategy����������������������������������������  163 Rule 2 – From Creating Shared Value to Impact ��������������������������������������  163 Rule 3 – Sustainability Education Is Key for Success ������������������������������  164 Rule 4 – You Need to Foster a Culture of Sustainability That Starts with Engaged Leaders, Sustainability Champions and Having the Right Governance in Place ��������������������������������������  165 Rule 5 – Sustainability Disclosure Needs to be Robust and Transparent����������������������������������������������������������������������������������  165 Rule 6 – Sustainable Transformation Is Data-driven and Digitally Enabled����������������������������������������������������������������������������������������������  166 Rule 7 – Executive Pay Linked to ESG Performance Is the Booster��������  166 Rule 8 – Innovation and Sustainability: The Means and the End��������������  166 Rule 9 – Corporate Sustainability Planning Should Be In House, But Green Marketing and Communication Could Be Partially Outsourced ����������������������������������������������������������������������������������������  167 Rule 10 – Build Your Own Storytelling Aligned with Your Purpose��������  167

About the Authors

Paolo Taticchi  is Professor in Strategy and Sustainability and School Deputy Director (MBA, Global Engagement, Executive Education) at UCL School of Management.Highly active in executive education, Paolo has trained thousands of managers and executives of Fortune Global 500 companies and is a sought-after speaker regularly invited to give keynote talks at world-class academic, governmental, and industry events.Paolo’s research on corporate sustainability and performance measurement is internationally recognized. Prior to this book, Paolo edited two books focused on sustainability in business. Corporate Sustainability published in 2013 and Corporate Sustainability in Practice published in 2021.Outside of the academy, Paolo has significant consultancy experience in the fields of strategy, education, and sustainability. He has worked in this capacity for firms of various sizes, and in a range of different industries. Today, he advises (or serves in the advisory board) influential organisations and is one of the scientific advisors of the Ministry for the Ecological Transition in Italy.He has received numerous awards for the impact of his work. His projects, quotes, and opinions have been featured over 350 times in international media outlets. In 2021, Paolo was indicated by Italian’s leading business daily Sole 24 Ore as the most influential Italian under the age of 40. Melissa Demartini  is an Adjunct Professor and Postdoctoral Researcher at the Southern Denmark University.She holds a BEng and MEng in Management Engineering and a PhD in Operations Management with a multidisciplinary background across Engineering and Social Science from the University of Genoa. Her main area of expertise is sustainable supply chain management and modelling. Prior to joining University of Southern Denmark, Melissa was a visiting Researcher at Imperial College Business School London where she started to collaborate with Prof. Paolo Taticchi and together edited the book Corporate Sustainability in Practice, published internationally by Springer in 2021.She teaches undergraduate, graduate, and MBA students, with teaching activity covering modules on sustainability, operations management, and supply chain management in Europe.Melissa’s research on sustainable supply chain, circular economy, and corporate sustainability is internationally recognized. She has authored over 25 published academic journal articles.Outside of academia, Melissa is currently involved in research and consulting projects related to the sustainable and digital transformation of business and the role they play in the SDG agenda. She is also the sustainability coordinator for the Intelligent Factory Cluster’s Roadmap Project – an Italian government initiative which aims to develop a national strategy to improve the international competitiveness of manufacturing companies. Melina Corvaglia-Charrey  is a Research Assistant at UCL School of Management, where she supports various projects focused on business strategy and sustainability, including case studies and white papers. Melina is also a freelance consultant supporting organisations with their marketing and business communications needs, as well as with developing their Sustainability Reports.Previously, Melina worked in the Media Sponsorship and Marketing field for 15+ years in Canada, where she collaborated with various Fortune 500 companies and brands to develop strategic partnership marketing initiatives, including several programmes that garnered awards from the

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About the Authors

Sponsorship Marketing Council of Canada. More recently, Melina worked as a Sustainable Content Marketing Strategist for a UK based consulting agency specialising in the sports and sustainability field.Passionate about the field of sustainability in sport, Melina is a current member and volunteer with Sport and Sustainability International, a not-for-profit organisation that is focused on accelerating sustainability in and through sport. A mother of two young girls, Melina is motivated to support, learn from, and collaborate with individuals and organisations that are striving to create a better world for future generations.

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The Way to a Sustainable Transformation of Business

Companies are becoming increasingly aware that the planet is at risk and the type of capitalism that has been built over the last century no longer works for society today. Simply put, the ways in which companies used to approach business are no longer sustainable. The issues facing the planet and society are not new. The alarm bells have been ringing and continue to ring all around the globe. Every day people are tuning in to new documentaries warning about the threats posed by climate change, following daily news headlines showing concerning situations in factories in developing countries, or reading stories of unethical and illegal corporate behaviour. The biggest challenges facing society today are summarised by a very popular framework, the United Nations Sustainable Development Goal (SDG) agenda, which was developed in 2015 as a tool to set objectives and priorities for government and business to enable a sustainable development of society. The SDG agenda includes 17 goals; 16 goals which relate to environmental, social, and economic challenges, and 1 that highlights the importance of establishing partnerships to address the other SDGs. Businesses can (and should) use this framework to evaluate their positive and negative impacts and take relevant actions to implement strategies that enable sustainable business transformation. Among the 17 SDGs, some are not only ambitious and relevant for businesses such as climate change, which represents a very material risk for entire sectors, but also an incredible opportunity for business in terms of technologies and solutions for decarbonisation of the economy. Addressing climate change not only means to tackle the most pressing environmental problem of modern society, but it also refers to addressing a social problem, as climate change is linked to climate injustice, where poor countries disproportionally suffer the consequence of climate change and extreme weather events. The topic of corporate sustainability is therefore linked to the wider theme of a sustainable development of society, which calls for government, business, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_1

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1  The Way to a Sustainable Transformation of Business

not-for-profit, non-governmental organisations, and individuals to rethink the way they conduct activities and make decisions to address the many grand challenges facing society. Adding to the global issues to be addressed is the reality that the planet has limited resources and capacities to equally sustain an increasing world population. In the last four decades, the topic of corporate sustainability has received a lot of attention and today sustainability transformation is a common item in the strategic agenda of companies of any size and in every region of the world. Momentum is building, and after many years of “talking” and let’s say it loud – “greenwashing” – for the first-time real action is taking place in industry as more companies demonstrate they are “walking the talk”. This decade is the one for action. It’s the decade to build a new type of capitalism that is stakeholder-centric (instead of shareholder-centric), and the decade to transform business organisations so they limit their negative impacts on the planet and society, and instead work toward driving positive change. Momentum is building, but several organisations are still struggling to understand why sustainable transformation is needed and what type of change is necessary. Hence the idea for this book, which disseminates twelve corporate stories of organisations in different sectors that have decided to address sustainability in a serious, smart, and strategic way. This book sheds light on their strategic approaches, their business cases for change, and their tactics and efforts to integrate sustainability into core business and competitive strategy. In the closing chapter of the book, 10 “golden rules” for sustainable transformation are identified and offered to companies that are working on similar initiatives of transformation. The book is based on previous research disseminated by the authors and by Professor Paolo Taticchi, OMRI in his TEDx Talk in 2021 “Business Strategy & Sustainability: Change to Survive and Thrive”. To fully appreciate the contents of this book, it is important for the reader to grasp several concepts, including what the authors call “modern corporate sustainability”, which were introduced by the authors in their previous book “Corporate Sustainability in Practice” published by Springer in 2021. Modern corporate sustainability builds on 4 key concepts: • The first one is purpose. Purpose is a powerful force for change, and today there is evidence from research that purpose-led companies have greater financial performance and purpose-led brands have the potential to establish stronger customer relationships, which increase customer loyalty and sales. • The second one is creating shared value. This means rethinking business models so that economic value is created jointly with societal value. This calls for considering all stakeholders instead of only shareholders and moving away from Corporate Social Responsibility (CSR)-based approaches, which focus primarily on reputation with limited connection to business, and more towards approaches where sustainability is fully integrated into business strategy.

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• The third concept is power-sharing and ESG-based decision-making. In order to create value and enable change for all stakeholders, companies need to give a real voice not only to shareholders, but also to employees and other parties who represent the interests of the environment and society more broadly. Environmental, Social and Governance (ESG) criteria should be integrated at all levels of decision-making. • The fourth concept is the objective of enhancing competitiveness. If sustainability is correctly integrated into business strategies, it results in higher levels of competitiveness and profit. Building on these 4 key concepts, corporate sustainability is defined as follows: Corporate sustainability is an integral approach to business aimed at enhancing competitive positioning and profitability through the sustained creation of shared value, co-creation practices with stakeholders and the integration of ESG factors in decision-making. (Taticchi & Demartini, Corporate Sustainability in Practice, 2021)

This definition is aligned with several industry reports which highlight the importance for businesses to align and integrate corporate sustainability strategies into business strategies and involve all relevant stakeholders in this process. For example, a McKinsey report entitled “How to prepare for a sustainable future along the value chain” published in 2022, emphasised the need to shape a more sustainable economy and highlighted the confusion among businesses when it comes to sustainability (McKinsey, 2022). The report once again highlights the importance of integrating ESG factors into decision-making and not merely focusing on the environmental dimension of sustainability with efforts that are only limited to reduce greenhouse gas emissions. Indeed, if businesses intend to meet the climate targets and regulations that have been set, a fundamental change in strategy is required; new business models will have to gain an increasingly firm footing and go beyond simply optimising their carbon footprint. Also, it’s not only regulations that put pressure on business, other relevant stakeholders (i.e., customers, investors, employees, and NGOs) are demanding more sustainable strategies and best practices from companies. In its report called “Six Steps to a Sustainability Transformation” (BCG Global, 2021), Boston Consulting Group emphasised once again that companies are hesitant on the way to drive a successful sustainability transformation and agreed with the importance of integrating ESG into the corporate strategy, create shared value, develop sustainability strategies anchored in purpose, and look at long-term value creation. The report also stressed the importance for companies of a shift in mindset to implement a successful sustainability transformation. Businesses should view sustainability as an opportunity to create new value, rather than viewing it only as a cost or as a compliance task. Businesses that are holistically engaging with sustainability can expand their competitive advantages, develop new business models and opportunities, and be prepared to face the consequences of climate change and socio-economic issues which inexorably will rise in the years ahead.

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A report by Deloitte titled “The turning point: A Global Summary” (2022) focused on sustainable transformation of business, emphasising that it’s a complex process in which there will be costs associated with the transition, but if business will not engage, the costs will be much higher (Deloitte, 2022). For example, in the case of climate change, it can directly impact companies through disruptions to the physical environment, which would impede productivity, business continuity, and trade. Corporate sustainability and sustainable transformation are not optional, they are the only possible ways of doing business that can create benefits – for society and the planet. In this direction, Taticchi and Demartini (2021) proposed a framework which focuses on supporting companies in this process of change. This book consists of twelve corporate stories of firms belonging to different industries and at different stages of maturity. All of them have successfully integrated their sustainability strategy into their competitive strategy. Stories include: • • • • • • • • • • • •

Chapter 2: ABN AMRO (financial services) Chapter 3: Avon (beauty) Chapter 4: Bayer AG (life (health and crop) sciences) Chapter 5: Consilient Health (pharmaceutical) Chapter 6: Enel (energy) Chapter 7: Formula E (motorsport) Chapter 8: The LEGO Group (toy production) Chapter 9: Leonardo (aerospace and defence) Chapter 10: Mercato Metropolitano (food and hospitality) Chapter 11: Sage (software) Chapter 12: Saint-Gobain (engineering and construction) Chapter 13: Yamamay (fashion retail)

To describe these stories of sustainable transformation, the authors conducted semi-structured interviews with the sustainability teams and business leaders of these organisations. Questions were built using the framework presented in Fig. 1.1 to standardise the dissemination of these stories. Each story presents practical and concrete actions taken by companies to develop their sustainability strategies, as well as challenges and issues faced during the process. By reading the twelve stories the enablers of sustainable transformation emerge, together with best practices. The authors hope readers will enjoy these stories and learn, in a practical way, how to lead sustainable transformation of business. This book will be a primary tool for sustainability leaders and practitioners who are keen to adopt effective corporate sustainability strategies, embrace stakeholder capitalism, and strive to build competitive and more sustainable businesses for the future. The authors have written this book with the hope of turning readers into impactful changemakers.

References

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THE FOUR-STAGE FRAMEWORK FOR DEVELOPING A CORPORATE SUSTAINABILITY STRATEGY

PRE-WORK

WHY?

BUILD THE CASE FOR CHANGE

WHAT?

CAPTURE THE CORE BUSINESS STRATEGY

CONDUCT STAKEHOLDER AND INDUSTRY ANALYSIS

DEFINE THE AMBITION

ESTABLISH CURRENT SUSTAINABILITY PROFILE AND APPROACH TO CORPORATE SUSTAINABILITY

BUILD THE BUSINESS CASE

IDENTIFY A FRAMEWORK TO STRUCTURE THE STRATEGY

WHAT IS THE POTENTIAL RISK OF NOT ENGAGING MORE WITH SUSTAINABILITY POTENTIAL OPPORTUNITIES?

CREATE STRATEGIC PILLARS

CONDUCT A MATERIALITY ASSESSMENT

DESIGN SUSTAINABILITY INITIATIVES

HOW?

CHANGE MANGAMENT HOW TO SUCCESSFULLY EMBED SUSTAINABILITY WITHIN THE ORGANISATION

MEASUREMENT AND REPORTING

RECOGINITION AND REWARD

MARKETING AND BRANDING

RESOURCE AND ORGANISATION

MAP TO THE SUSTAINABLE DEVELOPMENT GOALS (SDGS)

Fig. 1.1 Framework to develop a corporate sustainability strategy. (Source: Taticchi & Demartini, 2021)

References BCG Global. (2021). Six steps to a sustainability transformation [online]. Available at: https:// www.bcg.com/publications/2021/steps-­to-­a-­sustainability-­transformation. Accessed 15 Sept 2022. Deloitte. (2022). The turning point on global warming. Available at: https://www2.deloitte.com/ content/dam/Deloitte/global/Documents/gx-­global-­turning-­point-­report.pdf. Accessed 15 Sept 2022. McKinsey. (2022). How to prepare for a sustainable future along the value chain. Available at: https://www.mckinsey.com/industries/consumer-­packaged-­goods/our-­insights/how-­to-­ prepare-­for-­a-­sustainable-­future-­along-­the-­value-­chain. Accessed 15 Sept 2022. Taticchi, P. (2021). Business strategy & sustainability: Change to survive and thrive. TEDx Talk [online]. Available at: https://youtu.be/eVcSdOskwLQ. Accessed 15 Sept 2022. Taticchi, P., & Demartini, M. (2021). Corporate sustainability in practice: A guide for strategy development and implementation. Springer.

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ABN AMRO

Interviewee:  Tjeerd Krumpelman, Global Head of Advisory, Reporting & Engagement, Group Sustainability

Company Overview ABN AMRO is the third-largest bank in the Netherlands’ leading banks. With its Headquarters based in Amsterdam, the bank has a longstanding history that has seen it survive a series of mergers, divisions, and acquisitions that spanned the last three centuries. ABN AMRO, as the bank is known today, was formed in 2010 as part of a merger with Fortis Bank Nederland. Founded in the late eighteenth century, the bank’s history of sustainability can be traced back to its origins. During its early years, a Baptist Minister named Jan Nieuwenhuyzen established an association devoted to developing individuals and society. At the time this was achieved primarily through education. The association expanded to include local chapters that would go on to establish the first non-profit savings bank in the Netherlands in 1817. Years later, after a series of acquisitions, splits, and mergers, ABN AMRO was established on the same values upon which the bank was founded on centuries earlier. Currently, the bank employs approximately 20,000 people and serves Northwest Europe. In 2021, the bank reported a net profit of 1234 million (EUR). The bank has four main divisions including Retail Banking, Commercial Banking, Private Banking, and Corporate & Institutional Banking. The Netherlands makes up the bank’s largest market, and in 2022, the bank’s largest activities are comprised of mortgages, wealth management, and corporate loans.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_2

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Purpose and Values At the heart of ABN AMRO’s purpose and strategy is sustainability. The bank’s purpose is defined as ‘banking for better, for generations to come’. Given the bank’s longstanding history, its approach to business is one that considers not only the value of a sound investment, but also the impact that investment may have on people, the environment, and society. By considering both the positive and negative trade-offs that come with every banking transaction, ABN AMRO is steadfastly committed to minimising the adverse effects of its business activities on society and the planet for future generations. ABN AMRO operates in line with its core values of care, courage, and collaboration. Care means caring about the interests and needs of its clients, its people, and the planet. Courage refers to the bank’s commitment to making decisions that will drive positive change, and to deliver on its promises. Collaboration acknowledges that it is only by working together with its partners and stakeholders that the bank will be able to realise the goals and ambitions that it has set out to achieve. Guided by its purpose and core values, ABN AMRO’s leadership team is focused on making decisions that will improve the world for future generations. Its purpose guides the bank on what it should do today, for tomorrow. From the top down, and the bottom up, this purpose resonates with all employees across the organisation.

Approach to Developing ABN AMRO’s Integrated Strategy ABN AMRO’s sustainability strategy was developed in two stages. The first stage began in 2010, soon after the financial crisis that took the world by storm in 2008. Following the impact the crisis had on markets globally, it became abundantly clear to ABN AMRO’s leadership team that, to mitigate future risks, there was a pressing need for the bank to build its resiliency and change its approach to business. The second stage to formalising the bank’s strategy began in 2018. During this transition, embedding sustainability within the bank’s corporate strategy, operations, and business decisions became a key priority. Tjeerd Krumpelman, Global Head of Advisory, Reporting & Engagement, Group Sustainability at ABN AMRO, explains that incorporating sustainability into its corporate strategy shifted the bank away from looking at sustainability as a peripheral activity, and more towards seeing it as integral to driving the bank’s overall business agenda forward. From the onset, the decision to integrate sustainability into the company’s corporate strategy was driven from the top. ABN AMRO’s CEO and Board were fully aligned on the importance of sustainability being at the heart of the company’s strategy. While the bank’s strategy was developed and steered by a team of Strategy & Sustainability experts, Tjeerd Krumpelman emphasises that having the vision and support of the leadership team was, and continues to be, instrumental to the company’s approach to fostering a culture of sustainability. With the support of ABN AMRO’s new CEO and Senior Management Team, the bank set out to refresh its approach to sustainability. Part of the refresh included

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defining the company’s purpose, which is defined as ‘banking for better, for generations to come’. In line with its purpose, in 2018 ABN AMRO also defined three strategic pillars to guide its strategy and business decisions going forward. The first pillar focused on the customer experience; the second pillar centred around supporting clients’ transition towards sustainability; and the third pillar was about building a future-proof bank through digitisation. Equipped with a refreshed strategy, goals, and pillars, 2018 marked the beginning of the company’s efforts to formalise and develop a truly integrated approach to sustainability.

Three Key Pillars Guiding ABN AMRO’s Strategy Following the bank’s most recent materiality assessment, in its seventh Integrated Report, which covers the year 2021, ABN AMRO outlined its three key pillars of Customer Experience, Sustainability, and Future-proof Bank. Focused on linking the bank’s sustainability goals back to its products and services, each pillar includes specific products and services that support the bank’s overall agenda, goals, and targets. The Customer Experience pillar is built on the bank’s dedication to earning its customers’ trust. In doing so, ABN AMRO is well positioned to understand its customers’ interests and support them during all important financial moments and decisions. The Sustainability pillar defines the bank’s efforts to operate responsibly, while at the same time helping its clients transition to more sustainable business models. The Future-proof bank pillar speaks to the bank’s commitment to rigorously simplify and centralise its operating model. This involves further digitisation of business processes that will lead to more streamlined offerings and services for its customers. Building a future-proof bank also considers the evolving needs of the bank’s employees. Providing support, development, and training that will set the bank up for future success is the key to creating a bank for future generations.

Sustainability as a Competitive Strategy For a mainstream bank of ABN AMRO’s size and scale, placing sustainability at the core of its strategy was a relatively unique, bold, and innovative move. Tjeerd Krumpelman points out that when the bank began this phase of its journey back in 2018, having an integrated strategy was more common among the smaller banks, rather than the larger players. ‘When we first designed our integrated strategy in 2018, it was uncommon for a mainstream bank to have sustainability at the centre of its strategy. Of course, there were more niche banks that talked about sustainability at the time, and they are still there. But for a larger mainstream bank such as ours, it was progressive at the time to put sustainability at the core of our strategy.’ Whether or not the approach has paid off from a competitive advantage is something Tjeerd Krumpelman cannot say for certain. What he is sure about, however, is

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that through its integrated business approach, the bank’s integrated strategy and its competitive strategy are most certainly aligned. With sustainability being integral to the bank’s corporate strategy, and overall approach to business, ABN AMRO is committed to supporting its clients on their own journeys towards sustainable transformation. In line with its integrated strategy, within each of the bank’s key business areas of mortgages, investments, and corporate loans, sustainability-related products and targets have been outlined.

Approach to Reporting and the Triple Bottom Line Prior to establishing the company’s integrated strategy, in 2015 ABN AMRO published its first Integrated Report, which brought together the bank’s financial and sustainability performance and disclosures into one document. The bank’s Integrated Report provided a basis for developing its Integrated Strategy. Given its streamlined approach to reporting, sustainability is included as part of the bank’s corporate KPIs. The KPIs that have been defined within the company’s strategy, and captured within its Integrated Report, cover all aspects of the business, including financial and sustainability metrics. Referring to how the bank tracks and measures performance against the KPIs that have been outlined, Tjeerd Krumpelman advises that incentive programmes linking performance to financial and sustainability-focused KPIs are in place across certain levels of the organisation. Frameworks used to develop ABN AMRO’s annual Integrated Reports included the Integrated Reporting (IR) Framework, as well as Core and More, a framework that was developed by Accountancy Europe. Tjeerd Krumpelman advises that together these frameworks helped guide the bank’s approach to establishing the technical and accounting side of their reports. When reporting on the impact of ABN AMRO’s activities, Tjeerd Krumpelman explains the bank’s impact and initiatives were linked to the United Nation’s Sustainable Development Goals (SDGs). He emphasises that the approach taken – when referring to the SDGs – was output based, and not input based. Meaning, the bank aligned its initiatives to select SDGs that it identified as being the ones it could contribute to the most.

 BN AMRO Strategy and the United Nations Sustainable A Development Goals The main impact areas identified and linked to the most relevant SDGs were also used to inform and guide the direction of the bank’s Integrated Strategy. Committed to contributing to the global sustainable development effort, within its strategy ABN AMRO has identified three SDGs that the bank can contribute towards in a meaningful and impactful way. SDG 8 (decent work and economic growth), SDG 12 (responsible consumption and production), and SDG 13 (Climate Change) align with the bank’s three pillars of Social Impact, Circular Economy, and Climate Change, respectively.

Performing a Stakeholder Analysis

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While these three SDGs have been identified as the ones where the bank can make the greatest impact, in its 2021 Impact Report the bank has also outlined how it is contributing to all 17 of the UN SDGs on some level.

Engaging the Bank’s Partners and Suppliers Understanding the importance of engaging the bank’s key stakeholders is a key part of ABN AMRO’s approach to sustainable transformation. When considering the bank’s supply chain and impact Tjeerd Krumpelman emphasises it’s important to note that the bank’s suppliers are also their clients. Supporting customers with their own transition towards more sustainable business models, or investing in sustainable finance, are just a few ways the bank is engaging clients and inviting them to be part of ABN AMRO’s sustainability journey. Driven by its sustainability agenda, ABN AMRO is focused on being a sustainability leader by offering new products and services that will steward its customers, and the industry, towards more sustainable practices that will lead to greater short, medium, and long-term gains for all. While engaging its supply chain is important, Tjeerd Krumpelman stresses that to be an industry leader, a key priority for the bank is to ensure its own house is in order on the sustainability front. For this reason, efforts to reduce the bank’s own Scopes 1 and 2 impacts are key to achieving the goals that have been set out in its overall business strategy. ‘From a leadership perspective, and from a credibility perspective, if you’re talking to your clients about sustainability but do not having sustainable business practice internally, that will be a problem over time. To be a leader, we recognise our own business practices need to be at the highest standards. We want to lead by example.’ Optimising the bank’s own activities and practices from a sustainability perspective is a key priority for the procurement department, as well as for operations. Exploring ways to improve how the bank sources and uses energy is just one example of how the bank striving to operate more responsibly, and to lead by example.

Performing a Stakeholder Analysis Conducting regular materiality assessments is an important step in the company’s sustainability journey, which continues to shift and evolve with the ever-changing needs of key stakeholders, the environment, and of society. Beginning in 2014, every 2 years ABN AMRO conducts a materiality analysis with the aim of identifying the areas where the bank can create the greatest value. The assessment invites input from four stakeholder groups the bank identified as being key to its business. The groups include clients, employees, investors, and society at large. Tjeerd Krumpelman explains the analysis is quite structured and follows the Integrated Reporting (IR) Framework and approach that was used to develop the

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bank’s Integrated Reports. An external auditor oversees the exercise, providing an extra level of assurance of the data that is gathered and of the processes that are followed. Tjeerd Krumpelman advises that, overall, the analysis is designed to focus more on opportunities rather than risks. He stresses that risks are of course important and should not be ignored. When it comes to risks, the bank’s Integrated Report discloses both the risks and opportunities the bank deems most important. The Report also highlights how the most material topics identified in its materiality assessment link back to the bank’s broader strategy. Expanding on the approach taken to connect key topics back to its strategy, Tjeerd Krumpelman advises ABN AMRO’s strategy defines key strategic pillars. Each pillar is supported by the most material topics identified, which are also referred to as the biggest value creators (see Fig. 2.1 for 2021 Impact Dashboard). When considering both the risks and opportunities, Tjeerd Krumpelman aptly points out that the bank’s biggest value creators, when looked at from the flipped side, can also present the biggest risks.

 he Evolution of ABN AMRO’s Sustainability Profile T and Strategy As is the case with any journey or story of transformation, ABN AMRO’s approach to sustainability has shifted and evolved along the way. When the bank started its journey approximately 10  years ago, its agenda was driven by the pressures and

Fig. 2.1  ABN AMRO Value-creating topics, 2021. (Source: Integrated Annual Report 2021)

Incentives Linked to Sustainability Performance and Targets

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needs of society. Fast forward over a decade, and Tjeerd Krumpelman advises today the bank’s agenda is driven by each of the stakeholder groups it identified as part of its assessment. Of course, societal pressures still play a role, with the bank’s efforts to reduce carbon emissions being one example of how it is responding and working to address rising global challenges. Going beyond emissions controls, however, ABN AMRO’s strategy today aims to take into consideration the needs of all its stakeholder groups, with the goal of covering all areas of sustainability including social as well as environmental topics. Rather than adopting an external framework to develop the bank’s strategy, Tjeerd Krumpelman advises the outputs of the materiality assessments, combined with its purpose, provided the key inputs for developing the bank’s strategy. Once the integrated strategy was established, key metrics and KPIs were defined to help pave the way forward for the implementation stage. From beginning to end, rather than being driven by existing frameworks, the approach taken to develop the bank’s strategy was very process driven. While the approach seems simple in theory, it can also be quite challenging, and for this reason – when it comes to implementation – Tjeerd Krumpelman stresses that communication and education are the keys to success on this journey.

Approach to Education and Training When the bank decided to put sustainability at the core of its strategy, at the same time it knew that to achieve its ambitious goals and vision, it would need the support of all 20,000 employees across the organisation. To engage employees across different divisions, training sessions specific to each business area were organised. The first sessions were conducted with the commercial divisions and roles. All sessions were designed to inform each area of the bank about sustainability issues that were most relevant to their divisions and roles. To ensure there is a common foundation of knowledge, all mortgage advisors, investment advisors, and relationship managers across the bank received training about the fundamentals of sustainability. In addition to internal training sessions, select employees also took courses to gain a deeper understanding of topics related to their core functions. As is the case with all training that takes place within ABN AMRO, the sustainability-­focused education programme was spearheaded by the bank’s HR team, rather than by the Sustainability Team. Tjeerd Krumpelman emphasises that having the HR team lead the training is a significant step, as it demonstrates just how much sustainability is at the core of the business.

Incentives Linked to Sustainability Performance and Targets Incentives tied to sustainability performance, at a Board Member level, are not currently part of ABN AMRO’s integrated strategy or implementation plan. Tjeerd Krumpelman explains that, under the Dutch legal system, executive Board Members

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of Dutch-based organisations are not permitted to receive bonuses, ruling out performance incentives of all types, not only those tied to sustainability. Below the Board however, incentives are indeed part of renumeration plans that are linked to sustainability performance targets and KPIs.

Recognising Sustainability Champions To help drive the bank’s sustainability agenda forward, over the last few years ABN AMRO has identified ‘Green Experts’ or ‘Sustainability Champions’ keen to help steward and bring to life various green initiatives across the organisation. As of 2022, the bank has over 1000 green experts who were trained and went on to become internal ambassadors and advocates for the ABN AMRO’s sustainability agenda. Additionally, over 1000 mortgage advisers were trained on how to improve sustainability of homes and more than 1000 investment advisers were trained and certified in Principles for Responsible Investing (PRI). By providing training about sustainability, ABN AMRO is investing not only in its agenda, but also in its people. Tjeerd Krumpelman advises that this kind of training and certification goes a long way with employees, who appreciate gaining the knowledge and credentials that will enable them to play an active role in driving the bank’s agenda forward, while also having the tools to support and engage their clients along the way.

Industry Awards and Recognition ABN AMRO’s efforts to produce comprehensive and innovative Integrated Reports have garnered the attention of the industry, with the bank receiving multiple awards in recognition of its industry-leading disclosure and reporting practices. In 2019, ABN AMRO was awarded a Finance for the Future Award by the A4S Accounting for Sustainability awards. Additionally, in recognition of the bank’s sustainable investment offerings, in 2021 ABN AMRO was awarded the ‘Best Sustainable Investment Product Provider’ Cashcow Award by Cash Magazine.

 pproach to Communicating and Sharing the Bank’s Strategy A and Journey While developing an integrated strategy can be challenging at times, the difficult work begins at the implementation stage. ABN AMRO’s leadership team understands to realise the goals it sets out in the bank’s strategy, its plan and goals need to be clearly communicated to all the organisation’s stakeholders, starting with their own people internally. In addition to focused training sessions for employees, the bank has developed a clear and concise communications plan to share the company’s sustainability agenda and goals, internally and externally. To be clear with its messaging, the campaign ties ABN AMRO’s sustainability goals directly to its

Challenges Along the Way and a Look Ahead

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products and services, highlighting how each product and service is developed with sustainability in mind. To achieve the bank’s ambitious goals, key products and services are uniquely advertised through a sustainability lens, in a way that is meaningful to their clients. For example, to promote mortgage offerings, ABN AMRO’s advertising campaigns will ask ‘How can we help make your home more sustainable?’. A similar approach is taken when promoting the bank’s wealth management portfolio, whereby the communications will focus on sustainable investments. With its strategic approach to marketing and communications that promotes the bank’s commitment to sustainability, ABN AMRO is able to set itself apart as a bank that is putting the interest of its customers, employees and community at the heart of its agenda. Additionally, the bank’s communications efforts likely resonate with clients that are becoming increasingly aware of the rising environmental and social issues that are having a direct impact on societies. On this sustainable transformation journey, Tjeerd Krumpelman emphasises it is important for the bank to share its commitments and accomplishments along the way. ‘Through our communications efforts, we are not striving to overstate what we are doing, and of course we do not want to greenwash. What we want is to be clear that this is a journey that we are on together. We are not claiming to be the most sustainable bank at the moment, but we are very serious about helping our clients with this transition. We know we have the right product and the right services, as well as the right training for our employees to help our clients.’ Tjeerd Krumpelman cautions that equally important to sharing the bank’s progress is being transparent about products, services, and activities that cannot be described as sustainable. Tjeerd Krumpelman explains that, in addition to its sustainable investment options, the bank also has an energy portfolio that contains fossil fuels. Furthermore, not all the homes the bank finances are sustainable. Being transparent about these topics, as well as exploring ways to minimise the negative impact of these activities, is an important part of this journey. To develop and execute the bank’s communications initiatives across each of its business areas and portfolios, including its sustainability-focused campaigns, ABN AMRO works with multiple external advertising, marketing, and communications agencies.

Challenges Along the Way and a Look Ahead Similar to challenges faced by many organisations that are striving to improve their practices and impact, Tjeerd Krumpelman advises that gathering data is perhaps the single greatest challenge the bank faces throughout this process. The bank’s approach to developing its Integrated Strategy and Reports is very much data-­ driven. The data collected is assessed to determine the bank’s impact, and to inform key decisions for the way forward. Given the bank’s comprehensive approach to developing its Integrated Strategy and Reports, many processes have been put in place that have enabled a relatively

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continuous flow of data from key stakeholders. In preparation for impending regulations and new frameworks that will place a greater focus on the interests of clients, Tjeerd Krumpelman advises the bank will be focusing on gathering data that is more client-centric going forward. As industry regulations and standards continue to evolve, Tjeerd Krumpelman points out that more granular data will also be needed to adhere to more sophisticated methods of carbon accounting, which he anticipates will become an industry requirement in the near future. Tjeerd Krumpelman points to the EU Taxonomy regulations, CSRD and SFDR as the most recent examples of increased regulations impacting ESG activities and disclosure in Europe. Similar trends and regulations are emerging globally as well, as is seen with the International Sustainability Standards Board and the European standards which are revisited and updated regularly. ‘cross the industry and the globe, we are seeing an increase in regulations, which inevitably will lead to a call for greater disclosure from organisations. Knowing more regulations are coming, organisations need to be ready.’ Reflecting on the banks journey and challenges, Tjeerd Krumpelman advises,“A difficult part of this journey is thinking about how to get there? Having a clearly defined purpose, that is supported by our Board and our employees, to guide the way forward is really appreciated and helpful. It allows us to shift our thinking from focusing on the problem, to focusing on the opportunities, the possibilities, and the solutions.’ With its Purpose and Integrated Strategy as its compass, the bank is leading the way forward for the industry by financing new ideas, supporting the energy transition, and helping businesses in their transition towards sustainability. Driven by its sustainability agenda and staying true to its purpose, ABN AMRO is steadfastly committed to investing in a world that is more sustainable for future generations.

Sustainability Team Structure at ABN AMRO When ABN AMRO first began its journey towards sustainable transformation in 2010, the strategy was driven by the Communications Team. In 2018, when the bank set out to elevate and accelerate its sustainability commitments, sustainability became the focus of the bank’s corporate Strategy Team, which was renamed to Strategy and Sustainability. As ABN AMRO’s sustainability agenda continues to grow and evolve, in 2022 the bank is in the process of establishing a central Sustainability Team. The team will be led by a Chief Sustainability Officer (CSO) who will report directly to the CEO. With a dedicated team and CSO stewarding the bank’s sustainability agenda forward, the bank is striving to embed sustainability more broadly across the entire organisation.

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Avon

Interviewee:  Natalie Deacon, Head of Corporate Affairs and Sustainability, President Avon Foundation for Women

Company Overview Avon is a multinational cosmetic, skincare, fragrance, and personal care company with its global Head Quarters based in the UK.  Founded in 1886 by progressive pioneer, visionary, and entrepreneur David H. McConnell, since its inception Avon has supported and empowered women around the globe. More than a cosmetics brand, Avon celebrates innovation, honesty, inclusion, and beauty. Avon’s unique business model is a relationship-selling model. In 2022, the company has over five million self-employed representatives based in over 100 countries around the world. Avon’s products are predominantly beauty products, including products ranging from cosmetics to personal care products, such as body wash and body lotions. The company has also expanded its product mix to sell home fragrances and other products of this nature. In January 2020, Avon became a part of Natura &Co, a Brazilian global personal care cosmetics group whose headquarters are based in São Paulo. Today, Natura &Co employs 35,000 employees globally. Given Natura &Co’s purpose-driven values, the decision for Avon to join the group was a natural and seamless move. Following this transition, Avon became part of Natura &Co, a listed company on the Brazilian Stock Exchange, and in 2021 the company reported revenues of 40 billion reals.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_3

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A Company Driven by Its Purpose and Vision Avon’s purpose is to be the best beauty company for women. Driven by its purpose, Avon is committed to empowering women by providing meaningful career opportunities, and by supporting matters that are most important to them. The company’s vision is to create a better world for women, which is a better world for all – and to have a positive impact on climate and communities. Avon’s sustainability goals are aligned with its purpose and have been since the very beginning. The company’s strategy also aligns with the Natura &Co group-­ level strategy, which has also been developed on a sustainability foundation.

 eveloping a Sustainability Strategy for the Future That Is D Inspired by the Past Avon’s formalised approach to sustainability, in terms of developing a strategy and a report, began during the 2000s. Given the company’s 136-year history that has been rooted in social purpose however, the company has been practising sustainability since it was founded. To understand where Avon is on its sustainable transformation journey, Natalie Deacon, Head of Corporate Affairs and Sustainability and President Avon Foundation for Women, highlights that it is important to first understand where the company’s journey began and how far it has come today. When Avon’s first representatives established their own businesses back in 1886, it was during a time when only 20% of women worked outside of the home. It was also at a time when women didn’t have the right to vote. Empowering women and supporting their entrepreneurial journeys is part of Avon’s history, which is very much a history that is rooted in social sustainability. This was the company’s business model from the beginning. Over time, this model grew and evolved. Fast-­ forward 136  years, Avon remains steadfastly committed to supporting women’s progress and causes that matter most to women. For years the company has supported several women’s causes including breast cancer, violence against women, as well as supporting initiatives aimed at providing economic support for women. Each of the causes Avon supports is core to the business. Together, these efforts reflect Avon’s ongoing commitment to addressing the social dimension of sustainability, upon which the company was founded. When it comes to addressing other areas of sustainability, such as the environment, these efforts became a greater priority further along in the company’s journey. Deacon explains that efforts to minimise Avon’s environmental impact and improve practices really became a priority in the early 2000s. An early priority was to ensure paper was sustainably sourced. Avon traditionally sold their products through a paper brochure, and one of its earliest commitments was a “paper promise” whereby paper for all Avon brochures would be sustainably sourced – a goal that was achieved in 2019, ahead of schedule. The company’s foundation of social corporate citizenship, combined with its attention on environmental issues at the start of the twenty-first century formed the

Sustainability and Competitive Strategy

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basis of Avon’s sustainability strategy. This is when Avon’s transformational journey really began to take shape and become more structured. During these early days of Avon’s journey, steps had not yet been taken to conduct an in-depth materiality analysis with stakeholders to identify issues that would be most material to address. Attention was placed on matters that the industry was seeing as areas of greatest concern, and that needed to be addressed across the board. For instance, minimising the use of paper where possible, be it in product packaging or promotional brochures and materials, was a priority for Avon and the industry at the time. With paper being identified as an area where the company could make a meaningful impact, Avon developed a paper promise that moved operations towards fully certified paper. In addition to paper, Avon was also looking more closely at the ingredients it was using to create its products, with the aim of ensuring ingredients with potential human rights risks and negative environmental impact, like MICA and palm, were responsibly sourced. This marked the beginning of Avon’s journey of responsible sourcing of its ingredients. Deacon emphasises that, in the beginning, while Avon’s approach to developing a sustainability strategy wasn’t built on an in-depth materiality analysis, it was very much shaped and driven by the company’s values, as well as on matters that were deemed important to the organisation, to their stakeholders, and to society at the time. When Avon’s first formal sustainability strategy was developed over a decade ago, the focus continued to be on issues such as female empowerment and female progress, but the strategy also evolved to reduce the company’s impact on the planet. When it came to addressing environmental matters, in the beginning the focus was primarily operational, with efforts being aimed at improving existing operations, such as water consumption and waste management. Regarding Avon’s efforts to reduce the company’s carbon emissions, the focus in the beginning was on reducing its impact on scopes 1 and 2. In 2020 Avon amplified and accelerated its sustainability agenda even further (see Fig. 3.1 for Avon’s approach to sustainability).

Sustainability and Competitive Strategy Avon’s sustainability strategy is closely aligned with the company’s competitive strategy. As a company and a brand that is purpose-driven, Avon’s strategy is built around issues that matter most to its customers and its communities. Deacon explains that 95% of Avon’s customers and representatives are women. It is no coincidence, therefore, that the company has identified issues related to economic empowerment for women, gender-based violence and breast cancer as matters that are important for the company to support. While Avon’s strategy focuses on areas where the company can improve its own practices, it also aims to address issues that are relevant to its supply chain. Protecting human rights and supporting female

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Fig. 3.1  Sustainability at AVON. (Source: Corporate Responsibility Report 2021)

entrepreneurship are just a few areas that Avon is looking to support and address with its suppliers. When looking at the environmental dimension of sustainability, Avon has increased efforts to address environmental issues with the aim of minimising the company’s impact. The environmental pillar is an area where the company’s sustainability and commercial strategies have really evolved. Recent years have seen an increased emphasis being placed on improving environmental performances and practices across the organisation’s operations. Greater attention is being placed on assessing what goes into Avon’s products, for instance, as well as on how the products are being packaged and shipped. Customers’ expectations are also being factored into the company’s strategy and decision-making processes. All these factors combined are increasingly shaping the company’s strategy and direction for the way forward. Another key priority and area of transformation for Avon is around digitisation. Just as the company’s sustainability journey has evolved, so too has its approach to how it interacts with customers and suppliers. Over the last decade, Avon has gradually transitioned from a traditional way of conducting business that was very paper-­ based, to one that is seeing the company’s operations becoming more digitised. This impacts all areas of the business, including its sales model. And while the company’s approach to business has remained relatively unchanged over the past 136 years, which is a relationship-based model of women selling beauty products to their social networks, what has changed is the way in which they are selling, given most social networks today are predominantly online. With more customers and communities migrating online, the reliance on paper-based sales and marketing materials is transitioning to a mix with digital tools.

The Evolution of Avon’s Sustainability Profile and Mindset

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Deacon explains that Avon’s digital transformation is closely tied to its sustainability strategy. ‘The transformation of our business, for example digitisation, goes hand in hand with some of our sustainability ambitions. To achieve our broader environmental goals, such as reducing our carbon footprint, the decision to transition from paper to an omni-channel mix was a key driver.’ Deacon points out that as the company set out to develop its sustainability strategy, it was important to approach decision-making through a sustainability lens, as well as a commercial lens. This dual approach is applied to each area of the business, including product development. Deacon explains that when considering which products to bring to market, the questions that are increasingly being asked are, which products are really going to sell, and what is the environmental footprint of those products. Finding the right balance between these objectives is key when considering the product mix and product development. Sustainability is also being increasingly factored into the company’s R&D processes; a trend that is also being seen across the industry. Deacon explains Avon has always been a company that has been committed to R&D and innovation. Given it largely owns and operates all their production facilities and makes their own products, Avon is focused on improving its processes where possible. With sustainability being embedded throughout the organisation, Avon is committed to exploring ways to find efficiencies and reduce its impact on the environment. For example, Avon is looking for innovative new packaging and product formats to reduce use of single-­ use plastics, water consumption, and carbon emissions associated with traditional formats. Another example of how the company’s sustainability agenda is influencing decisions on the production line is seen with refillable formats which are currently being researched with representatives and customers. The response from both representatives and customers has been positive. Equally important is the sourcing of ingredients. For example, in 2021 Avon launched a new version of its best-selling Far Away fragrance with a sustainable upgrade – an eau de parfum created using 100% upcycled vanilla beans that would have otherwise gone to waste. The popularity of the fragrance is a sign of how sustainability and innovation can lead to solutions that meet customers’ needs without compromising the needs of the planet. With its innovation-driven approach, Avon is devoted to seeking solutions to the many environmental and societal challenges facing the company and the industry today. From a competitive landscape perspective, sustainability plays a pivotal role in defining the company’s positioning and strategy. Avon’s market research over the last year has demonstrated that its customers’ expectations around sustainability have increased significantly during the last 12 months. Deacon stresses this research underscores the fact that consumer growth opportunities are being driven by purpose and environmentally aware organisations. Based on these trends in the marketplace, Deacon stresses the company’s sustainability strategy is unquestionably linked to its competitive strategy.

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The Evolution of Avon’s Sustainability Profile and Mindset Avon’s sustainability journey has evolved over the years. Rooted in addressing social issues from the beginning, in the early 2000s the company also began to also look at ways it could minimise its environmental impact. At the same time, its approach to sustainability evolved from a CSR (Corporate, Social and Responsibility) approach, to one that integrates sustainability-focused thinking into Avon’s approach to business, and into core decision-making. The transition represents a mind shift that sees sustainability being embedded more deeply into the culture and fabric of the company, rather than something that happens alongside the business. We are on a journey from CSR, which is something that is done on the side of someone’s desk, through to genuinely embedding sustainability into how we do business. And that’s one of the greatest challenges for organisations today. As an organisation, we are shifting from saying sustainability is somebody’s job to understanding it’s everybody’s job. Natalie Deacon, Executive Director Corporate Affairs and Sustainability, President Avon Foundation for Women

Given the increase in awareness about the importance of sustainability – for people, planet, and business  – it’s clear to Avon’s leadership team that its sustainability agenda is a key driver for the business. What is also clear is that the company’s commitments and actions matter to Avon employees and representatives, and that each employee and representative across the organisation plays a pivotal role in shaping and implementing the company’s strategy. It’s this combination of a top-down and bottom-up approach that is key to the process. Deacon points out that, as research has shown, people want to work for organisations that are trying to do good for the world, and this is something that Avon’s leadership team recognises and values as an organisation. Deacon stresses, ‘Ultimately, if we believe sustainability is everybody’s job, then it must be viewed as a system, as a way that we work, and as a mindset. If we want to really make a difference it cannot be seen simply as a core function of one business division, or one team. It must be part of the culture.’

Engaging the Supply Chain Deacon acknowledges that engaging and working with suppliers is a crucial step on this journey. Avon’s approach to engaging its supply chain is twofold. Firstly, to ensure the company is implementing its sustainability agenda and communicating expectations consistently with the broader Natura &Co group, the process to engage the supply chain starts at a group level. This process begins with responsible sourcing and procurement team. Once suppliers have gone through the procurement processes, the next level of engagement happens at the operations level. For this part of the process, Avon counts on its operations team to implement activities and practices aimed at reducing carbon emissions or improving water and waste management at a regional and

The Importance of Innovation

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local level. This approach is taken to address all matters of sustainability across the supply chain, including environmental and social issues. Additionally, the company’s responsible sourcing policy applies not only at a supply chain level, but also at a more granular level that considers critical materials the company uses to make its products. Deacon explains the materials are deemed critical either in terms of volume, or in terms of what is deemed important and critical to the environment. For instance, Deacon points to palm as an example of a material that Avon considers critical. Not because of volume, as the beauty industry is a relatively low user of palm compared to other industries, but because of the wider issues related to sourcing palm responsibly. For this reason, Deacon stresses that ensuring materials are traceable and/or certified is a key priority and goal for the organisation. In line with this priority within its sustainability goals, as part of the Natura &Co Group, Avon has committed to full traceability and/or certification for its six most critical supply chains by 2025, which comprise: palm oil, mica, paper, alcohol, soy, and cotton.

Approach to Engaging Stakeholders In 2019, Avon conducted its first materiality analysis with the company’s key stakeholders. Prior to this period, Avon’s approach to developing its sustainability strategy had been driven mainly by consumer insights and industry trends  – which pointed primarily to social issues that were important to women, as well as key environmental issues such as recycling and reducing paper. These insights reinforced Avon’s decisions to support women’s causes, as well as its ‘paper promise’ commitment aimed at reducing paper and making the transition to digital. When conducting its materiality analysis in 2019, Avon asked key stakeholders very specific questions about issues that were most material to them, covering all aspects of sustainability, including environmental, social, and governance. The stakeholders that were engaged included Avon’s own representatives, self-employed representatives, consumers, and employees across the organisations. The exercise also involved surveying key external stakeholder groups, including partners and NGOs. Currently, in 2022, Avon is in the process of conducting its second materiality analysis. Given the speed at which sustainability issues are changing and evolving, the company has committed to engaging its stakeholders every few years. A key objective of the assessment, Deacon explains, is not only to identify the issues that are most important to address today, but to also identify emerging issues that are looming further along the path. This is one of the biggest challenges facing not only Avon, but the industry as a whole. When considering the risks and opportunities associated with engaging with sustainability, or not engaging, Deacon advises there has not been a lot of attention placed on the risks of not engaging. Across the board there is an acute awareness and understanding that the company has a responsibility to try and improve the impact it has on the world. For this reason and given where Avon is on its journey today, the company is much more focused on the opportunities and solutions, rather

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than the risks. When it comes to opportunities, the greatest challenge that Avon faces is determining which opportunities to prioritise, as well as deciding the best ways to resolve those issues going forward.

The Importance of Innovation With a focus on opportunities and solutions, Deacon advises that innovation plays an integral role in accelerating the company’s efforts to progress its sustainability transformation and progress. Being a purpose-driven brand that is driven by innovation is also key to the company’s competitive position in the marketplace. Deacon explains, ‘In our industry, the ability to innovate through product development is crucial, as is the process of digital transformation. As a large company with a longstanding history, this transformation will take some time, compared to a smaller or newer company that can start these processes from the beginning.’ The direction of Avon’s sustainability strategy is guided by and supported by the company’s leadership, at a corporate level as well as at the broader group level. At a corporate level, each leadership meeting starts with the topic of the triple bottom line at the top of the agenda. To drive the company’s sustainability agenda forward, there is an expectation from the top that sustainability needs to be considered a priority not only at the boardroom level, but throughout the organisation. Deacon stresses that whilst current environmental challenges have not always been central to business strategy, what has been present and embedded into the company’s DNA from the very beginning is its purpose – which is rooted in addressing social issues, and particularly issues that matter to women. Supporting these issues remains core to the company’s agenda still today.

A Sustainability Strategy Built on Two Key Pillars Avon’s sustainability strategy outlines the company’s commitments around two key principles: being humankind and planetkind. Deacon advises that Avon’s strategy is built on a foundation of these pillars, with specific initiatives and targets that support each area. She stresses that the social and environmental strategies and goals are infinitely connected. Planetkind outlines initiatives to address Avon’s environmental impact. This includes addressing the climate crisis, with a commitment to being net-zero by 2030. Being planetkind also covers commitments on circularity, covering activities aimed at improving packaging by reducing the weight, as well as reducing the amount of plastic that is used. In line with its circularity goal of improving packaging, Avon has committed to using 100% reusable, recyclable, or compostable packaging by 2030. By 2021, 80% of the company’s packaging already met this goal. The area of circularity also covers targets around waste management, and efforts to make more efficient use of natural resources, including a target of using 95% renewable or natural ingredients in Avon products by 2030.

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The second principle is about being humankind. Under this pillar Avon has outlined steps being taken to promote gender balance, diversity, and inclusion, as well as efforts to ensure the company is delivering a living wage. Among the company’s many humankind commitments is its gender balance goal that sees women making up 50% of the company’s board and senior team by 2030. In 2021 Avon already exceeded this goal, with women making up 52% of the company’s board and senior team. The principle of humankind also includes supporting supply chain and sourcing communities, for example through the responsible sourcing of the six critical materials. Crucially, this pillar includes investing in good causes and the core of Avon’s business model – providing opportunities for women to earn and learn and lowering barriers to economic participation. Humankind is at the heart of the organisation, and central to its approach to building a responsible business.

Frameworks Used to Build Avon’s Sustainability Strategy Avon’s approach to developing its strategy started with the company’s materiality analysis, with the primary objective being to identify what issues mattered most to their stakeholders, and in turn to the company. Once the main issues were identified, the next step taken was to prioritise and group together the key issues in a way that made sense for the business, in terms of where and how it could make the greatest impact. As Avon was developing its strategy, Deacon stresses it was important to recognise the company was still in a transitional period, having only recently joined the Natura &Co group. The company’s sustainability strategy was therefore being defined in parallel to this broader transition that was taking place. What’s remarkable to note is how in sync Avon’s strategy was with the broader Natura &Co strategy and priorities. While each organisation that makes up the Natura &Co group has their own set of priorities, many of Avon’s values are shared with the broader group, making the overall transition process seamless. This alignment and support from the wider group level helped reinforce Avon’s agenda and efforts. It also provided an extra level of assurance that the company was headed in the right direction with its agenda and approach. When setting out to develop its strategy, Avon looked to external frameworks and benchmarks, and leaned on the support of the Natura &Co group for strategic guidance and direction for the best way forward. But most crucially, its strategy is rooted in the needs and concerns of Avon’s key stakeholders and communities.

 pproach to Training and Managing A Sustainable Transformation To share the company’s agenda and commitments across the organisation, Avon’s approach involves engaging each business area about the topics that are most relevant to specific divisions, at the right time. Deacon acknowledges that just as the

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company is on a journey of transformation, so too is each of its business units, and not all are at the same point in the journey. Based on this reality, Avon has set out to engage each department in a more strategic and meaningful way. In addition to communicating the organisation’s goals, a concerted effort is made to ensure that each department is armed with the proper training and resources they need to move the dial forward in their specific areas. For example, Deacon advises the R&D department to be actively involved in industry associations, such as SPICE (Sustainable Packaging Initiative for CosmEtics), an organisation that focuses on packaging in the beauty industry. Given the nature of this business unit, which is spearheaded by inquisitive scientists who demonstrate an innate passion for learning agility, there has been a significant amount of upskilling in this department over the last few years. This dedication and enthusiasm have created a centre of excellence which is being leveraged and leaned on by the rest of the organisation. Another example of how the organisation is elevating efforts to build capability across the organisation is seen around efforts to engage the marketing area with insights into the benefits of circularity, and what that means in terms of emerging consumer trends. This means the marketing team can make more informed decisions during their portfolio planning. For example, rather than planning to launch a product that comes in a single-use, non-recycled or recyclable 500 ml plastic container, they can consider the opportunity to look at new options. Deacon explains that when it comes to engaging and educating different departments across the organisation, the biggest challenge is to understand where each division is on this journey, and then to assess their specific needs. Deacon emphasises that engaging the right group, with the right information, at the right time is key. In addition to engaging each business area directly, Deacon advises it is also important to identify what each individual role needs in terms of training and upskilling. Equally important is identifying people internally that may not have a lot of experience or knowledge in the field of sustainability but have a passion for it as well as a zest for learning. Deacon highlights that the company’s approach is a combination of upskilling and bringing in new talent and skills when needed. ‘Our approach to building sustainability skills and expertise considers a mix of leveraging employee’s functional expertise – and then learning how to apply sustainability to that function. And then there are times when we know we need to bring in someone with a specific skill or expertise.’ Deacon recognises that communicating the company’s overarching strategy, at a very top-line level, is also important and this is something that is being done in parallel with the more specific interventions that are taking place. To communicate Avon’s broader plan and commitments across the organisation, Deacon and her team organised regular webinars and engagement opportunities, including three annual seminars around net-zero, circularity, and planetkind, during which guest speakers are interviewed about various initiatives that are relevant to each pillar. These seminars are open to any employees who would like to take part and learn more about what the company is doing in these areas, and also provide an opportunity for employees to engage and be part of the conversation and journey.

Approach to Reporting and Disclosure

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In terms of how the company’s agenda has been received by employees, Deacon explains there has been a lot of momentum and enthusiasm growing around the topic of sustainability across the company, and the tone that has been set from the top has helped with this. Even where the company faces its biggest challenges, mainly within the area of its scope 3 goals, the response has been positive and encouraging. Deacon explains that, across the board, managers and suppliers have demonstrated a genuine willingness and eagerness to find solutions and to work towards the company’s goals. Looking ahead, the greatest challenge for the organisation is not rallying support, rather its around setting priorities and assessing the best way to proceed to resolve certain issues. Deacon stresses that often there is a clear business case, and in those instances the way forward is clear. Other times can prove more difficult to determine how to best proceed, especially when considering resources are not finite. Therefore, having clear priorities is important for making informed decisions about resources, and how to best allocate those resources in line with the company’s goals.

Approach to Reporting and Disclosure Prior to joining Natura &Co, Avon issued its own corporate Annual Report. Over the last decade Avon has also published an Annual Corporate Responsibility Report, a separate sustainability report that outlines the company’s commitments and targets. In June 2022, Avon published its most recent 2021 Corporate Responsibility Report. While Avon still publishes its own reports, it also feeds into the Natura &Co Group level strategy titled ‘Commitment to Life’, which provides one overarching strategy for the Group. Adopting a similar approach to developing its sustainability strategy, Avon’s approach to developing its Corporate Responsibility Report begins with looking at what the company is already doing around environmental, social and governance areas. The company’s report provides a platform to share its sustainability commitments and progress with its most important stakeholders  – its representatives, employees, customers, suppliers, and partners. Being a part of the Natura &Co group, which is a standalone publicly listed company, Avon’s Corporate Responsibility Report is as much for the company’s key stakeholders, as it is for ESG investors. For this reason, Deacon explains that taking a less formalised approach that aims to drive awareness about Avon’s commitments and progress among its broader mix of key stakeholders is the best approach for the company at this point in its journey. When it comes to challenges Avon has faced throughout the reporting process, Deacon advises that data gathering is one of the greatest challenges. ‘Data gathering, and navigating what I call the sustainability spaghetti, is the biggest challenge facing anyone in a corporate sustainability role. Given the lack of common frameworks and industry standards, as an industry we are dealing with many different reporting mechanics externally, all with differing definitions and requirements. All are asking for similar data, but in slightly different ways. Add to this our own 31 metrics that we aim to report on, and the process is extraordinarily complex. Despite

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the complexities, we have come a long way in the last 12 months with our processes and approach, but we also recognise we still have a way to go. As a company, and as an industry.’ To gather and navigate the sea of data that is required for reporting purposes, Deacon advises Avon has put in place a quarterly roll-up reporting process, which allows for a continuous flow of data that can be reviewed and monitored on an ongoing basis. The process enables Deacon and her team to work with each business division directly, and to provide continuous support and guidance. Deacon advises that a Sustainability Steering group has also been established which includes leaders representing each of Avon’s different business areas. The data that is gathered from each area is culminated into a scorecard that is reviewed during Steering Group meetings, which take place on a regular basis. The meetings provide an opportunity for all the leaders to come together, and to discuss challenges as well as solutions along the way.

Implementation and Management Incentives To drive its sustainability agenda forward from an implementation perspective, Avon has established incentive targets that are tied to both short and longer-term sustainability metrics, in addition to some of the more traditional KPIs that are in place as part of its broader corporate strategy. Some of the shorter-term metrics are based on initiatives aimed at reducing the company’s scopes 1 and 2 carbon impact, as well as efforts to reuse recyclable and compostable packaging moving forward. Long-term targets focus on the scope 3 level of carbon reduction and efforts. Deacon explains that with Avon’s short-term and long-term plans, incentives are directly linked to the company’s sustainability goals, and therefore to its triple bottom line. In turn, Avon’s sustainability goals are being measured alongside more traditional commercial performance metrics. From a performance management perspective, to ensure employees have a clear understanding of the goals and expectations that are linked to their performance, the company’s triple bottom-line objectives have also been incorporated into objective-­ setting processes. The process is a functional cascade that starts with the company’s goals, and these goals then cascade down to specific targets that are set for each business unit.

Awards and Industry Recognition Each year, Avon celebrates remarkable achievements by employees, business units and teams across the organisation with the company’s annual Avon International Awards. During the 2021 Awards, which were celebrated earlier this year, a cross-­ functional ‘sustainability superstars’ team including team members from R&D, operations, and communications, won an award for overachieving their units’ KPIs in 2021.

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Externally, Avon has also received recognition from the industry for the company’s efforts to be a responsible business. In 2021, Avon was listed on the World’s Most Ethical Companies List and has received other external recognition for its corporate responsibility initiatives. Notably, Avon has been recognised with different awards in many countries for its campaigning work around women’s issues.

Approach to Marketing and Communications To communicate the company’s sustainability agenda, key pillars, and commitments, Deacon advised that her team works in close collaboration with the company’s brand development team and external creative partners. Key to all communication that is developed around sustainability is the message of purpose. Communicating the company’s purpose, or the ‘why’ behind the ‘what’, is an important part of the communication process. Deacon explains that the company’s approach to marketing and communications around sustainability is twofold. Firstly, Avon strives to share their journey from a corporate and brand perspective, leveraging the two pillars of humankind and planetkind to promote initiatives that Avon is supporting and developing in each of these areas. The next level of communication is more tactical, focusing on initiatives and progress that is being made at a product level. This can be seen, for example, when Avon promotes a cleanser that has moved to a vegan solid bar format, removing the need for excess packaging, and reducing the amount of water that is used to make the product. Sustainability plays a key part in the promotion of that product.

Sustainability Team Structure and Continuing Avon’s Legacy Avon’s Sustainability Team is led by Natalie Deacon, Head of Corporate Affairs and Sustainability, President Avon Foundation for Women. Within her immediate team Deacon has specialists focused on the humankind and planetkind aspects of sustainability, including areas such as carbon accounting and reduction and impact reporting. While the central sustainability team is small in numbers, Deacon explains there is an army of sustainability champions that are positioned throughout the organisation across different business units, with varying levels of inclusion of sustainability as a core job function. When reflecting on the topic of sustainability from an organisational perspective, Deacon explains that while sustainability may not be a formal job title for everyone’s role, every employee plays a key role in bringing the company’s sustainability strategy to life. In line with its broader sustainability and purpose strategy, going forward Avon remains steadfastly committed to living the legacy that was created by its founder back in 1886. And while Avon’s strategy has evolved over the years, moving from a

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social agenda that focused on women’s issues to one that covers all facets of sustainability, sitting at the heart of the company’s legacy still today is the belief that a better world for women is a better world for all. Driven by its purpose, and key strategic pillars of planet-kind and humankind, the company is on a path towards realising its vision of creating a better world for women, and a better world for all.

4

Bayer AG

Interviewee:  Klaus Kunz, Head of ESG Strategy, External Engagement and Performance Reporting

Company Overview Bayer AG is a German multinational company that specialises in Life Science fields of health and agriculture with the corporate headquarters in Leverkusen (Germany). The company was founded in 1863 by businessman Friedrich Bayer AG and dyer Johann Friedrich Weskott, two friends who shared a curious nature and two kitchen stoves for discovering and experimenting. Today, Bayer AG is a public limited company with over 99,000 employees in 83 countries around the world. Bayer AG is comprised of three business divisions which include pharmaceutical, consumer health, and crop science. The pharmaceutical business is driven by research and new patentable medicines, while the consumer health side of the business focuses on prescription-free medicine, including Bayer AG’s famous Aspirin. These two divisions make up 50% of the company’s revenues. The other half of the business is driven by the company’s crop science division. In 2018, Bayer AG acquired Monsanto, expanding Bayer AG’s crop science operations significantly. Through each of the company’s divisions, Bayer AG is committed to nurturing the health and nutrition of people, communities, and society.

Purpose and Values Bayer AG’s approach to business is led by its vision of ‘health for all, hunger for none’. Guided by this vision, the company is committed to promoting inclusive growth and a responsible use of resources aimed at helping both people and planet thrive well into the future. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_4

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For Bayer, inclusive growth means improving the quality of life of people in regions all around the world by providing access to health care and food security, and by contributing to environmental solutions and biodiversity preservation. Bayer AG firmly believes that to address the many growing environmental issues facing the world today, agriculture must be part of the solution. While the company’s vision is big, it expresses that a health and agriculture company can have a positive impact if it operates in alignment with societal needs. Klaus Kunz, Head of ESG Strategy, External Engagement and Performance Reporting, explains that, with its many commitments and initiatives aimed at improving quality of life for communities around the world, the company is truly striving to operate and live by its vision.

The Beginning of Bayer AG’s Sustainability Journey Since Bayer AG is operating within health and agriculture, its core business incorporates the environmental and social aspects of sustainability. When it came to disclosing their sustainability activities and strategy, in a more formalised and strategic way, Klaus Kunz explains this process began in and around 2018. Reflecting on the beginning of this journey, Klaus Kunz emphasises that in many ways, being a multinational organisation with over 99,000 employees around the world, the organisation is a mirror of society. It is made up of many different people, cultures, perspectives, and opinions. Just as in society, which is seeing an increase in awareness around the need and urgency for businesses to address global issues today, the same holds true across the organisation. Klaus Kunz explains this awareness has grown even more rapidly over the last 5 years, including among the organisation’s leadership team. Driven by an understanding that the company needs to do more to accelerate sustainability across its operations, in 2018 Bayer AG’s leadership team decided to systematically incorporate sustainability into the organisation’s business strategy and operations. The decision represented a fundamental shift for the organisation. In the past, Bayer AG had developed several initiatives under the umbrella of sustainability; however, these were created and driven mostly by the organisation’s public affairs and communications department and were not considered as being integral to the company’s core business strategy and approach. By integrating sustainability into the core business, Bayer AG’s leadership team decided that for meaningful change to take place, sustainability needed to be approached in a different and more systemic way going forward. With the acquisition of Monsanto in 2018, came with additional pressure from the public, Bayer AG’s motivation to accelerate its transformation was elevated even more. To accelerate this transformation, the first significant step taken was to define sustainability as impact generator and to give the same level of priority and weight to sustainability targets as is typically given to financial targets. Klaus Kunz acknowledges that from an external perspective perhaps this is something that was long overdue. But for an organisation with a longstanding history, this shift was significant. In 2019, sustainability goals were linked to Bayer AG’s top management

Identifying and Addressing Challenges Along the Way

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Fig. 4.1  Sustainability  – strategic elements, impacts, and 2030 targets. (Source: Sustainability Report 2021)

remuneration, providing a tangible incentive for managers to reach the sustainability targets outlined by the organisation. This was an important step that, in addition to incentivising management, adhered to pressure coming from investors who were also becoming increasingly aware of the rising calls for action around the Sustainable Development Goals (SDGs) and targets set out by the United Nations. Shortly after introducing these new sustainability-driven targets and incentives, Bayer AG’s leadership team put in a place several initiatives and commitments in line with the organisation’s goals. With these activities, implementation of Bayer AG’s strategy began to take effect across the organisation. One of the biggest commitments that followed, within just a few short weeks, was Bayer AG’s commitment to become carbon neutral by 2030. Once again, this marked a significant shift for the organisation. More than an environmental promise, the journey to carbon neutrality also required an immense financial commitment. As is the case with many large multinational corporations, to achieve this target Bayer AG’s leadership team recognised they would inevitably need to offset part of their emissions financially. Significant investments to improve existing processes and systems, with the aim to reduce the organisation’s scopes 1, 2, and 3 emissions globally would also be required (see Fig. 4.1).

Identifying and Addressing Challenges Along the Way One of the greatest challenges that Bayer AG faced as an organisation, given its sheer size and scale, was to ensure that the priorities of each division of the organisations were being considered and covered within the strategy. Klaus Kunz points to the pharmaceutical division as an example. Core to the pharma division’s approach to sustainability is to provide 100  million women in low- and middle-­ income countries with access to modern contraception. At the same time, Bayer AG’s consumer health division is devoted to supporting 100 million in underserved

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communities with self-care. These are just two of several sustainability-focused targets the organisation has introduced in recent years. Similar initiatives have been put in place across each of Bayer AG’s business divisions. On the crop science side of the business, Bayer AG took a step back to recalibrate and redefine its priorities for the business. To identify the biggest issues the crop science division needed to focus on going forward, Bayer AG conducted a stakeholder analysis which involved hundreds of interviews, internally and externally, as well as industry panel discussions. The goal of this exercise was to engage and deliberate with all stakeholders across the industry to gain insights, and to identify the most significant challenges facing the industry in the coming years. When considering the crop science division’s raison dêtre, Klaus Kunz points to the challenges that lie ahead in the face of a world that is seeing populations only getting bigger. With more people to feed on the planet, more demand and pressure is being placed on the global food supply chain. To meet this growing demand for food, Klaus Kunz stresses Bayer AG’s crop science division is making important contributions in this field. With food scarcity and security being a significant challenge facing the world in the coming years, similar to commitments made by the pharmaceutical and consumer care sides of the business, Bayer AG’s crop science division has committed to support 100  million small rural farmers in low- and-middle-income countries around the world. This target is the focus of ‘The Better Life Farming’ concept, an initiative developed to provide farmers with access to markets, products, partnerships, and finance. Thanks in large part to this initiative, farmers have seen immense growth in their yields as well as their income, with some even tripling their income versus previous years. The programme doesn’t rely on sophisticated or expensive technology, but on providing basic access to training, education, and resources. Klaus Kunz acknowledges the approach seems simple, but the positive impact it has on these communities is immense. For Bayer, the commitment to support rural farmers requires a significant financial investment and a mind shift within the organisation. Bayer AG’s leadership team does not view these commitments and initiatives as charity. They are convinced that sustainability and economic success go hand in hand. Rather, they are important investments for the future of the organisation. The communities it is serving with these programmes are also future customers. While Bayer AG is already operating in these communities, the business would no doubt grow organically as populations grow. Klaus Kunz explains that if Bayer AG were to continue as business as usual in these regions for the next 10 years, the organisation would possibly support around 60 million farmers, rather than the 100 million the company aims to support, e.g. through the ‘Better Life Farming’ programme. Klaus Kunz stresses the decisions and investments Bayer AG is making to accelerate sustainability in communities around the world are not based on separate social responsibility initiatives the company was already doing in these areas. These are strategic business decisions and investments that are being made as part of the company’s core business strategy: At Bayer AG, sustainability is a business decision. It is not something that is approached separately. (Klaus Kunz, Head of ESG Strategy, External Engagement and Performance Reporting)

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When looking at sustainability from an industry perspective, Klaus Kunz highlights the industry has traditionally not been talking about the impact agriculture on the environment and in particular the negative impact it can have. At least not to the same extent that this topic is nowadays being discussed beyond the industry. Pointing to how medicines come with side effects that continuously need to be considered and reduced, Klaus Kunz underpins the same approach that needs to be taken with agriculture. To progress towards improved practices in this field, Klaus Kunz emphasises there needs to be a shift across the industry towards more transparency and honesty about how and what the industry is doing. To stress the importance of transparency, Klaus Kunz points to the industry’s controversial use of insecticides to protect crops. Klaus Kunz highlights, ‘to say insecticides do not have an impact on the environment is not true. While they offer several benefits to agriculture, it is true they also have negative impact on the environment that needs to be continuously addressed and reduced.’ Klaus Kunz stresses the importance for the industry to acknowledge these trade-offs, with a focus on improving and minimising negative impact going forward. Thinking about the role the industry plays in agriculture, alongside the need to feed a growing population in the future, Klaus Kunz reflects on an important question, ‘we need to ask ourselves “what can we do differently”? We know that it isn’t enough to simply produce more food. We also need to preserve the environment in a better way at the same time. And this is a new way of thinking for us.’ Based on this new way of thinking and looking to the future, Bayer AG made two key commitments as part of their strategy to preserve biodiversity and to help mitigate climate change. To minimise impact on the environment, Bayer AG committed to reducing its impact of pesticides by 30%, as well as helping reduce greenhouse gas emissions in major agricultural markets – per kilogram of crop yield – by 30% by 2030. This applies to the most emitting cropping systems in the regions in which Bayer AG operates. The decision to reduce both by 30% was based on some initial calculations, which Klaus Kunz acknowledges may not have been perfect; but there was an understanding by the leadership team there was a need to start, and that putting in place agile goals superseded the need for perfection. It was a departure from the organisation’s traditional style for making decisions, which typically requires a more calculated and timely process. With these big commitments from the crop science division, combined with the significant commitments made by consumer healthcare and pharmaceutical sides of the business, Bayer AG had begun its journey towards creating a more responsible business for the future.

 pproach to Implementing and Measuring Its A Sustainability Strategy To ensure the goals outlined in the sustainability strategy would be implemented and adhered to, as a next step Bayer AG linked the environmental targets to promotional criteria of new chemistry that were being produced within Bayer AG’s R&D (research & development) department. If the product failed to meet sustainability

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criteria along the R&D process, it would not be submitted to the next phase of development. When considering each of the commitments and initiatives Bayer AG has put in place with its strategy, compared to the broader industry, Bayer AG has made great strides to improve its practices and to pave the way forward towards a more sustainable future. Klaus Kunz highlights that the vast majority of commitments being made across the industry today are still being approached as investments, rather than through fundamental shifts in business operations and decisions. The approach taken is still a traditional one that does not necessarily lead to a significant impact. To accelerate change across the industry, with its ambitious targets, Bayer AG has taken a leadership role by making the conscious decision to become an ‘impact generator’ that is focused not only on the targets it has set out, but on the positive impact generated by those initiatives. To measure and track this impact is complex, and Klaus Kunz acknowledges it will need to be co-developed through partnerships and collaborations with many other organisations, institutions, and communities. First and foremost, to bring together expertise from different areas, but also for the trust and credibility that third parties bring to the table. For example, Bayer AG has partnered with the University of Copenhagen to develop a model for measurement to make better-informed decisions in order to reduce negative impact of crop protection. Bayer AG is not alone in its commitments and efforts to improve its practices and reduce its environmental impact. Many other organisations and industries are increasingly coming forward with their plans and commitments aimed at improving their sustainability practices. And like many other industries, where emissions cannot be reduced, Bayer AG is committed to offsetting these activities. By offsetting, Bayer AG is able to support efforts being made further along the chain that are aimed at returning carbon back into the soil that is used for growing the crops to begin with. Building on this concept, Klaus Kunz explains the idea that the farmers themselves could play a bigger role in regenerating the soil, given many farmers are already involved with carbon sequestration presently. If this was taken to the next level, where the process could be measured and credits could be generated in a certified fashion, then ultimately as an emitter, Bayer AG will be able to buy these credits directly from farmers. Furthermore, given the increase in carbon emissions offsetting across the board, there are more standards and reforestation initiatives that are being driven by research, thereby elevating industry standards and approaches to carbon offsetting more widely. Klaus Kunz points out that this renewed thinking and approach could lead to the development of a more sustainable and collaborative supply chain that could excite and motivate both farmers and businesses alike to be part of the solution, rather than responding to rising pressures alone. In addition to creating new business opportunities, the approach would also incentivise farmers to adopt more sustainable practices. Adding to efforts to make the global food chain more sustainable, Klaus Kunz highlights that there is also a business case and model for growing food in a more

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sustainable way that is building and evolving, and this model revolves around carbon. More and more larger food distribution companies are looking to sustainable farming and practices, as they too are facing mounting pressure to reduce their carbon footprint and impact. Therefore, farmers who are adapting their practices stand to benefit from a growing sustainable supply chain movement that is underway. Klaus Kunz emphasises, ‘By connecting carbon emission reduction efforts to value creation, this is how meaningful and impactful change can transpire. And the bottom line is that, yes, we have made these commitments, and they go along with innovative changes in our business models.’ While the environment is certainly a key part of Bayer AG’s sustainability strategy, Klaus Kunz mentions that it’s important not to lose sight of the fact that sustainability has many dimensions, with environmental, social, and economic dimensions being equally important. This is crucial to highlight for a global organisation that operates in many different regions that have very different perspectives and ideas for what sustainability means to their communities. With these differing views in mind, Bayer AG considers the various environmental, social, and economic needs and priorities of each of the regions in which it operates. Through this attentive and focused approach, Bayer AG is committed to creating value and driving meaningful change globally.

 pproach to Engaging Stakeholders and Identifying Key SDGs A with a Materiality Assessment When developing its sustainability strategy, Bayer AG conducted a materiality assessment which involved engaging each of its stakeholders, internally and externally. Given the speed at which ESG needs evolve, this is a process that the company conducts every 2 years. While the process began with many discussions around the company’s approach, as well as around what is most material to the business, from early on there was a consensus across the board that the company needed to move quicker to accelerate processes and actions towards sustainable transformation. Bayer AG’s leadership team understood that during this decade of action, the company needed to approach business decisions in a faster, more agile way, parting with more traditional processes that would normally require more time. The materiality assessment exercise shed light on the need for Bayer AG to increase focus on governance over their sustainability efforts. It’s an important evolution that has led the company to where it is today, in terms of how it approaches sustainability, as well as how it manages, implements, and governs sustainability across the organisation and its ecosystem. To develop its strategy, Bayer AG referred to the United Nation’s Sustainable Development Goals (SDGs) as a framework to help shape the organisation’s corporate strategy going forward. Following the materiality assessment and using the SDGs as a guide, Bayer AG identified SDGs 1 (no poverty), 2 (zero hunger), 3

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(good health and well-being), 5 (gender equality), 6 (clean water and sanitation), 13 (climate action) and 15 (life on land) as being the most material areas for the company to focus on, and where it could have the greatest impact based on its core competencies. Klaus Kunz mentions that while the UN SDGs provided a clear framework to work from, at this stage in the process the company also considered the ‘planetary boundaries’, a concept that was introduced in 2009 by a group of environmental scientists led by Johan Rockström. The concept identifies nine boundaries within which humanity can continue to develop for future generations.1 The framework helped Bayer AG sharpen its focus and put into perspective the areas where the company could make the greatest impact, as well as the areas to steer away from as they fell mostly outside of the company’s boundaries or control. In some ways, this framework helped shape the company’s strategy even more so than the SDGs. Klaus Kunz underpins that too often companies today are identifying all 17 SDGs to benchmark their activities. Despite the best of intentions, he states this is not necessarily a helpful or meaningful approach.

Building a Competitive Advantage Through Sustainability When reflecting on the company’s competitive strategy, Klaus Kunz believes that Bayer AG’s industry-leading approach to transparency, when it comes to its sustainability activities, has led to increased credibility for the organisation. What was also novel for the industry was Bayer AG’s approach to giving stakeholders access to the company’s data and research about crop protection practices, a move that was aimed at educating and improving practices throughout its value chain. It is this link between transparency and credibility that Klaus Kunz credits as a driving force behind Bayer AG’s competitive positioning. In markets where there is less agreement, and where approaches differ, Klaus Kunz states that without doubt, those companies that are moving faster are gaining a competitive advantage. He explains that Bayer AG’s leadership team understood early on that, to meet their ambitious goals, the company needed to inform stakeholders, and invite them to be a part of the journey. Klaus Kunz points to carbon agriculture as just one of many areas that is becoming a competitive space, and one that offers new business opportunities for companies. ‘As an industry, each organisation is coming forward with their own commitments and initiatives. These goals and ideas may all differ, but that is not what matters. What is most important, and what I am encouraged to see, is that overall, as an industry we are moving in the right direction. We are all just moving at different speeds.’

 Source: https://www.stockholmresilience.org/research/planetary-boundaries.html, July 2022. 1

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Bringing Suppliers Along on the Journey

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Bringing Suppliers Along on the Journey Given Bayer AG’s commitment to become carbon net zero by 2050, for scopes 1, 2, and 3, our supply chain plays an integral role in this process. It is not enough to look at its own production processes, but Bayer AG also needs to look at how its suppliers are producing products. By inviting suppliers to provide their inputs, they are very much being engaged throughout the process. As this transformation is new and continues to evolve, Klaus Kunz explains that it has been a journey of learning for all parties involved, including Bayer AG, as well as their suppliers. Reflecting on the process and efforts being made to engage the supply chain, Klaus Kunz recalls a conversation he had with one farmer from the Midwest (US). ‘I met a farmer on a huge field and asked him is your farm sustainable? And he replied, “Yes, I’m in the eighth generation here”. I loved this response, because he aptly put into perspective that this too is what it means to be sustainable. Of course, in its eighth generation, the farm is sustainable! It is remarkable and should not be underestimated.’ For Klaus Kunz, and for the company, this conversation served as a good reminder that, amidst all the talk and narrative that is being spun around sustainability with the desire to meet the SDGs and targets should not come at the expense of farmers. The model that needs to be adopted is one that aims to reduce impact, while at the same time supports the economic growth of farmers. Putting additional pressure on farmers will not move the dial in the right direction. Conversely, this pressure could have reverse effects. Currently, there is a lot of pressure and expectations about how farmers should be farming more sustainably, however there is little support to finance these efforts. Klaus Kunz points out that in Europe, certain sustainability practices are progressing slightly faster than in other regions. While environmental topics have dominated the European discussion around agriculture in the past decades, the topic of food security has gained increasing attention with the political crisis in Ukraine. At least for a short period and for the first time in 70 years, basic food supplies were missing from supermarkets in Germany. The same is happening in supermarkets across the continent. The situation sheds light on the bigger climate crisis, but it also serves as a reminder for societies that food does not grow in the supermarket. The act of growing food and farming requires an unbelievable amount of work and effort, with many interconnected and interdependent steps along the way. This awareness also brings to light that there is no single answer, or even approach to growing food. Klaus Kunz stresses once again there are trade-offs that will need to be considered and weighed throughout the process. The use of pesticides is one of those trade-offs which Klaus Kunz spoke of earlier. In theory, Bayer AG does not stand against organic conventional farming. The reality is that without the use of pesticides to protect crops, the yields are lower. If all farmers were to shift to organic, today, Klaus Kunz emphasises there are other implications that need to be considered. Firstly, there wouldn’t be enough food, or alternatively, more land would need to be taken from nature and converted to agriculture, which would have a negative impact on biodiversity. The key is to find the right balance and approach to more sustainable farming practices for the future.

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When exploring ways to improve best practices across the industry, farmers are often being asked to change their ways and to adopt more sustainable practices. Klaus Kunz cautions that, as part of this transformation, it is important to be mindful and respectful of the many different traditions that are practised in different parts of the world, as these traditional methods can also offer new perspectives and potential solutions. Bayer AG’s sustainable rice project in India is one example of how Bayer AG is working with farmers to improve practices while still using traditional approaches to farming. The practice involves growing rice in a paddy field, which is a field of arable land that is flooded and used for growing semiaquatic crops, such as rice. From an environmental perspective, the practice is not considered sustainable as it requires an enormous amount of water, which is not readily available in many regions. Secondly, the practice generates an immense amount of GHG through methane that builds up in the water. The obvious alternative to paddy rice growing would be dry-seed rice growing, which immediately reduces the use of water as well as GHG emissions. Klaus Kunz stresses this alternative option does not come impact free, however. Dry-seed rice growing would require pesticides to keep weeds from growing around the crops. Based on these options, Klaus Kunz underscores that once again there are trade-offs that need to be considered. The question that needs to be asked, at every step, is ‘what is the better way’? Building on this thought, Klaus Kunz goes back to the importance of transparency: ‘We should refrain from saying the “‘right and wrong” way so often. We need to be open to ideas and proposals. Therefore, it is so important for us to engage our customers from the beginning. We need to listen to them because they are the ones that are at the forefront producing the food, not us. They are feeling the greatest impact, and they need support. That is what we are committed to providing.’ Klaus Kunz explains the example illustrates that while it is important to educate and inform farmers about more sustainable practices, it is equally important to learn from them and to understand the trade-offs before deciding which is the best path forward. ‘I want to emphasise that farmers are completely aware of the issues, and many are aware that agriculture needs to change. Some of the most progressive minds that I have met are farmers.’

Identifying Key Risks and Opportunities Identifying key risks is an important part of the aforementioned materiality assessment. Klaus Kunz explains that over the years, there has been an increased awareness about the financial risk that comes with not addressing matters related to sustainability. Klaus Kunz explains that, simply put, investors will not invest if the company’s environmental, social, and governance (ESG) ratings are poor. When it comes to assessing the financial implications, Klaus Kunz acknowledges that, like many other companies and industries navigating their way on this journey, Bayer AG is still in an early phase when it comes to truly understanding the financial risks associated with ESG matters.

A Top-Down and Bottom-Up Approach to Sustainable Transformation

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Another risk that Bayer AG has identified relates to the impact of agriculture. It is important to understand that not adapting also has an impact on the future of agriculture. Klaus Kunz explains, ‘The biggest risk of not changing is that the challenges are co-existing in a cyclical manner. Climate change is undeniably affecting agriculture. At the same time, soils can get exhausted from agriculture, and this is problematic. Healthy soil is the foundation for healthy businesses for farmers. For all of us at Bayer, understanding these challenges is the biggest motivator for change.’ Building on this point, Klaus Kunz emphasises that to run a successful business, there needs to be a mind shift around the definition of success. This involves shifting from viewing success as selling inputs and financial gains – to one that focuses on selling outcomes, in the form of impact and value created. This too presents a grand challenge for a large multinational organisation. When considering the opportunities that come with a sustainability-focused business strategy, the greatest opportunities are driven by innovation, science, and technology. Klaus Kunz stresses that it’s very clear that the company cannot meet its goals to produce more food, and protect food in a better way, without a commitment to innovation. Looking at advancements made in the crop science field alone, the level of precision that is offered by innovative technology (precision agriculture) enables farmers to identify which crop or which leaf requires the use of, e.g., pesticides or water, thereby no longer requiring an entire field to be sprayed. Klaus Kunz explains that this level of innovation is a breakthrough for the industry, and a significant step forward towards more sustainable farming. Other areas that are being explored in the field of crop science are new breeding technologies, which Klaus Kunz explains can be debated as to whether genetically modified crops are a good or bad approach for the future of farming. Additionally, approaches to chemistry are also improving. Klaus Kunz explains that today, safety is included as a selection criterion alongside efficacy. Progresses in this field will lead to reducing the negative impact of chemicals going forward. Commenting on the role innovation and technology play in the path towards a more sustainable future for agriculture, Klaus Kunz states ‘To answer the question “is innovation and technology the answer to a more sustainable future”? I would say it is the only possible answer.’

 Top-Down and Bottom-Up Approach A to Sustainable Transformation At a large organisation like Bayer, which has a longstanding history that is steeped in tradition, for enormous changes like sustainable transformation to be transpired, a dual top-down and bottom-up approach to change is required. Klaus Kunz explains, ‘To really drive meaningful change across the organisation, there needs to be support from the top leadership, and to get this buy in, sustainability needs to be part of the business case.’ Additionally, Klaus Kunz stresses that it is equally important to physically be present in countries where the company operates to identify

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individual challenges and opportunities, which can differ based on geographical conditions. By listening to the requirements of each region, Bayer AG gains a better understanding of the initiatives already in place. In turn, the company can make better-informed decisions about where to allocate resources, which existing programmes to support, and which new initiatives should be developed in collaboration with stakeholders in each region. Highlighting the importance of working ‘with’ and ‘in’ each region, Klaus Kunz states, ‘You cannot invent a strategy from a desk in e.g., Germany. You need to visit colleagues in the countries where we operate. Only by doing so can you see and learn about the many great initiatives that are already in place in each region.’ Reinforcing this point, Klaus Kunz points to a well-known saying at the company, ‘If Bayer AG knew what Bayer AG knows.’ The primary point being, there is a lot that is already happening at the regional level, and for a company as large as Bayer AG – it is impossible for HQ to know about every initiative. This goes back to the importance of having a dual approach that considers the priorities and needs across the organisation, from HQ boardrooms all the way through to the farmers’ fields. Klaus Kunz emphasises that this approach requires a lot of effort, but he fervently believes it is the key to success.

 ayer AG’s Approach to Sustainability Reporting B and Disclosure To report on the company’s performance and progress, Bayer AG has included sustainability in the company’s Annual Report. Additionally, since 2019, Bayer AG also publishes a separate Annual Sustainability Report. The company’s Sustainability Report is aligned to the Global Reporting Initiative (GRI) Standards and the 10 principles of the UN Global Compact (UNGC). As of 2021, Bayer AG’s Sustainability Report also aligned with the SASB (Sustainability Accounting Standards Board) and TCFD (Task Force on Climate-related Financial Disclosures). The company clearly defined extra-financial indicators outlined in the report help Bayer AG to benchmark and measure its performance year over year. Since publishing its first report, Klaus Kunz highlights that the report has grown in scope by 20–30% each year, a reflection of how the company’s efforts and progress has also grown since starting this formalised approach to sustainable transformation. Third-party experts review the reports to provide additional assurance and credibility. Bayer AG’s Sustainability Report is promoted externally to stakeholders, but also internally to all employees across the organisation. Educating employees is a key step on this journey, as it enables employees to talk about the company’s goals, vision and sustainability-focused initiatives with their own families and friends. When it comes to reporting, Klaus Kunz explains that the principles of financial reporting are well established. The principles of extra-financial reporting are just beginning to be established, and therefore are less clear to define and report on. Expanding on this point, Klaus Kunz explains, ‘The more ambitious your

How the Strategy Has Been Received So Far – And the Road Ahead

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extra-­financial targets are, especially if they go as far impact, you are in new territory in terms of how and when these can be reported, since impact reporting takes time and is highly complex. Therefore, there is a balance that needs to be found. In the short term, companies may not be able to report on ESG impact accurately and concisely.’ To effectively communicate the company’s strategy and progress to stakeholders, internally and externally, Bayer AG works with its marketing and communications teams as well as agencies to leverage all the company’s communications channels and resources. Klaus Kunz explains the company’s approach to communication is less about ‘promoting or marketing’ to an audience; and more about ‘driving awareness and providing a platform for discussion’. Where and when possible, the company encourages dialogue with the intention of listening and learning from its customers, and more widely from the public. Focused on building a responsible business for the future, through various communications channels and opportunities, Bayer AG is particularly interested in engaging and hearing from the next generation about how the company can improve its practices going forward.

 ow the Strategy Has Been Received So Far – H And the Road Ahead Reflecting on how Bayer AG’s approach to sustainability has been received so far, given the extent to which sustainability has been incorporated into the core business strategy, and across the organisation’s operations, overall, the strategy has been embraced by stakeholders internally and externally – even if Bayer AG is not yet perceived externally as the sustainable company that Klaus Kunz believes it is. To highlight just how much sustainability has been embedded into the culture at Bayer AG, Klaus Kunz shares a conversation he had with one an employee from the Asian business who said, ‘My boss, who is the commercial lead, talks more about sustainability than about my customers’. Klaus Kunz explains, ‘He was partly joking, but I think the sentiment is true that sustainability is very much present across the business. It’s embedded in our minds and in the way we think about business.’ As is the case with any transformational journey, there are learnings and mistakes made along the way. Bayer AG’s journey is no exception. Klaus Kunz explains that, early on in this process, the company put itself in a difficult position due to the lack of exchange with the public. For too long the company ignored critical voices – viewing these voices as a threat, rather than an opportunity. Klaus Kunz explains the opportunity provides a mirror that enables the company to reflect on how others perceive it. ‘This is where we are evolving as an organisation, and where we will strive to improve going forward’. Looking ahead, Klaus Kunz believes the biggest challenge facing the industry in the coming years is the ongoing need to identify and assess trade-offs. Faced with difficult and complex issues, the trade-offs will continue to be challenging to weigh. Equally difficult will be determining the best way forward. As a global company that operates in many different regions of the world, Bayer AG understands the

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importance of recognising and considering the many different societal perspectives and priorities effecting different countries and communities. Going forward, Bayer AG remains steadfastly focused on its vision of health for all, hunger for none. Keeping in mind the differing needs of the communities it serves, Bayer AG remains open to new approaches, ideas, and perspectives at it continues on this journey. Looking forward, the biggest challenge for our company is that still a large part of the world has not yet seen or heard of what we do and how we do it. Because we talk too much to ourselves and not enough externally. I want the company to become a trusted and popular citizen. This is my hope for the organisation going forward. (Klaus Kunz, Head of ESG Strategy, External Engagement and Performance Reporting)

Sustainability Team Structure Bayer AG has sustainability teams in the corporate functions and in the divisions. From 2018 to 2021, Klaus Kunz has led the sustainability and product stewardship team in the Crop Science division. Since February 2022, he is Head of ESG Strategy, External Engagement and Performance Reporting, with a team of around 20 leaders driving sustainability across all divisions, measuring progress against the commitments, documenting the efforts in the annual and assured sustainability report, and engaging with external stakeholders, especially investors.

5

Consilient Health

Interviewee: Karen Pulley, Head of Sustainability

Company Overview Consilient Health is a medium-sized pharmaceutical company that specialises in the commercialisation and distribution of medicines for women’s health, urology, and endocrinology. Established in 2005, the company’s headquarters is based in Dublin, Ireland, with offices in London, England and Uppsala, Sweden (for the Nordic region), as well as partnerships in Benelux and Spain, where it has expanded its operations and services in Europe. In 2022, Consilient Health employs approximately 90 employees. In 2021, the company reported revenues of approximately 67 million euros. As a company that specialises in the commercialisation and distribution of medicines, Consilient Health does not develop or manufacture medicines. Rather, it is a front-end pharmaceutical company that collaborates with developers and manufacturers to represent, market, and distribute medicines. Consilient Health’s business model has been built on cultivating strong partnerships with pharmaceutical companies. Through these partnerships, Consilient Health markets and distributes prescription healthcare products across Europe.

The Company’s Vision and Values Consilient Health’s vision is to deliver meaningful medical treatments to patients in Europe in the areas of women’s health, endocrinology, bone health, and urology by being the partner of choice to developers and manufacturers.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_5

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Consilient Health is driven by its values of teamwork, working in partnerships, and having an intelligent approach to business. With the value of teamwork, the company aims to identify individuals’ strengths, and empower their people with experience and ideas to lead the team and to optimise results. Consilient Health is also dedicated to fostering partnership, both in business and healthcare, and to work together with fairness and integrity. The company’s intelligent approach to business involves making informed decisions based on insights to determine the best path forward. Guided by these values, Consilient Health’s aims to be a sustainable business by focusing on being a responsible business, a people business, and a competitive business. In line with the company’s vision and values, Consilient Health is known across the industry for its reputation of being a respected and valuable business partner that is committed to delivering quality service to its partners. As a responsible business, Consilient Health is equally committed to supplying doctors and patients with affordable medicines, where and when they need them. With its clearly defined short-, medium-, and long-term business and sustainability goals, Consilient Health is focused on becoming a market leader, and a sustainability leader, within the global SME pharmaceutical industry.

 he Beginning of Consilient Health’s Sustainable T Transformation Journey Consilient Health’s journey towards sustainable transformation began in 2019, when Ahmed Al-Derzi, the company’s co-founder, and CEO at the time, had just completed his executive MBA with Imperial College London. Having taken away many great insights and learnings from the programme, the module that inspired him and stayed with him the most was the portion that focused on corporate sustainability. Motivated by what he had learned during his MBA, and in particular about how a corporate sustainability strategy can provide a competitive advantage for an organisation in the marketplace, Ahmed Al-Derzi set out to apply what he had learned at Consilient Health, the company he co-founded. With the support of his team, in the Spring of 2019, Ahmed Al-Derzi started to work on developing the company’s first sustainability strategy. Ahmed Al-Derzi had identified two key areas that were going to be pivotal to the company’s long-term success, sustainability, and digital transformation. Ahmed Al-Derzi had exactly 1 year to develop the strategy before presenting it to the board for final approval. For the proposed strategy to move forward, Ahmed Al-Derzi understood it required the support of the full leadership team. Building a strong business case for sustainability and digital transformation therefore needed to be a key part of the presentation to the board. To spearhead the two key areas of sustainability and digital transformation, Ahmed Al-Derzi appointed a leader for each area who would work in parallel to develop the overall strategy. Leading the sustainability strategy was Karen Pulley, Head of Sustainability. Karen Pulley was supported with a newly appointed

Engaging the Supply Chain

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Sustainability Officer. Leading the digital transformation side of the strategy was the Head of Digital Transformation. To develop the sustainability strategy and build the business case for the board, as the sustainability strategy lead, Karen Pulley sets out to engage with all the different business units throughout the organisation. Several meetings and forums were organised to gather input from each area about what was important to them, and also to gain insights about their understanding of sustainability, and what it meant for Consilient Health as well as for their specific business areas. In addition to the internal meetings and discussions, the Sustainability Team also conducted research that looked externally for insights and trends related to sustainability and innovations that were happening in the marketplace.

Building the Business Case for a Sustainability Strategy To move forward with developing and implementing its sustainability strategy, the Sustainability Team was first charged with the task of building the business case for sustainability to be a key part of the business strategy going forward. One of the key drivers for developing a sustainability strategy was the recognition that a sustainability agenda would help Consilient Health attract and retain talent. This was considered as a key factor that would help build the business case for the board. Related to the company’s endeavours to attract and retain talent were its efforts to prioritise the mental health and well-being of their employees. When looking externally to the company’s partners and suppliers, another key area that was deemed important to Consilient Health’s strategy was to focus on reducing the company’s carbon footprint. Karen Pulley underscores that many of the issues which surfaced as being key to address within the strategy fell under the area of sustainability as well as digital transformation. Therefore, building a corporate strategy that incorporated both of these areas in parallel was an important part of Consilient Health’s approach and transformational journey. Following a comprehensive stakeholder assessment to identify key priorities for the organisation, in March 2020 the team presented the corporate strategy to the board. The strategy outlined the company’s strategic priorities and goals for the next 3 years, through to 2024. Having made the business case for the company to invest in the areas of sustainability and digital transformation, the team succeeded in getting approval from the board. The support gained paved the way forward for Consilient Health’s corporate strategy for the next 3–5-year period.

 onsilient Health’s Approach to Sustainability Reporting C and the Triple Bottom Line With its strategy approved, the sustainability team’s attention turned to implementation and reporting on the company’s progress throughout the process. The company’s sustainability performance is included in a report that is shared with the board

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on a quarterly basis. As part of the reporting process, Karen Pulley explains that there are financial approvals that are considered at the same time. Therefore, the company’s sustainability performance is closely linked to the financial performance, which is reviewed together as a triple bottom line report.

Engaging the Supply Chain Prior to engaging its supply chain, Karen Pulley explains that it was important to first engage the operations side of Consilient Health about the newly developed sustainability strategy. In the beginning, while getting buy-in for developing a sustainability strategy was challenging, this was managed by engaging and education key stakeholders and divisions across the organisation. With the support of the board, and the majority of business units across the organisation onside, the next step in the process was to engage the supply chain. From a competitive landscape perspective, Karen Pulley explains that most of the suppliers she engaged understood the importance of sustainability to their business, and to the industry. Karen Pulley stresses that the greatest pressure on the supply chain is being felt by the smaller players who have not yet started to engage with sustainability, despite understanding they will need to adapt sooner rather than later. For some other suppliers, although they too may be moving slowly, they have at least started to show signs that they are engaging and working towards improving their practices. Given that not all suppliers are at the same point on this journey, Karen Pulley emphasises that key to their strategy is setting out to understand the needs of their suppliers, and then to provide support along the way. As a front-end pharmaceutical company that relies heavily on the well-being of their partners and suppliers, this is vital to Consilient Health’s sustainability goals.

Performing a Stakeholder and Industry Analysis To assess what was most material to its stakeholders, internally and externally, Consilient Health conducted a comprehensive stakeholder analysis. Internally, the company engaged directly with key business units through various meetings and discussion forums. Externally, a desktop research approach was taken to look at how stakeholders were engaging with sustainability, and to gain insights into what issues mattered most to each stakeholder. The key stakeholders that were reviewed included government bodies and key customers, including Consilient Health’s largest customer, the National Health Service (NHS) in the UK. The analysis also looked at the industry’s competitive landscape, assessing what organisations across the industry were doing in relation to sustainability, and specifically looking at what the larger enterprises were doing, as many were already leading the way with ambitious goals and industry best practices.

Framework and Foundation Used to Build the Strategy

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The internal and outward assessments were conducted by Consilient Health, with the support and guidance of an external consultant with an expertise in sustainability strategies and frameworks. Key findings that emerged from the assessment pointed to the fact that more organisations were starting to look at sustainability in a more serious and structured way. What also stood out from the analysis was that a shift was underway across the industry, in terms of how sustainability was increasingly being seen as key driver for business, rather than as a cost. Another important insight that came to light was that to remain competitive in the marketplace, being transparent about their sustainability goals and initiatives was a key part of the process. The assessment underscored the important of being transparent on this journey. It became very apparent throughout this process that we will not be in a position to attract or retain talent if we are not actively communicating and sharing our sustainability-driven initiatives and commitments along the way. (Karen Pulley, Head of Sustainability, Consilient Health)

Identifying Risks and Opportunities Following the stakeholder analysis, it became clear to the organisation that not engaging with sustainability presented the greatest risk for the company. Staying the course and not adapting would lead the company down a path that would see its reputation as being a responsible business being damaged, and it would also lead to fewer customers further down the road. With many of its customers beginning their own sustainable transformations, Karen Pulley explains that the benefits that come with having a sustainability strategy, in terms of strengthening its competitive position in the marketplace, was a key opportunity for Consilient Health.

 he Importance of Purpose-Driven Leadership to Guide T the Way Forward When setting out to develop its sustainability strategy in 2019, Karen Pulley explains that the idea and process was initiated and championed by the company’s CEO at the time. One of Consilient Health’s key board members also supported and advocated for the company to embrace sustainability as a key strategy for the way forward. And while the advantages of having a sustainability-driven agenda were broadly understood and supported, getting the necessary buy-in and budget approvals to move the agenda forward required some convincing and negotiating. Understanding the importance of having the leadership team on board from the onset, in preparation for the upcoming presentation to the board Karen Pulley decided to engage each member individually in advance of the meeting. The aim of these discussions was to gain a deeper understanding of the concerns each board

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member had about the initiatives being discussed. By better understanding all the concerns, Karen Pulley was able to address each issue when it came time to formally present the strategy to the board. The approach proved successful, as it set the stage for open deliberation and productive discussions that led to the board fully supporting the strategy that was presented.

Framework and Foundation Used to Build the Strategy To develop its sustainability strategy, the Sustainability Team referred to a four-­ point framework that was introduced by Paolo Taticchi, Professor of Strategy and Sustainability, and Melissa Demartini PhD in a book titled ‘Corporate Sustainability in Practice: A Guide for Strategy Development and Implementation.’ The framework provides clear guidelines for developing a sustainability strategy. Karen Pulley explains the approach taken to develop the strategy follows four key steps including pre-work, followed by explaining the ‘why’, the ‘what’, and the ‘how’ sections of the strategy. To build the strategy in a way that would be meaningful to Consilient Health’s stakeholders, following the comprehensive stakeholder analysis that was conducted, three key areas emerged as being key foundations for the company to focus on going forward. The first area that was ‘being a people business’, the second focused on ‘being a responsible business’, and the third was about ‘being a competitive business’. Together, these three pillars formed the foundation for building the strategy, and for guiding key business decisions going forward (See Fig. 5.1 for Sustainability Pillars). Under the pillar of ‘being a people business’, Consilient Health identified attracting and retaining talent as a key indicator. Also covered under this umbrella were initiatives aimed at supporting employees’ mental health and well-being and fostering a healthy work environment. The foundation of ‘being a responsible business’ is supported by initiatives aimed at benefiting Consilient Health’s surrounding communities and environment. This pillar covered Programmes aimed at supporting and working with local communities, as well as initiatives that focus on transforming Consilient Health’s office spaces into ‘greener offices’. Also included under this area are efforts to reduce the company’s carbon footprint, as well as efforts to clearly outline Consilient Health’s ESG (environmental, social, and governance) criteria and expectations for their partners and suppliers. Upon establishing the three strategic pillars that would provide the foundation for the company’s sustainability strategy, Consilient Health also referred to the UN Sustainable Development Goals, with the aim to align the company’s targets with the broader global goals that have been set for 2030.

Approach to Training and Engaging Employees

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Fig. 5.1  Consilient Health’s Sustainability Pillars. (Source: Consilient Health Healthy Business Healthy World Sustainability Brochure, September 2021)

Approach to Training and Engaging Employees To educate and inform their employees across the organisation about the company’s sustainability agenda and goals, Karen Pulley organised dedicated ‘lunch and learn’ sessions that invited employees to learn about the strategy and to ask questions. Intent on not overwhelming employees with too much information all at once, each session was strategically designed to focus on one specific topic at a time. The approach allowed for meaningful conversations to take place in an open and inviting way. As part of the organisation’s efforts to provide Managers with the tools and resources they needed, for the implementation of the sustainability strategy as well as the digital strategy, Consilient Health provided all Senior Managers and front-­ line Managers ILM (Institute of Leadership & Management) level training. The

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training was appreciated across the board, and the approach ensured that all Managers were at the same starting point and were given the resources they needed to lead their respective teams and business areas through the transformation. Looking ahead, to accelerate the implementation of Consilient Health’s efforts to reduce the company’s carbon footprint, carbon literacy training sessions will be rolled out throughout the organisation in 2022. The training will provide the upskilling and tools that are necessary to navigate the data that has been collected as part of the company’s carbon assessment and tracking efforts. To support this process, Consilient Health is working with a partner that specialises in climate and carbon assessments and supplier engagement, for their guidance.

Awarding Sustainability Efforts and Achievements To recognise progress and efforts of employees who are embodying Consilient Health’s sustainability-driven values through their work, in September 2021, Consilient Health introduced the company’s first Sustainability Award. The Award provides the opportunity to celebrate and communicate achievements and advancements being made throughout the organisation, in line with the company’s strategy. The first award went to the team that was spearheading Consilient Health’s ‘greener office environment’ initiative. The initiative showcases how the company is making strides towards becoming a greener and more responsible business, while at the same time generating excitement and engagement on the part of employees across the organisation. The initiative also led to the development of the ‘Give Back’ programme, an initiative that encourages employees to take time off and to dedicate their time to helping charities. Tying back to the ‘greener office’ initiative, the time donated to charities was then captured as an offset to the company’s use of paper in the office. Committed to fostering a green culture that extends beyond the office space, Consilient Health encourages their employees to continue their efforts in their own environments at home. In recognition of Consilient Health’s commitment to being a people business that is focused on providing a safe and healthy workplace for its employees, in 2021 Consilient Health was listed on the UK’s Best Workplaces for Wellbeing list by Great Place to Work™. It was the first list from Great Place to Work™ that recognised organisations that prioritised the well-being of their employees, making it an even more appreciated and proud moment for Consilient Health. Being recognised by Great Place to Work as one of the UK’s Best Workplaces™ for Wellbeing is a great achievement and shows the positive progress we have made with the execution of our sustainability strategy. One of the core pillars of this strategy is ‘Being a People Business’, where we support the wellbeing of our employees and create a positive workplace for them at every stage of their career. We’re proud to sit on this list alongside some of the top organisations in the UK who also take pride in looking after the wellbeing of their employees. (Karen Pulley, Head of Sustainability, Consilient Health)

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Sharing Their Journey with Stakeholders To communicate the company’s strategy, commitments, and progress so far, Consilient Health has developed communications materials that are available on the company’s website. These materials have also been shared directly with key stakeholders, with the aim of keeping them informed of the company’s progress and goals for the future. When reflecting on the Consilient Health’s strategy has been received to date, Karen Pulley advises that, overall, stakeholders are supportive of the company’s plans and vision for the way forward. There are some, however, that will find the transformation more challenging than others, and this is primarily because they are smaller players with limited resources. For the larger organisations the transition will be much smoother, and many are already on their way towards adopting and implementing more sustainable practices. In terms of how the strategy has been received internally, Karen Pulley concedes that while it took a bit of time to build the business case in the beginning, momentum has certainly grown over the past year. With the support of the company’s leadership team and employees across the organisation, Consilient Health’s sustainability strategy is accelerating and progressing forward.

Time-Limited Challenges That Were Met Along the Way As an SME pharmaceutical company, Karen Pulley advises the greatest challenge facing the company lies in the fact that resources, and in particular people’s time, is limited. Despite the company’s leadership team being supportive of the sustainability agenda and goals, given the strategy requires both time and financial support to implement, finding the resources can be a challenge at times. Our greatest challenge throughout this process was finding the time to work on the initiatives we had outlined in our strategy. We are a flat organisation and, quite simply, employees didn’t have the extra time to dedicate to the projects we had identified as being key to the strategy. We needed to be creative with our resources, therefore we decided to bring two interns on board for a six-month period to help us move the projects forward. (Karen Pulley, Head of Sustainability at Consilient Health)

On the digital transformation side of the journey, which was happening in parallel, similar challenges were encountered by the team leading that strategy. To drive the digital strategy forward internally, faced with similar resource constraints, alternative options needed to be explored. As a result, the company turned to a government kickstart scheme that provides funding to organisations to create job opportunities for young adults who are at risk of long-term unemployment. The opportunity enabled Consilient Health to bring people on board to work on the project, while at the same time provide opportunities for young people who were looking to build work experience with an organisation. In line with the company’s commitments to being a responsible business and a people business, the approach taken offered a

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creative solution that delivered value to Consilient Health, as well as to people in the surrounding community.

 pproach to Communications and Sharing Their Journey A with Stakeholders To communicate the strategy to stakeholders, as a lean SME organisation and sustainability team, Karen Pulley engaged the expertise of an external communications agency to develop the company’s first Sustainability brochure. The brochure provided a clear and concise overview of Consilient Health’s strategy, its values, and where the company is headed with its sustainability commitments and goals. The branding for the brochure, which is ‘Healthy Business, Healthy World’, was also created specifically to promote the strategy, as well as to reinforce Consilient Health’s positioning as a responsible and sustainable business. Shared and promoted within the business section of the company’s website, the brochure drove awareness about Consilient Health’s sustainability-focused plans and initiatives among key stakeholders, internally and externally. To share their journey beyond the pharmaceutical industry, Consilient Health collaborated with UCL School of Management to develop a case study that would be used for teaching future leaders keen to learn about strategy and sustainability in practice. Additionally, Karen Pulley has also spoken at several industry events about the company’s journey and goals going forward.

How the Journey Is Going Since rolling out their sustainability strategy in early 2021, Consilient Health has shown immense progress and improvements around their sustainability practices over the last year. In 2022, the company is in the midst of conducting an updated stakeholder analysis. Early findings show that, compared to 2019 when the initial assessment was done, the industry has seen a significant upswing of companies engaging with sustainability, with approximately 40% more companies showing signs of engagement today versus just 3 years prior. It is a positive sign that demonstrates the industry is moving in the right direction in terms of improving sustainability practices and performances. Karen Pulley emphasises the finding underscores the need for Consilient Health to continue its sustainable transformation path. It is a point Karen Pulley ensured she shared with the board in a recent update meeting about the strategy and the way forward. Looking ahead, the primary focus for Consilient Health will be on its carbon footprint reduction. This is partly driven by the company’s pillar of ‘being a responsible business’, but the decision to accelerate carbon reduction efforts is also being driven by the agenda of the company’s biggest customers, the NHS. In 2020, the NHS in England announced its Greener NHS plan, which includes goals to reduce the health services scopes 1, 2, and 3 emissions to net-zero by 2045. Included in the

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NHS’s plan are specific targets that must be met by their suppliers within the next few years. Karen Pulley stresses the NHS’s ambitious plans have a direct impact on Consilient Health, as well as its partners and suppliers. It is yet another reason for Consilient Health to continue its sustainability efforts and ensure it establishes a leadership position in the marketplace. The NHS’s net-zero plan doesn’t impact only suppliers, but it effects the entire supply chain as the requirements extend to the product development and manufacturing level of the supply chain. Karen Pulley points out that the changes are significant, and the supply chain ecosystem is vast, therefore many organisations and players will be impacted by the changes and will need to be supported along the way. In addition to her role with Consilient Health, Karen Pulley also sits on the Sustainability Working Group for the British Generic Manufactures Association (BGMA). Through her role with the BGMA, Karen Pulley advises that while pressure is being felt across the supply chain, and specifically by the smaller players, overall, there is an understanding that the industry needs to move towards sustainable transformation. Karen Pulley advises that the BGMA has been working closely with the NHS to gain a better understanding of expectations, to share challenges, and to discuss best practices and solutions for the way forward. Through this collaborative approach, the industry is striving to work together and to support the supply chain along the way. Looking forward, Karen Pulley is cautiously optimistic for what lies ahead, ‘By working together as an industry I believe we can achieve the goals that have been set. The biggest challenge on this journey, however, will be for the smaller companies. Without the right level of support and resources along the way, there is a risk companies will be left behind.’

Sustainability Team Structure Consilient Health’s sustainability team is led by Karen Pulley as Head of Sustainability. On Karen Pulley’s team is a Deputy Sustainability Champion. Although the sustainability team is lean in size, the team works in close collaboration with all business divisions across all regions of the organisation. The team also engages external consultants, agencies, and contractors when additional support and resources are needed to help drive the strategy forward. When reflecting on the structure of the team, and the journey so far, Karen Pulley emphasises the importance of having ‘sustainability champions’ that extend beyond the core sustainability team. These champions are especially important to identify early in the process, including at a leadership team level. Having the support and resources that are needed to build a strategy from the beginning, will make all the difference for driving that agenda forward. With the dedicated support of its leadership team, alongside the stewardship of its sustainability team, Consilient Health is on a path towards becoming the responsible business, the people business, and the competitive business that it has set out to be on this journey.

6

Enel

Interviewee:  Giulia Genuardi, Head of Sustainability Planning, Performance Management and Human Rights

Company Overview Enel Group, also referred to as Enel, is an Italian multinational energy utility company with more than 70 million end-users worldwide and over 91.2 gigawatts of total net installed capacity. Founded in 1962, today Enel operates in global energy markets in 30 countries across five continents, with a focus on Europe, Latin America, and North America. As one of the leading electricity companies in Europe, the company employs more than 66 thousand people worldwide. Enel’s energy portfolio includes hydroelectric, thermoelectric, nuclear, geothermal, wind, solar, and other renewable energy plants. The company manages production, distribution, and sale of energy and services, and in 2021 Enel reported an EBITDA of 19.2 billion euros. Of the organisations 75 million plus customers and approximately 45 million smart meters installed, enabling Enel to support them in managing their energy consumption. Starting out in hydroelectric power in Italy, since its inception Enel made it its mission to power and accelerate Italy’s national grid, which would eventually grow to become a part of the European network. Since the beginning, by providing access to energy, Enel contributed to the sustainable development of communities and nations where it operated. It’s an approach that has guided the company on its path to becoming an industry-leading multinational energy organisation it is today.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_6

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An Energy Company Powered by Purpose Enel’s purpose is ‘Open Power for a brighter future: we empower sustainable progress.’ Open Power means opening energy access. Giulia Genuardi, Head of Sustainability Planning, Performance Management and Human Rights, explains that Enel’s mission is as follows: ‘We are opening energy access to more people. We are opening the world of energy to new technology. We are opening new ways for people to manage energy. We are open to new partnerships.’ Enel is demonstrating they are open to creating value with all stakeholders across their entire value chain. In 2014, we decided we needed to change our approach to sustainability completely. Therefore, we immediately put actions in place, and this started with restructuring our organisations in a way that put sustainability at the centre of our business. At Enel, our day-­ to-­day commitment, that motivate all of us, is to improve the future for everyone, to drive sustainable progress, to leave no one behind and to make the planet a more welcoming place for future generations. (Giulia Genuardi, Head of Sustainability Planning, Performance Management and Human Rights)

Put simply, openness defines Enel’s strategic and operational approach to business, which is one that is driven by innovation, sustainability, and partnerships.

Sustainability-Driven Leadership and Organisational Structure What is unique for a large multinational organisation, Enel operates as a vertically integrated utility company that is focused on sustainability. Giulia highlights that, given the breadth of the company’s global operations, to identify the best solutions for each territory, a sustainability-driven approach is based on identifying the key social, economic, environmental factors of the different countries, sharing with the local communities, and constantly listening to the needs of the concerned stakeholders. With this process it is possible to anticipate the future needs and develop mapping that is as complete as possible, of the impacts that the activities carried out by the Group have on the communities and territories where it is present. When reflecting on Enel’s approach to formalising and developing its sustainability strategy, Giulia remarks that Enel’s journey began several years ago. In the beginning, the company’s sustainability focus was on environmental compliance, as well as on social philanthropy. On the environmental front, given part of Enel’s core business was devoted to building power plants in many different regions globally, priority was placed on compliance, environmental authorisation and certifications which were required for the development of its plants. In the following years, as the organisation continued to grow and evolve, Enel decided to take a different approach towards sustainability, beyond compliance. This marked the beginning of Enel’s Corporate Social Responsibility (CSR). In 2004 Enel became a member of the UN

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Global Compact and of the major organisations worldwide. As part of this process, starting from 2002 Enel set out to establish and write several relevant publicly available code of conducts (Code of Ethics, Zero Tolerance of Corruption plan, and Human Rights policy) for the company, while formalising to a greater extent procedures and processes aimed at improving the company’s sustainability practices that were put in place. Perhaps the biggest transformation the company underwent on its sustainable transformation journey took place in May 2014, when Francesco Starace was appointed as the Enel’s new CEO. Enel decided to change the company’s structure and its approach to sustainability, which was previously part of the External Relations department. Soon after joining the organisation, Francesco Starace decided to create a new department within the organisation that would bring together innovation and sustainability. The new department was called Innovability®. The same structural change occurred at country level, thereby embedding a culture of innovation and sustainability across the entire organisation. For Enel, innovation and sustainability are both fundamental and interdependent: sustainability requires ongoing innovation and, for innovation to be genuinely useful, it must be sustainable. We also believe that if innovation and sustainability are combined, they can lead to solutions that can genuinely change the world. With this novel approach to sustainable transformation, Enel was establishing itself as an industry leader in both sustainability and innovation.

The Sustainability Structure and ESG Management at Enel The organisational and corporate governance model ensures that sustainability issues are appropriately taken into consideration in all relevant corporate decision-­ making processes, by defining specific tasks and responsibilities for the main corporate governance bodies. The Innovability® Function (Innovation and Sustainability), which reports directly to the Chief Executive Officer, manages all activities relating to sustainability and innovation. The Holding units responsible for Enel SpA’s operations, particularly the sustainability, circular economy, and community relations processes, play a guidance and coordination role for the Sustainability and Innovation units located in the various countries and Business Lines. In particular, the Holding’s Sustainability Planning and Performance Management and Human Rights unit, responsible for the management of sustainability planning, monitoring and reporting processes, including compliance with the European taxonomy, as well as the management of ESG ratings, sustainability indices and the Human Rights Policy, also reports to the Group Chief Financial Officer (CFO), in order to ensure the ever-greater integration of these issues into corporate strategies and corporate reporting.

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The Global Business Lines, Countries, Global Service Functions and Holding Functions integrate ESG factors into their decision-making and operating processes, to create long-term sustainable value, thanks to the presence of dedicated sustainability structures in all countries, Business Lines and Global Service Functions. At the local level, the expectations of the various stakeholders are identified, and specific sustainability plans are defined, in line with the Group strategy. Additionally, Giulia highlights that a priority was to consider sustainability not only from a reporting perspective, but more proactively from a planning perspective. To support this, Giulia’s team underwent a transition, in 2014, that saw the department’s name change from ‘Sustainability Reporting’ to ‘Sustainability Planning, Performance Management’. More than a name change, the new title signalled a new approach to how Enel’s leadership team was thinking about sustainability as a game changer. While sustainability reporting was still an important part of the process, Giulia explains the shift marked a change in approach that brought sustainability to the forefront, rather than solely at a reporting stage. The focus on planning would also enable Giulia and her team to develop a roadmap based on robust data-driven sustainability. The shift also supported Enel’s mission to integrate ESG aspects into the company’s business model and strategy. Overall, the primary objective of this transformation was to accelerate the company’s sustainability journey and create robust processes across the board with a high level of ambition. The latest evolution is the reference, right from the current naming of the unit, i.e., Sustainability Planning, Performance Management and Human Rights, to the social side of the equation in a more evident way. The integration of environmental, social and governance factors is guaranteed by structured processes throughout the Group which include: analysis of the sustainability context, identification of priorities for the Company and stakeholders, sustainability planning, implementation of specific actions in support of sustainability objectives, reporting and management of ESG ratings and sustainability indices. Every stage of the process relies on respect for human rights as a fundamental element for pursuing sustainable success. (Giulia Genuardi, Head of Sustainability Planning, Performance Management and Human Rights)

 n Open Invitation to Address the SDGs Through Innovation A and Collaboration To encourage new uses of power and new ways of managing it and making it accessible to increasing numbers of people in a sustainable way, Enel has made innovation a key component of our strategy. It is a path that involves traditional activities and the development of new models and technologies, based on cutting-edge innovation, creativity, passion, and ideas not only from inside the Group, but also from outside. Enel works to identify the most innovative solutions to meet the main challenges of sustainable development as well as the 17 SDGs of the 2030 Agenda of the United Nations, both in line with and as a support for the Group’s strategy.

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In line with the organisation’s purpose, which is to ‘open power for sustainable progress’, Enel has launched openInnovability®.com, an online platform that introduces challenges motivated by specific business needs, many of which are directly related to the SDGs, and invites organisations from all corners of the globe, including start-ups, established organisations, not-for-profit, or individuals to submit their solutions. Through the platform solutions are collected, filtered, measured, and tested across the Hub&Lab network. In many cases the solution is not in line with what we are looking for. For an organisation whose culture is driven by innovation, this is expected and accepted as part of the process. For proposals that make it through to implementation stage, Enel collaborates with the organisations involved throughout the process. Giulia highlights that the key objective of the initiative is to ultimately merge a need with an opportunity, and this can only be achieved through stakeholder engagement. The ecosystem of Open Innovability® creates value for the future, that should be protected in a suitable manner. This is why we are working to strengthen the processes related to Intellectual Property (also referred to as “IP”) which guarantees double protection: on the one hand, it allows to control inventive solutions, technologies and knowledge that originate from the Company and the ecosystems of which Enel is part and in which universities, research institutes, suppliers, programmers and consultants are involved; on the other hand, IP makes it possible to safely and sustainably disseminate technological solutions that are used to implement electrification, platformisation, and stewardship programs.

Enel’s Approach to Developing Its Sustainability Strategy As a multinational utility company, Enel’s strategy is focused on leading the energy transition that the world is demanding today. To realise this ambitious strategy, Enel is working towards increasing renewables, enhancing its infrastructure, working on advancing innovation and promoting electrification. Using the United Nation’s Sustainable Development Goals (SDGs) framework as a guide, Enel has defined their strategy as clearly and concisely as possible. Defined in the strategy are 4 key SDGs that Enel has identified as being most important for the company to address as the most aligned to Group business strategy and its direct contribution to sustainable development. The first goal identified is Climate Action (SDG 13), followed by Affordable and Clean Energy (SDG 7), Industry, Innovation, and Infrastructure (SDG 9), and Sustainable cities and communities (SDG 11). Guided by these goals, since 2014 the company’s sustainability strategy and business strategy have become more and more integrated. With this streamlined approach, Enel is committed to creating a sustainable business model that will lead the company into the future. Electricity is the most efficient, safe, and competitive form of energy, and, thanks to renewable sources and storage, is the key to totally decarbonise our planet, in line with the Paris Agreement goals. The energy system is becoming less dependent on fossil fuels and their volatility and is therefore contributing to building a more

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sustainable future. At Enel, 94% of the investments planned for the 3-year period 2022–2024 are in line with the United Nations Sustainable Development Goals and over 85% are aligned with the European taxonomy. Giulia underpins that for Enel, Climate Action is clearly the biggest challenge for the company to address, but it also offers the biggest opportunity in terms of where the company can make the greatest impact. Enel has brought forward the “Net-­ Zero” commitment both for direct and indirect emissions by 10 years, from 2050 to 2040. To achieve these goals, from the beginning Enel recognised the transformation would be no small task, and would require an overhaul of the organisation’s operations, infrastructure, structure, and business strategy. This includes switching to producing 100% renewable energy by 2040, and the closure of all thermoelectric power plants the company had in operation. Additionally, to meet its ambitious targets, Enel will need to exit entirely from coal plants by 2027, and from gas by 2040. Adding to Enel’s commitments to reduce carbon emissions, the company is working towards an SBTi-certified target of 82 gCO2eq/kWh by 2030. The goals are enormous, and the path to get there may be even more challenging. By working in collaboration with their stakeholders, Enel is steadfastly committed to achieving the short and long-term goals it has set out. As part of the journey towards electrification, the grid plays a crucial role because it enables the integration into the system of distributed renewable plants. On a smaller scale, generation and flexible resources (such as photovoltaic panels on roofs and household batteries) can also be integrated. Moreover, the grid enables Enel to reach people who still do not have full access to energy. To implement this level and scale of change, Giulia stresses it’s important to not only consider the infrastructural changes that are required for decarbonisation, which for an energy company can be a herculean task in and of itself; but Enel also needs to consider the social impacts of the transition. It’s an important and crucial point to highlight. Therefore, Enel’s action in this sense is not only related to the energy transition but reflects a broader commitment, which is part of the Group’s approach to respect human rights along the entire value chain, as also defined by the Enel Human Rights Policy. When faced with multiple issues that are connected, as is the case with employees and contractors being affected by plant closures, Enel has put in place specific initiatives aimed at supporting their people through the transition, setting targets on increased upskilling and training programmes for instance. By taking into account the results of the materiality analysis, in synergy with the Strategic Plan, we set out our Sustainability Plan, which is divided into specific short-, medium- and long-term objectives, to make our journey towards sustainable progress more transparent and verifiable. Every year, these objectives are updated and new targets are set to ensure continuous alignment with the business strategies and the results achieved, in order to increasingly integrate sustainability along the entire value chain, taking into account the potential impacts on the economy, on the environment and on people. (Giulia Genuardi, Head of Sustainability Planning, Performance Management and Human Rights)

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Fig. 6.1  Overview of 6-macro areas of 2022–2024 Sustainability Plan. (Source: Sustainability report 2021)

Figure 6.1 shows Enel’s the 2022–2024 Sustainability Plan divided into 6 macro-­ areas, closely linked to each other, and representing the strategic lines of action. Giulia acknowledges that mobilising public and private capital to serve the sustainable strategy is of crucial importance for achieving the SDGs and for the ambitious investment objectives set by the Strategic Plan. Enel started exploring financial tools related to some environmental aspects already in 2017, with the first green-­ bond issuance, but 2019 was a key year for Enel’s sustainable finance strategy, with the launch of the first SDG-linked bonds in the world, with the interest rate dependent on the achievement of ambitious decarbonization objectives and on the strengthening of renewable generation, marking the start of the sustainability-linked bond market. In 2021, Enel was also the first company in the world to set up a ‘Sustainability-Linked Financing Framework’, an all-encompassing document that extends the sustainability-linked approach to all financial debt instruments. With a clearly defined purpose and approach to sustainability, as Enel continues its mission to open power for sustainable progress, the company’s leadership team have demonstrated that for every business decision the company makes, there are environmental, social, governance, and economic impacts that need to be considered at every step of the journey.

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Conducting a Materiality Assessment with Key Stakeholders When first developing their strategy, Enel performed a materiality analysis that engaged the organisation’s key stakeholder groups. The process was conducted in each country where Enel operates and involved all stakeholders in each country. The outcomes of the analysis served as the inputs for developing Enel’s sustainability strategy, as well as for the core business strategy. The analysis was led by Enel’s sustainability team and involved all the company departments. As part of the broader materiality analysis process, Enel has identified, also with the support of an external sustainability expert, and analysed the main current and future ESG megatrends, to identify their risks, limit their impacts and take full advantage of their opportunities. The digital revolution, definition of new governance models, climate and demographic change, and resources preservation are the main megatrends that are currently influencing and will continue to influence the economic, social, and environmental dimensions of sustainable development. Giulia underpins that: ‘These phenomena often influence each other and act in combination with each other, reinforcing their individual impact. The technological revolution and digitalisation have in several cases accentuated income inequality and the consequent could increase in inequalities.’ Continuous monitoring of stakeholder expectations allows the evolution of material issues to be tracked over time, identifying ESG objectives aimed at creating long-term sustainable value and defining the contents to be included in Corporate Reporting documents. The collection, aggregation, and processing of data and information are managed through a dedicated computer system (‘E-mia: Engagement – materiality & impact analysis’), which also allows the best practices of engagement to be shared within the Group and stakeholders to be monitored in line with the corporate organisational model. The results, which are updated annually, are presented at both Group and individual company. The material issues and the related management methods concern the following areas: Occupational health and safety, Decarbonisation of the energy mix, Infrastructure and Networks, Sound governance and fair corporate conduct, Economic and financial value creation, Innovation, circular economy, and digital transformation. See Fig. 6.2 for the main outcome of materiality assessment showing point of view of all the Company’s stakeholders as well as a representation of the Company’s contribution to sustainable development for each ESG issue. For an overview of Enel’s value creation and business model, which followed the materiality assessment, see Fig. 6.3.

Engaging and Supporting Suppliers and Local Communities Through Sustainable…

Fig. 6.2  Enel’s 2021 Priorities’ Matrix. (Source: Sustainability report 2021)

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Fig. 6.3  Value creation and business model. (Source: Sustainability report 2021)

6 Enel

Engaging and Supporting Suppliers and Local Communities Through Sustainable…

Fig. 6.3 (continued)

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 ngaging and Supporting Suppliers and Local Communities E Through Sustainable Transformation To create long-term value with and for all stakeholders, Enel supports them to grow and meet challenges. In addition to addressing the needs of employees as part of this transition, Giulia explains that Enel is committed to managing the transition at an individual country level in order to put into practice the principles of a just transition with all the players most directly involved in the process, particularly in the conversion of sites and coal-fired power plants. The Group follows the “think globally, act locally” approach, based on which the Futur-e initiative has been developed, which promotes an inclusive transition in the areas surrounding the power plants that are undergoing this energy transition. Futur-e is the first example in the world of requalification on a large scale of an industrial area that uses an approach based on the circular economy; a vast and unique program designed to find new uses for obsolete power plants. A strategy based on the following fundamental principles: • Integrate site personnel through a process of reassignment within the Group • Promote requalification projects to write new stories of energy conversion, sustainable growth and development of innovative ideas that improve creative thought and promote business initiatives. • Collaborate with local communities through a multi-stakeholder approach for favouring the creation of shared value along the entire project, from the preliminary interviews with the stakeholders, up to the decision regarding which requalification projects to follow • Guarantee the protection of the environment • Maximise the reuse of divested structures, such as roads, infrastructures, connections to the high-voltage network, buildings, etc. in line with the principles of the circular economy When it comes to communicating and informing suppliers about Enel’s goals and objectives, Giulia explains that ESG factors are incorporated into all Enel’s procurement processes and systems from the initial phases, including qualifications systems which are the first point of contact for suppliers interested in Enel tenders and contracts. In addition to compliance with local legislation, Enel procurement processes are based on criteria to promote sustainable development and social stability, as well as on the principles of free competition, equal treatment, non-discrimination, transparency, and rotation. The selection of the best partners and the execution of contracts according to the highest standards of sustainability are guaranteed by the company’s analysis and monitoring of the entire procurement process. The process is comprehensive by design. If at any point during the process it is revealed that a supplier is not complying with the requisites outlined, specific ethical clauses are built into the agreement which come into play if needed. The aim of the monitoring system is not necessarily to reprimand suppliers. Rather, the goal is to bring to light issues as they

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arise, and to address those issues through increased education and training that may be needed to help suppliers improve their performance in specific areas. Giulia highlights that, ‘Together with suppliers, we work to define new metrics and indicators and to promote co-innovation projects fostering decarbonization and circular economy, with positive impacts on both manufacturing and purchasing processes.’ Enel has adopted a structured process governed by a specific procedure to define ‘sustainability Ks’, which can be used in the tendering stage by the various purchasing and monitoring units throughout the entire life of the contract. The process involves a ‘Library’, cataloguing all the ‘sustainability Ks’, grouped into two macro-­ categories: environmental Ks, including waste management, carbon footprint; circular economy projects, and social Ks, including training to develop the skills of local communities, or action to ensure respect for gender diversity. Enel launched several initiatives to increase the resilience of the supply chain and to make Supplier Centricity more and more concrete and tangible. One example is the Supplier Development Program, launched in July 2020 and relaunched in November 2021 when it was opened to over 6000 suppliers in Italy, to support the growth pathway companies in the supply chain and, at the same time, to contribute to achieving the Group’s strategic objectives. By entering into agreements with the main players, Enel guarantees more favourable conditions than the market average and we contribute with partial coverage of the services offered as part of the program. These range from financial instruments that can facilitate access to liquidity, to managerial and technical training programs that promote the conversion of the business towards the energy transition, from consulting services on sustainability, circular economy, strategy, M&A, and internationalisation, to access to catalogues of means of transport and working machines, all the way to services to obtain certifications. Particular attention is paid to initiatives to support the conversion and diversification of businesses, such as the ‘Companies Counter’, consisting of periodic meetings with individual traditional generation companies to support them in their processes of growth and redevelopment towards expansion in areas such as renewables or new services related to energy efficiency. Establishing solid, long-lasting relationships with local communities represents a fundamental pillar of Enel strategy at the base of a new development model that does not leave anyone behind and is able to create shared value over the long term. The Creation of Shared Value (CSV) is both an objective as well as a precise methodology that aims to integrate sustainability into business by using an inclusive approach. The CSV model for managing community relations integrates socio-­ environmental factors within business processes and throughout the entire chain of value, with special reference to operations of business development, engineering and construction and supply chain, in addition to management and maintenance of assets. Giulia points out that Enel’s Innovability® approach to business, combined with the trust the organisation has built over the years with its stakeholders, identifying and supporting the needs of local communities is part of the process for Enel. Until the year 2014, the almost 300 inhabitants of Ollagüe – the least inhabited commune

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in Chile, located more than 3700 m above sea level on the border with Bolivia – had to endure extreme weather and living conditions. However, their lives improved by taking advantage of renewable energies’ opportunities to bring electricity to communities located in isolated places. To deliver 24  h of energy to Ollagüe, Enel designed and built a stand-alone hybrid plant, that combines photovoltaic, wind, and cogeneration systems. This project’s development meant establishing collaboration agreements and joining forces with various partners, all committed to improving this population’s quality of life and taking advantage of the special conditions of the project for research. The entire plant system is designed to operate remotely. However, supervision and system maintenance, such as cleaning panels and minimal monitoring, are carried out mostly by female members of the community, who are specially trained for this function, contributing both to developing technical skills within their population and the project’s sustainability. These projects – that combine innovation, local and natural resources, public-private partnerships, and the local community’s participation – create a new electrification model and make a vital and essential pillar for isolated villages like Ollagüe.

The Evolution of Enel’s Sustainability Journey So Far Giulia explains how Enel’s approach to sustainability is a dynamic one that is ever evolving. The concept of providing ‘open energy access’ differs from one region to the next, and it’s important to distinguish what this means for each region. In many developing countries access to energy is related to first access to energy with a strong focus in terms of infrastructure. In other areas Enel shifts its attention from looking at ‘how can we open access with infrastructure’ to ‘how can we make energy more affordable and manage energy poverty’. In turn, Enel’s focus turns to the issues that are specific and material to the regions where it operates. Combining macro and micro approach to sustainability, Enel is determined to continuously improve sustainability practices of the organisation. Giulia explains that today, Enel’s sustainability department has to identify and manage the so-called weak signals that could become material, in a broad sense, in the next future. The idea is to proactively get ahead of the issues, make decisions today that will ensure the company remains resilient when faced with similar risks in the future and reach the great opportunities. As is reported in the stakeholders’ letter of the 2021 sustainability report, ‘We (Enel) continue to look ahead into the future, and we work together with our stakeholders to ensure that society makes sustainable progress.’ With this promise, the company is steadfastly committed to its purpose of opening power for a brighter future.

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Formula E

Interviewee:  Julia Pallé, Sustainability Director, Formula E

Company Overview The ABB FIA Formula E World Championship is the world’s first all-electric international single-seater championship. Founded in 2014, the idea of the championship was conceived a few years earlier. On third March 2011, Formula E founder Alejandro Agag and Jean Todt, who was the Fédération Internationale de l’Automobile (FIA) President at the time, met at a Parisian restaurant where they ideated and imagined a dream that would lead to the development of the fastest growing motorsport series in the world. With its Headquarters based in London, UK, today Formula E employs over 200 people and operates in several countries around the world each season. The Championship is comprised of 11 teams and 22 drivers who compete in approximately 16 races in a given season. Founded on a sustainability-driven platform, Formula E’s inaugural season was launched on the grounds of the Olympic Park in Beijing in 2014. Since making its debut, the series has grown into a truly global sports entity that has garnered the attention and support of a new generation of motorsport fans from around the world.

Formula E’s Vision and Purpose Originally founded on a purpose to promote electrification and accelerate change towards a more sustainable future, today Formula E’s vision is steadfastly focused on leveraging the power of motorsport to accelerate sustainable human progress. Committed to realising this vision, Formula E is on a mission to promote sustainable mobility in the race for better futures. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_7

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 Championship’s Approach to Developing A a Sustainability Strategy Formula E Sustainability Director Julia Pallé describes the series as being a start-up when it first entered the scene. ‘When Formula E first emerged on the international motorsport scene, we were very much operating as a start-up, in terms of growth phase. Now that we are in our 9th season, we have certainly evolved into a more mature business. We are still in a transition phase, but compared to where we began, we are certainly growing and maturing as an organisation.’ Since its inception, sustainability was not only at the core of the series, but it was the catalyst for its development. Part of this had to do with having a sustainability-­ focused agenda, and part of it was due to timing. Julia Pallé explains that the idea for creating a new motorsport series, born on a sustainability platform, came with opportunities, as well as some challenges. “The idea for Formula E was conceptualised more or less ten years ago. At that time, the idea presented big opportunities, but also big challenges. On the one hand, there were several trends emerging around mobility and future mobility solutions, where electric vehicles played a huge role in promoting alternative energy solutions to address climate change. On the other hand, we knew the market wasn’t quite ready for big changes in the mobility and energy sectors, and that this would need to build over time.” Julia Pallé, Sustainability Director, Formula E. While alternative energy solutions and advanced technological innovations were gaining traction, the market was showing that it was not yet ready. Understandably, these are all big areas that still needed to be developed, improved, understood, and adopted over time. Building on the emerging trends and momentum that was growing across the automotive and renewable energy sectors at the time, Formula E founder Alejandro Agag and FIA President Jean Todt saw an opportunity to develop and promote the electric-vehicle (EV) sector through motorsport. Driven by a shared passion for motorsport, and a desire to accelerate future mobility solutions, Formula E was born. Throughout history, motorsport has been a test lab for technological advancements and innovations that have benefited society. Understanding the important role motorsport could play to further develop the EV sector, Alejandro Agag created a series that leveraged the platform of electric racing to promote and advance EV technology, which could then be adopted more broadly by auto manufacturers. Julia Pallé points out that the all-electric motorsport series provided a powerful platform to not only promote the EV sector, but to also put a different face to the sector. ‘If you recall in the beginning, the first EVs were not very appealing to a broader market. Since we started racing, there have been fantastic cars that have entered the marketplace. So, you not only have EVs, but now you also have “electric luxury vehicles”, with the likes of Porsche, Jaguar, and many others. With these new vehicles in the market, EVs are much more appealing and exciting today than they were 10 years ago.’ As is often the case with the introduction of any new technology, there were many challenges that need to be addressed. Two primary challenges facing the EV industry,

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which Formula E was focused on addressing, were infrastructure and cost. To grow the EV sector, Formula E recognised the importance of having the right infrastructure in place. Working in close collaboration with its title sponsor ABB, as well as with several industry stakeholders, Formula E focused on developing and making infrastructure more accessible and affordable to install and adopt more widely. The other challenge Formula E was focused on addressing was cost, or more precisely as Julia Pallé points out, the misconception that exists around cost. ‘There is a perception that EVs are expensive. But when you factor the full lifecycle and cost of a vehicle, including the price of fuel, EVs actually work out to be less expensive and much more affordable than people think. That’s a very important message to drive awareness around, as cost is going to be a big factor in driving change.’

 he Evolution of Formula E’s Sustainability Strategy (Then T and Now) When the series was first established, Formula E’s focus was primarily on the environmental dimension of sustainability, as this was what stakeholders expected, including the fans. In the beginning, its sustainability strategy focused less on addressing social and economic dimensions of sustainability, and more on ensuring the series was taking the right steps towards meeting their environmental targets. It was a strategy that proved to deliver, with the series earning the 3-Star FIA Environmental Accreditation in its first season. While this was a great accomplishment marking the Championship’s inaugural season, Julia Pallé and her team recognised this was just the beginning – and there was still a lot more work to do to drive the sustainability agenda forward across the sector. As the series continued to evolve and mature as a business and organisation, its sustainability strategy evolved as well. Of course, the environmental dimension was still an important pillar that the Championship would continue to focus on improving, but Julia Pallé and her team understood that to lead the way forward for the industry, and to showcase what is possible, the series would need to expand its focus to also consider the social and economic aspects of sustainability. With the environmental dimension and goals defined, Formula E turned its attention to developing initiatives aimed at making a positive social and economic impact. Using the ISO 20121 standards as a guide, Julia Pallé and her team set out to expand Formula E’s strategy to also include social and economic indicators. At the same time, Formula E applied to obtain the internationally recognised ISO 20121 certification, a process which intentionally occurred in parallel with developing their strategy. Using the ISO 20121 standards and application process as a guide to building their sustainability strategy, the exercise enabled Formula E to identify the areas of sustainability that were material, in turn highlighting where the Championship could make the greatest impact. To ensure compliance of the standards and practices outlined in their strategy, Formula E established a Sustainability Champion in each department. In addition to developing and stewarding the strategy across the organisation, the champions were

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trained and educated on sustainability to work in line with Formula E’s short and long-term goals, with the aim of bringing partners along on the Championship’s journey towards building a more sustainable future for motorsport.

Inviting Stakeholders to Join the Race Innate in Formula E’s culture is a desire to push the boundaries and to imagine what is possible, and this involves imagining what is possible to achieve together with their stakeholders. Since the beginning, engaging stakeholders has been a key part of Formula E’s approach to developing and implementing its sustainability strategy. Formula E’s network of stakeholders includes the teams, car manufacturers, event organisers, partners, investors, fans, governing federations, and suppliers. It’s a vast and complex network to navigate. To work towards achieving its environmental, social, and economic targets, Formula E recognised the importance of engaging stakeholders and bringing them along on the journey. When developing their strategy, Formula E conducted a stakeholder analysis using the IS 20121 guidelines, in relation to stakeholder engagement, as a guide to establish an initial framework. Further along in the process, Formula E altered the framework to better align with the needs of the Championship and its stakeholders. The approach taken was to engage each stakeholder separately, allowing for more meaningful and productive discussions to take place with each party. The comprehensive analysis is conducted every 3 years, while it is refreshed and updated on an annual basis. Discussions with stakeholders are ongoing however, with all parties being equally committed to continuously evolving and improving their practices along the way. Following the comprehensive assessment, Formula E is well poised to identify areas that are most important to their organisation, as well as to their stakeholders. The exercise sheds light on the key areas to focus on in the sustainability strategy, and also helps Formula E align their priorities with the interests of their stakeholders. Through this collaborative approach, all parties gain a clearer understanding of the goals and objectives outlined, enabling them to work together towards achieving the goals.

Engaging a Complex Supply Chain and Network When developing its sustainability strategy, Formula E engaged their supply chain from the very beginning. As is the case in most industries, Julia Pallé describes the Championship’s supply chain as a pandora box of sorts – you will never really get to the bottom. That said, processes were put in place from the start to educate and bring suppliers along on the journey. Before engaging suppliers, the process started in-house with Julia Pallé’s team first engaging Formula E’s procurement division to ensure sustainability was integrated into Formula E’s procurement policies and practices. Together the two divisions developed a condensed version of Formula E’s sustainability strategy as well as roadmap specifically for suppliers, to help educate

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them and guide them along on the journey. From the first point of contact with suppliers, sustainability-focused questions and clear requirements are built into Formula E’s pre-qualification applications. Sustainability requirements are also integrated into tenders and contracts, ensuring expectations and KPIs are clearly defined and outlined from the onset. For suppliers whose products or services are closely related to the deliverables outlined in the sustainability strategy, directly impacting areas such as logistics or waste management for instance, Julia Pallé’s team is brought into discussions early on to help train those organisations on Formula E’s overall strategy, requirements, and expectations. When it comes to engaging local suppliers who may only be involved during a single event weekend, such as a local waste management and recycling company, Formula E’s procurement team is on the front line to ensure the company has a clear understanding of what is required of them. To implement Formula E’s sustainability strategy with suppliers, given the integral role the procurement team plays in engaging suppliers from beginning to end, Julia Pallé emphasises that the internal training that takes place early on with the procurement team is an incredibly important part of the process. Considering the complexity of Formula E’s supply chain, combined with the robustness of its sustainability strategy and targets, in some ways – developing the strategy is the easy part. The hard work begins with the delivery of the strategy, which involves the engagement and contribution of many different departments and stakeholders, both internally and externally. While the process is complex, getting to the bottom of the pandora box is not the end goal for Formula. Making progress and improvements, educating and informing, and driving sustainability forward through innovation leadership for the industry remain the focus.

 eading the Industry with a Sustainability Strategy Built L on Four Key Pillars When looking at where Formula E is positioned across the motorsport industry, in relation to its sustainability performance, it is positioned well ahead of the pack. Julia Pallé attributes the Championships success to its unique purpose-driven values. ‘What sets us apart from other series, or other sports, is that we were born with ‘a sense of purpose’ that has always been at the centre of everything we do.’ Part of Formula E’s success can also be attributed to its holistic approach to sustainability. Building on the progress made during the initial seasons of the series, Formula E’s most recent sustainability strategy is built around four key pillars:

Environmental Excellence The first pillar forming Formula E’s strategy focuses on the environmental footprint of the Championship. Driven to lead by example, in 2020 the series became the first sports organisation in the world to be certified as net-zero since its inception. In

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Fig. 7.1  Science-Based Targets Initiative Commitments. (Source: Season 7 Sustainability Report 2020/2021)

2021, Formula E also became the first sport to join the Science Based Targets initiative (SBTi), with its pledge to reduce its emissions by 45% by 2030 (see Fig. 7.1). Determined to meet its commitments to reduce its environmental impact as much as possible, during its first 6 years seasons Formula E focused on tracking, measuring, and reducing its carbon emissions at every opportunity. In addition to improving existing processes, to meet the net-zero target it set out, Formula E made the decision to offset its carbon activities. Julia Pallé emphasises that  – during this decade of action  – efforts to improve practices around freight, which makes up approximately 70% of the series’ carbon footprint, will play a pivotal role to achieve this target. In recognition of the progress made so far on its journey, Formula E has earned several environmental achievements and certifications since the series launched in 2014. In 2015, following its inaugural season, Formula E received the 3-Star FIA Environmental Accreditation. Additionally, in 2017, the series earned the internationally recognised ISO 20121 certification. The certification marked another industry first, with Formula E being the only motorsport series to hold an ISO 20121 certification for sustainable events. Altogether, these achievements reinforce Formula E’s commitment to leading the way forward for motorsport, and more widely for the global sport and sustainability movement.

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Social Progress The second pillar that is central to Formula E’s sustainability strategy focuses on social progress, with the aim to accelerate social justice across motorsport and beyond. Each of the initiatives Formula E develops and supports, together with their partners and host cities, is aimed at building more inclusive, resilient, and diverse communities around the world. By leveraging the power of motorsport, Formula E is committed to creating opportunities for groups that are still underrepresented in the sport today. By working in close collaboration with all their stakeholders, including their sponsors and local community partners, and guided by its vision to accelerate sustainable human progress, Formula E strives to build a legacy in each of the cities and regions it visits. Improving the quality of life for people in each community the Championship visits is paramount. One example of how Formula E is working with their partners to support the well-being of people and communities is seen in the work it is doing with UNICEF. In 2021, Formula E partnered with UNICEF to support their ‘Safe & Healthy Environment Fund’. Committed to investing in the well-being of children in each of the communities Formula E visits, the initiative aims to educate children about the climate crises, while at the same time inspire and empower them to become agents of change. Julia Pallé stresses, ‘It is important that we work together to try and address climate change. While it’s true that today we are already feeling the impact of climate change, unless we work together, it is our children’s futures that will be compromised.’ Being a motorsport Championship, Formula E recognises that for many people today, gaining access to the sport can still be challenging. Steeped in tradition, motorsport has historically been a relatively exclusive and expensive sport to access. Committed to removing barriers and making the sport more accessible to people of all economic and social backgrounds, together with the FIA, Formula E developed Girls On Track, a programme designed to make motorsport more accessible to girls. Leveraging the power of motorsport, the programme aims to engage young girls interested in STEM, inspiring them to imagine or possibly pursue a future career in motorsport or STEM. To further support the Championship’s efforts to improve inclusivity, within the sport and beyond, in each of the cities Formula E visits it works closely with local community partners, including schools, businesses, and charities, to support initiatives that benefit the local community and surrounding areas.

Leadership and Innovation The third pillar that Formula E has identified as being key to building its sustainability strategy is ‘Leadership and Innovation’. Leadership and innovation represent the ethos and culture upon which the series was founded. Guided by this pillar, the series provides a unique and innovative platform to showcase sustainable lifestyles. Being a leader in innovation is the driving force behind Formula E’s motivation to

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be at the forefront of new and emerging technologies. Julia Pallé emphasises the goal of being on the leading edge isn’t to necessarily be the first, rather, it is to demonstrate to the industry what is possible, and what is achievable. Innovation-driven leadership was the catalyst that led to the creation of Formula E, and has been embedded throughout the Championship’s culture ever since. It is also what has propelled the organisation into being an industry leader that is devoted to engaging all stakeholders with the aim to accelerate sustainability across the board. One example of how Formula E has played an integral role in elevating sustainability performances across the industry was seen when, for the first time in its history the FIA, motorsports international governing body, put sustainability indicators into its race car requirements. It was a big shift for the industry, and this was done in large part due to the positive influence and encouragement provided by Formula E. Formula E is also playing a key role in updating the image of sustainability. Describing the look of Formula E’s newest racing vehicle, Julia Pallé states, ‘The new generation all-electric racing vehicle we launched at the beginning of this season is really the pinnacle of what sustainability can look like in a racing car. Certainly, this isn’t the finish line – but it’s a momentous step on this journey, and that is very important to us.’

Creating Value Through Values The fourth pillar identified in Formula E’s sustainability strategy is built around the idea of ‘value created through values and partnerships’. In line with the UN SDG #17, which is about ‘partnerships for the goals’ and calls for leaders to ‘strengthen the means of implementation and revitalise the global partnership for sustainable development’1, Formula E works in close collaboration with their partners to drive their sustainability goals forward. Building on a solid foundation of shared values, from the beginning Formula E sets out to understand their partners’ priorities, and gives them the visibility and platform to promote the work they are doing, especially among fans. Julia Pallé recognises that fans play a vital role in driving sustainability forward, not least of all through the lifestyle decisions they make, therefore bringing them along on the journey is key. Dedicated to working with their partners to create value that benefits communities and fans, Formula E provides a platform that enables their partners to showcase what a sustainable lifestyle means, and what it can look like for their fans. We aim to work with our partners to find authentic ways for them to showcase their solutions to our fans. At the end of the day, through the partnership initiatives we develop, we want to help our fans to better understand what ‘adopting a more sustainable lifestyle’ can mean for them. For example, something as simple as ‘enjoying a beer in a reusable and recyclable cup’ is one way we can strive to influence behavioural changes. In this sense, we are inviting our fans to be part of the journey.  Source: https://sdgs.un.org/goals/goal17, accessed June 2022.

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Building Purpose-Driven Partnerships When Formula E first emerged on the global motorsport scene, its purpose at the time was to advance electrification and to bring it to all streets and cities around the world. As the Championship grew and evolved, so did its purpose, vision and mission. A few years ago, Formula E revisited and redefined its vision, shifting its focus to be less on accelerating electrification, and more on accelerating sustainable human progress. The newly defined purpose represented a shift within the organisations approach to sustainability and innovation leadership. Looking forward, Formula E wanted to ensure they were investing time and resources in innovation that was driven by purpose. And although innovation at Formula E starts in the garages, it doesn’t end there. Formula E’s garages are often a testbed for new innovations that can benefit their partners, stakeholders and even other industries. Building on their pillar of creating value through values, in addition to driving innovation forward with their own engineers and sustainability experts, Formula E also leans on the expertise of their partners in different sectors, who share their ambitions to accelerate sustainability practices and performances. Julia Pallé points to Formula E’s partners DHL and Heineken as just two of many partners who are keen to work together to develop initiatives that will help them not only achieve their own sustainability goals, but at the same time support Formula E’s vision and ambitions. Going beyond traditional sponsorship arrangements, that often focus on ROI, Julia Pallé highlights their partners are motivated to contribute and support Formula E’s sustainability goals, with each one bringing something to the table that creates value and makes a positive impact for the communities the series visits, as well as for fans. Formula E sponsors also benefit by partnering with the series to create initiatives aimed at supporting their own sustainability goals and objectives. Julia Pallé explains that DHL for instance, being a logistics partners, also needs to meet Science Based Targets (SBTi), so they also have an invested interest in testing new technologies, and through their partnership Formula E is able to provide the perfect platform and testbed for DHL. Julia Pallé emphasises that the initiatives they have developed with their partners provide an opportunity to collectively showcase that this is much more than a race. ‘Through the work we are doing together, our partners are able to drive awareness around their sustainability initiatives, as well as engage and connect with our social-conscious fans who share our values and support our vision.’

Engaging and Inspiring a New Generation of Motorsport Fans Formula E’s approach to innovation also extends to how the series works with its sponsors. As a motorsport championship that was born on a sustainability platform, the series has partnered with several commercial partners who share Formula E’s values and vision.

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The message that Formula E strives to convey with each initiative they develop with their partners is one of optimism and hope. Julia Pallé acknowledges that, although the world is no doubt facing a climate crisis, and the stark warnings that come from industry reports such as the one published by the IPCC are incredibly important for educating and informing the world on the risks and urgency to act, being an organisation that is driven by innovation, through the programmes they develop with their partners Formula E is devoted to leveraging their platform to seek solutions. When you look at neuroscience it’s proven that people are much more motivated when they receive a message of hope and positivity. We see it as our role at Formula E to take these reports and digest them, and then try to turn the message into a one that is more encouraging. (Julia Pallé, Director of Sustainability, Formula E)

Promoting electrification remains a key driver for the series and its partners. As the series has evolved however, so too has its sustainability agenda and goals. Formula E recognises that, now in its eighth season, the Championship has become much more than sheerly a race or platform to promote EVs. Since its inaugural season in 2014, Formula E has expanded its approach to sustainability to more holistic than it was in the early years, when the focus was primarily on the environment. Today, Formula E has in place several initiatives aimed at addressing different areas of sustainability, including social and economic dimensions. Julia Pallé explains this evolution and expansion is what fans want and expect of the purpose-driven series, as well as their partners.

Fostering a Family Culture and Environment Building on Formula E’s pillar that is focused on social initiatives, in addition to supporting communities near and far, Formula E is equally committed to supporting and taking care of their employees. Being a Championship that values performance and excellence, fostering a family culture and environment that celebrates employees’ achievements and efforts is important for the organisation. To show their appreciation to employees for their valuable contributions, employees are regularly offered free lunches in the office, or are invited to after-work drinks and social gatherings by Formula E’s leadership team. Additionally, each year the leadership team organises two dedicated team-building days, where the organisation’s strategy and goals are shared with the entire organisation. In line with Formula E’s commitment to fostering a family environment, these days also include fun and engaging team-building activities for all to take part and enjoy. Additionally, recognising employees’ efforts to support the organisation’s sustainability agenda, Formula E organises annual Employee Awards at the end of each year.

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Sustainability Reporting and Disclosure At the end of each season, Formula E has published an annual Sustainability Report that discloses the Championship’s environmental, social, and governance (ESG) activities, and progress made each season, as well as their commitments for the coming years. To report on the Championships sustainability practices, Formula E follows the GRI referencing level, which provides a detailed overview of the Championship’s ESG activities and performance. Being a relatively small organisation, Julia Pallé concedes the data collection process alone is a major undertaking for the series. That said, given Formula E has conducted lifecycle assessments following each event, since the beginning, the data-gathering process has become somewhat routine – with metrics being well measured and tracked along the way. Being a privately held organisation, having access to this level of data is also useful when communicating and reporting to the Championship’s board of investors. In addition to producing a Sustainability Report at the end of each season, Formula E also issues its annual financial report at the end of each fiscal year. And while there are some ESG elements factored into the financial report, currently Formula E’s Sustainability and Financial reports are separate. Looking ahead, streamlining the reporting waves and processes, and merging the two reports into one integrated report is something the series is open to exploring potentially for future reports. Focused on trying to simplify the information that is shared and communicated to their stakeholders through a Sustainability Report, in recent years Formula E has referred to the United Nation’s Sustainable Development Goals (SDG) Framework to shape its reporting structure, which provides a more common way of presenting and communicating ESG goals and targets to stakeholders.

Approach to Training and Educating Formula E’s approach to training employees about their sustainability goals starts at the point of hiring. When a new employee joins the Championship, as part of their onboarding they are introduced to Formula E’s overarching strategy, vision, and ambitions. At a basic level, all employees receive a sustainability onboarding that provides a broad overview of their strategy, of what sustainability is, and what it means for the organisation. For departments that require more specialised training for their specific area, external experts are brought in to provide more in-depth training sessions. This customised approach to training is also taken with external stakeholders. For Julia Pallé and her team, the key to engaging and training all stakeholders, both internally and externally, comes down to effective communication. Considering the complexity and around of information that comes with developing a sustainability strategy, Julia Pallé stresses the importance of distilling and communicating information that is pertinent to specific stakeholder groups. Explaining how the

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goals relate to specific departments and roles is essential for the strategy to be embraced and implemented across the board. For an organisation that operates in multiple countries internationally, understanding and navigating the complexities of working in different regions and dealing with different laws and regulations is a key part of the process. All these factors need to be considered for, and by, each stakeholder group at every step.

How the Strategy Has Been Received So Far Much like what transpires on the racetrack, Formula E’s approach to working with their suppliers is a very collaborative ‘teamwork’ approach. All supplier relations begin with dialogue around Formula E’s sustainability goals and objectives. To work towards achieving each goal, working groups including representatives from Formula E and their suppliers are formed to develop a road map. Julia Pallé explains that it is only at this point in the process, when all parties have contributed and feel comfortable with the plan, that KPIs are introduced into supplier agreements. She points to the agreement they have in place with their waste management supplier as an example, ‘Currently we have KPIs in place with our waste management supplier, but this only came into effect after years of working together and collaborating on improving our processes and indicators. This is the way we operate, by working alongside our suppliers and supporting them along the way.’ When reflecting on Formula E’s journey and how far the series has come since the Championship was first conceptualised in a Parisian restaurant over a decade ago, Julia Pallé touches on the culture and momentum that has been built over the years, ‘We are now at a place where, rather than us pushing our sustainability agenda, our internal departments are coming to us and asking “what more can we do” or “what else can we improve”. I think this shows that we have really created a culture of sustainability. And I believe this culture is here to stay – it’s very much engrained in our organisational purpose, values and mission going forward.’

Industry Awards and Recognition Being an industry leader in sustainability and innovation, Formula E has earned several industry awards and accolades in recognition for their efforts to drive sustainability forward. While the environmental accreditations and certifications Formula E received are certainly important for recognising Formula E’s efforts, and for reaffirming they are on the right path, Julia Pallé emphasises it is the recognition received by third-party awards and certifications that are a true testament of the Championship’s achievements so far. To date, Formula E has received several industry awards in recognition of their efforts, including the 2020 Sustainability Award by the Business Intelligence Group, as well as being shortlisted for the 2020 Sustainability in Sport Award by Sport Business. Additionally, Formula E has achieved a Silver Medal rating by

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Ecovadis, a globally recognised sustainability assessment and ratings provider. The Championship has also received ISO 20121 certification since 2018, as well as earning the FIA (Fédération Internationale de l’Automobile) Three-Star Accreditation since 2015. The FIA Three-Star Accreditation is the highest accreditation level issued by the FIA to motorsport stakeholders in recognition of their environmental practices and performances. Altogether, the certifications and recognition garnered by the industry reinforces Formula E’s position as leaders in sustainability and innovation across the industry. In addition to being recognised as an industry leader, through various awards and certifications, Formula E is also leveraging its platform to elevate and recognise sustainability-driven actions and behaviours across its ecosystem. In 2020, in partnership with the Climate Group’s EV 100 Programme, Formula E launched the Climate Champion Award. The annual award is issued to a Formula E team that is making strides to raise awareness and tackle climate change through the promotion of electric mobility.

Approach to Marketing and Communications To communicate their sustainability agenda and initiatives to their stakeholders, Julia Pallé and her team work closely with Formula E’s communications and marketing department, which includes someone who is primarily dedicated to creating sustainability content and communications initiatives for the organisation. ‘With sustainability being deeply embedded throughout our organisation, talking about sustainability across our marketing and communications channels comes naturally. Working with our marketing team, with each initiative we promote we strive to capture the minds and imaginations of our fans. At the end of the day that is what this is all about – connecting and engaging our fans in an exciting and meaningful way.’

Formula E’s Sustainability Champions Team Formula E’s sustainability team is led by Julia Pallé as Sustainability Director, who reports directly into the Chief of Staff, who reports into the CEO. Under Julia Pallé, there is a Senior Sustainability Manager and a Sustainability Manager. When more specialised training or guidance is needed, Julia Pallé and her team lean on the expertise of external consultants who are brought in for specific projects or training sessions. Julia Pallé sagely points out that, on this journey towards a more sustainable future, as a team it’s important to acknowledge ‘what they know’ – and perhaps more importantly ‘what they don’t know’. To this end, Julia Pallé stresses that bringing in the right experts at the right time is always the best approach. It is sound advice for any organisation that is either just beginning their own journeys, or already on their way towards creating a more sustainable future.

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The LEGO Group

Interviewee:  Tim Brooks, Vice President Sustainability at The LEGO Group

Company Overview Founded in 1932 by Ole Kirk Kristiansen, the LEGO Group is one of the world’s leading manufacturers of toys. The name ‘LEGO’ is an abbreviation of the Danish words ‘leg godt’, which means ‘play well’. More than a name, ‘play well’ defines the ideal and core value that the company was founded on, and that it continues to build upon today. The company started as a family business in a small carpenter’s workshop, which was passed down from one generation to the next. Today, the company is still owned by the same family and led by Thomas Kirk Kristiansen as Chairman of the Board, who also represents the fourth generation of the owner family. The company’s Headquarters is located in the same village where the company was founded, in Billund, Denmark. In 2022, the LEGO Group is a global enterprise that has evolved into one of the world’s largest toy manufacturers, with more than 24,000 employees in over 40 countries around the world.

LEGO’s Purpose and Vision The LEGO Group is driven by its mission ‘to inspire and develop builders of tomorrow’. The company’s commitment to sustainability is woven into the fabric of its mission and core values. As a family-owned and operated company, sustainability has always been at the centre of the LEGO Group’s core values. Sustainability has also been central to the values shared by the family and the company’s executive leadership team.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_8

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The Company’s Four Purpose-Driven Promises Underpinning how sustainability is embedded throughout the company, the LEGO Group has defined four key promises, as part of its brand framework, that guide the organisation’s approach to business. The four promises include the Play Promise, the People Promise, the Partner Promise, and the Planet Promise. Together, the four promises form the compass that guides the direction for the company’s business decisions and strategy going forward. These four promises are threaded throughout the organisation, starting with the onboarding processes that welcome new employees to the company. Tim Brooks, Vice President Environmental Responsibility at the LEGO Group, highlights that these promises are not only embedded into organisational processes, but they are truly part of the culture that has been fostered at the LEGO Group since the very beginning. Going beyond policies and procedures, these promises are measured by what the company refers to as its pinnacle KPIs. Delving deeper into each of the LEGO Promises and their KPIs, the Play Promise is based on the company’s philosophy of ‘Only the best is good enough’, which refers to the belief of founder Ole Kirk Kristiansen that if you make great products, then children and adults will increasingly want to play with them. This promise is measured using a Net Promotor Score (NPS) that tracks, month-on-month, how the physical products and sets are being assessed by both adults and children, as well as the perception of the experience with the products – and in turn, how likely the different target groups are to recommend a product or experience from the LEGO Group. The Partner Promise focuses on the company’s value chain and building partnerships with customers, suppliers and intellectual property partners based on mutual value creation. The Partner Promise is also measured by an NPS score that is based on a series of questions that ask partners whether they would recommend the LEGO Group as a good company to work with, or to supply. The People Promise is centred on upholding human rights and building fair, equitable, and responsible workplaces, for their own people, as well as their supply chain. This promise is measured by a KPI that asks employees if they would recommend the LEGO Group as a place to work for to family or friends. The fourth promise focuses on the planet. With this Planet Promise, the LEGO Group is committing to playing its part in building a sustainable future and making a positive impact on society and on the planet. To measure this promise, which aligns with the Sustainable Development Goals (SDGs) #4 (Quality Education) and #12 (Responsible Consumption and Production), the LEGO Group uses the metric of corporate reputation as the Pinnacle KPI for how the company is performing in this sphere (see Fig. 8.1 for the LEGO Group’s Planet Promise). What is notably missing from the KPIs outlined, as Tim Brooks aptly points out, is a financial parameter. This is by design, as the organisation operates on the assumption and belief that if each of the four promises is met, the financial performance will come as a result of this effort. Regarding the financial gains that come with creating a business that is built on sustainability, Tim Brooks mentions that the profits generated offer an additional incentive for the company to continue to invest in its four promises.

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Fig. 8.1  The LEGO Group’s Planet Promise. (Source: The LEGO Group  – Sustainability Progress 2021)

 pproach to Building a Sustainability Strategy One LEGO Brick A at a Time With the company’s origins dating back to 1932, for the past 90 years the LEGO Group has endured what may perhaps be the greatest sustainability test of all for a business, which is the test of time. Given its longstanding history, the company has been on a sustainability journey since the beginning. Not unlike the building blocks that are synonymous with the company, over the years the LEGO Group has continued to build and evolve its approach to sustainability. Prior to establishing a formal sustainability strategy, in 2006 the LEGO Group developed and published its first Sustainability Report. The publication of the report marked the first of many industry firsts that would follow. The LEGO Group’s sustainability journey was accelerated even further in 2010 when the company began to look at and address the issue of sustainable materials and plastic used for the toys that it manufactured. Tim Brooks points out that when the LEGO Group started to look at the issue of plastic in a more formalised way, as part of the company’s strategy cycle in 2015, this timing preceded the modern discourse around plastic and single-use plastic that is very prevalent today. As the internal ambitions around sustainability grew, fuelled by both the tangible results that the LEGO Group was seeing as a result of its activities, as well as the growing need for organisations to formalise their approach to sustainability in order to be able to better connect and engage with external audiences, in 2019 the LEGO Group set out to formalise its sustainability strategy and approach. At this time, the topic of sustainability was firmly incorporated into the company’s strategy planning cycle for the 2021–2022 timeframe. Currently in 2022, the LEGO Group is in the

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midst of its strategy planning cycle for 2023–2025, which promises to be even more comprehensive and robust than the previous strategy. Tim Brooks emphasises that prior to formalising this process, there had always been a comprehensive set of sustainability initiatives in place, including the significant investment in sustainable materials announced in 2015; however, they had not been integrated into a formal corporate strategy process until recently.

Sustainability as a Competitive Strategy Speaking about how sustainability fits with the company’s competitive strategy, Tim Brooks says that increasingly the two are becoming more aligned. With the next strategy that is currently in development, Tim Brooks says these approaches and strategies are even more harmonised. While sustainability makes good business sense, more importantly Tim Brooks stresses that for the organisation, sustainability is viewed as the right thing to do. It is something that the family and employees driving the organisation feel passionate about. This passion is fuelled by the company’s mission of inspiring and developing builders of tomorrow. Guided by our mission, I think there is a very strong feeling and understanding across our organisation that we have no right to say, ‘we want to inspire and develop builders of tomorrow’ or to bring ‘learning through play to children to help shape them into adults of the future’  – if somehow, we are compromising that future. (Tim Brooks, Vice President Sustainability at The LEGO Group)

It is this strong sense of purpose and responsibility that drives the company’s competitive strategy and positioning. By earning people’s trust, the company earns the right to play in the field of play. It earns the right to say its mission is to inspire and develop future generations. To earn this right, Tim Brooks emphasises the company is committed to doing everything it can to not compromise the future of the builders of tomorrow. The approach the LEGO Group takes to shape its strategy can be simply explained by a ‘plus’ and ‘zero’ game. The ‘plus’ is about the LEGO Group’s vision of Learning-through-Play. At its core, this vision is both about giving as many children as possible access to play but also about the power of play. Because when children play, they can build valuable life skills while having fun. Learning through play enables children to solve problems creatively, boosting confidence and resilience. Essentially, the belief is that through play, children can learn to become great world leaders, police officers, teachers, and parents of the future. This leads to having a positive impact on society. The ‘zero’ game focuses on how to minimise the company’s impact on the planet. At its core, the LEGO Group wants to communicate to the world that it is fundamentally here for good. It wants to be a good corporate citizen that is having a positive impact on society, and on the planet. Furthermore, it wants to create a world where its idea of ‘play well’ is a reality for all.

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Underscoring how the company’s purpose-driven strategy ties into its competitive strategy, Tim Brooks explains that, from a commercial and brand perspective, the LEGO Group has always been driven by its high ambitions, and, in turn, a desire to ensure that it always lives up to that. Tim Brooks acknowledges that with great products and a great brand comes a great responsibility. Therefore, from a commercial perspective, having a clear sustainability strategy enables the company to earn the trust of children, retailers, and more widely, society as a whole.

 he Evolution of the LEGO Group’s Sustainability Strategy T and Journey On 10 August 2022, the LEGO Group celebrated its 90th Anniversary. While the company has grown into the global entity that it is today, 90 years since its inception the company’s Head Quarters remain in the very same village of Billund, where its journey began back in 1932. And just as the company has evolved over the years, its Head Quarters have also evolved into an enormous state-of-the-art campus located in the centre of the town. Tim Brooks points out that despite its growth, the company remains at the heart of the community, both literally and figuratively. For the LEGO Group, sustainability is defined primarily by how the company treats its people, its surrounding community, and the environment. By taking care of their people, the LEGO Group values having a reputation of being a great employer and building a company where people want to work. The same care and approach is applied to how the LEGO Group engages with its surrounding community and environment. Being a family-owned organisation that is based in a small village, the LEGO Group has always made a conscious effort to be a responsible business that respects its surrounding environment. Since the beginning, the LEGO Group has always ensured that they respect the local environment, and for example, not deplete forests to make their toys, which in the early years were made from wood. In 1958, the LEGO Group established its patent for its famous plastic LEGO brick. In 1962, the company began to use ABS plastic. From this point onward, the LEGO Group leveraged and harnessed the power of this new and innovative product that would lead to the company’s growth globally. This growth accelerated in the late 1980s and 1990s. Up to this point, the company’s operations were based entirely in Billund, which was and continues to be home to multiple large production facilities for the LEGO Group where the company still produces a significant number of its bricks to this date. Despite its growth, the third- and fourth-generation family members have remained very much part of the organisation and are well known in the local village still today. Tim Brooks highlights that the LEGO Group’s sustainability journey is a story of progression, which for the LEGO Group starts and ends with responsible ownership – and that involves building a positive reputation with its employees, its local community, and its global customers and consumers.

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Approach to Reporting and the Triple Bottom Line In 2006, the LEGO Group began to communicate about its sustainability journey in a more formalised way when the company issued its first Sustainability Report. At the time, the LEGO Group was leading the way in terms of disclosing and reporting on its activities and performance, especially considering it is a family-owned company that is not required to report on its financial or sustainability performance. Appreciating the importance of disclosure and transparency however, the LEGO Group has made strides to share its activities and progress each year with the publication of its annual Responsibility Report (see Fig. 8.2 for headlines from the LEGO Group’s 2021 Sustainability Report). The first Sustainability Report provided an overview of the company’s sustainability initiatives, which at the time were mainly focused on improving energy efficiency and manufacturing processes, with the goal of minimising the company’s impact on the environment. In line with this goal, and as an industry-leading organisation, in 2003 the LEGO Group became the first toy manufacturer to join the UN Global Compact, clearly showcasing the company’s steadfast commitment to addressing rising global challenges and making a positive impact along the way. Currently, the LEGO Group’s sustainability reporting is separate from the company’s annual financial reporting. That said, given the focus on the KPIs defined under the company’s four promises, the two reports are closely linked and published within the same timeframe. Tim Brooks highlights that there is an increased awareness on the part of the leadership team that the company’s sustainability performance – in relation to the four promises – has a direct impact on the company’s financial performance and report. Tim Brooks highlights that there is a clear line

Fig. 8.2  The LEGO Group’s 2021 Sustainability Report Headlines. (Source: The LEGO Group – Sustainability Headlines for 2021)

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that can be drawn between the sustainability KPIs and the financial KPIs – which, put together – cover the triple bottom line of planet, people, and profit. Looking ahead, Tim Brooks remarks it is possible the two reporting processes and outputs could be integrated in the future, especially as more stakeholders become increasingly interested in understanding the company’s ESG results alongside the company’s financial performance. The company’s continued journey of digital transformation and innovation will also play a pivotal role in shaping how the company develops and shares results in the future, making information easier for stakeholders to access and navigate going forward.

Engaging the Supply Chain The Partner Promise that the LEGO Group has outlined in their strategy was defined with the value chain in mind. In 2014, the LEGO Group began to engage their suppliers in a more formal way with the introduction of its ‘Engage-to-Reduce’ programme, an initiative that is focused on bringing suppliers along on their sustainability journey, while at the same time striving to educate and influence suppliers towards reducing their own impact. The LEGO Group understood early in the process that to achieve their own goals, partnership is key. The LEGO Group’s efforts to engage suppliers have gained momentum over the years, and in 2021, the company held its first Supplier Sustainability Summit. The conference marked a significant event on the LEGO Group’s journey, which included key members from the LEGO Group’s leadership team like COO, Carsten Rasmussen. The event provided an opportunity for the company’s leaders to share their vision and to engage directly with suppliers about the challenges and opportunities that lay ahead. The conference also provided the platform for the LEGO Group to clearly outline the areas the company was focused on addressing, specifically in relation to environmental and carbon footprint issues. As an organisation whose business is centred around children, the health, safety, and well-being of children is paramount to the LEGO Group. Included within the company’s many social responsibility initiatives are policies aimed at ensuring children’s rights are protected, they are kept safe, and that child labour does not exist within its supply chain. For the LEGO Group, these are clear expectations and redlines that have been drawn and implemented for many decades. When it comes to its promise to the planet, the LEGO Group acknowledges that while it has moved towards reducing emissions from its own operations, 98% of the company’s carbon emissions reside within its supply chain. This means that, for the company to truly minimise its environmental impact globally, engaging and collaborating with suppliers is the only way to achieve this goal. Tim Brooks explains that this realisation is the driving force behind efforts being made to retrieve data from suppliers. To support suppliers on their own journeys towards net-zero, the LEGO Group has encouraged their main suppliers to report to the CDP (formerly known as the Carbon Disclosure Project). Additionally, the LEGO Group has asked their key suppliers to make the transition towards renewable energy. In parallel,

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suppliers are being asked to provide their data so that the LEGO Group can help guide them during this transition towards lower carbon emissions. Tim Brooks explains that obtaining accurate and granular data is a key part of the process that will empower both the LEGO Group and their partners to make informed decisions about where they need to focus their attention to make the greatest impact. In addition to gathering data, the primary objective of the Engage-to-Reduce initiative is to gain insights from suppliers, and to work with them to identify the issues that are the most important to address. The process also enables the LEGO Group to clearly communicate their expectations, share learnings between partners in the supply chain, and to help steward the way forward with their partners. To meet their own sustainability targets, the LEGO Group has clearly outlined their expectations for their suppliers and partners, in line with their own goals. For example, the LEGO Group is asking all their key licensing partners and suppliers to work towards utilising more sustainable materials in their production. Similarly, they are being asked to switch to more sustainable packaging. Therefore, even for products that are licensed and not manufactured directly by the LEGO Group, the same expectations apply. In addition to engaging suppliers, another key objective of the Engage-to-Reduce programme is to foster collaboration between different suppliers from different parts of the value chain, encouraging them to interact and discuss various challenges and solutions together. Tim Brooks points to an example where one of their partners brought forward a more sustainable plastic material as a possible option for the LEGO bricks. Due to various quality, health & safety standards it was not deemed suitable for the LEGO bricks themselves; however, the supplier was guided to connect with another supplier that provides the internal plastic packaging inside the cardboard boxes containing the LEGO products – as this new material could offer potential packaging improvements, as well as make the packaging lighter weight which also supports efforts to reduce carbon emissions. It is an example of how dialogue and solutions-focused collaboration is encouraged and valued throughout the supply chain. The example is also a sign of how momentum towards more sustainable practices is building, not only within the organisation but among partners and suppliers as well. While immense progress has been made in recent years, Tim Brooks acknowledges engaging suppliers and bringing them along on the journey is still a work in progress. Going forward, the LEGO Group remains committed to supporting their suppliers, as well as challenging them on areas where they can improve their own practices and reduce their impact. To further accelerate change, the LEGO Group is further exploring ways to build even stronger relationships with those suppliers that aim to meet their sustainability standards and go even further. Tim Brooks highlights that while the company has hosted many licensed supplier conferences in the past, the 2021 conference was the first event that brought all of the LEGO Group’s suppliers together. The event served as a platform for the LEGO Group to share their sustainability goals and expectations with all their partners at the same time, with the clear message that the LEGO Group’s targets are also

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the targets of its suppliers, and that the company and the suppliers are on this journey together.

Approach to Identifying Risks and Opportunities Many of the formal processes that the LEGO Group has established, both internally and externally, to develop their sustainability strategy have been designed to map the risks and opportunities associated with sustainability. Tim Brooks explains that in this regard using the CDP framework is a great tool for companies, as it will inspire them to consider both the business risks and the physical risks of not taking action. Tim Brooks emphasises that with each risk, there are also benefits and opportunities. When it comes to assessing the benefits and opportunities, the LEGO Group considers each opportunity by asking first and foremost whether it supports one of the company’s four promises – which LEGO views as the highest barometer and test for deciding the best way forward.

 ngaging the Company’s Most Important E Stakeholder – Children Recognising that sustainability is an evolving journey, every 3  years the LEGO Group also conducts a materiality assessment which engages key stakeholders to work together and to identify issues that are most important and relevant to all parties. The primary goal of the assessment is to ask stakeholders what they expect from the LEGO Group on sustainability. What is perhaps most unique about the LEGO Group’s approach to their stakeholder engagement process, and to developing their sustainability strategy, is how children are very much positioned at the centre of the LEGO Group’s key business decisions. Tim Brooks explains that, in many ways, children drive the strategy. A primary of example of this was seen when the company conducted its first materiality assessment in 2013. Among the many stakeholders that were engaged throughout the process were children. According to the consulting firm that was supporting LEGO on their materiality assessment, it was the first time they had heard of a company of any size engaging children as part of their assessment. For the LEGO Group, the move was logical and in line with the company’s mission and drive to inspire and develop the builders of tomorrow. Tim Brooks explains, ‘We fervently believe that if we are committing to putting children’s best interests at the centre of our business, then we actually need to put them at the centre’. As part of the process, 5000 children were interviewed along with their parents, on what mattered to them. The responses covered a wide range of topics, including concerns about the natural world, social issues, family issues, and many more. While the interaction marked the first for the company, in terms of formally engaging children on matters relating to sustainability, it wasn’t the last. Tim Brooks explains that to

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date the company receives over 1000 letters each year from children voicing their concerns and ideas related to sustainability. This doesn’t count the many other letters that pour in about other material matters for children, such as product reviews or wish lists for Christmas, but Tim Brooks remarks on how encouraging and inspiring it is to see how much children are engaged. Altogether, the letters received, and the concerns raised feed into the company’s sustainability strategy which is then shared with the Board of Directors. Additionally, many of the letters and issues raised are also used as Case Studies, which help build the business case for certain initiatives to be considered and adopted, internally as well externally. A practical example of a change that was supported as a result of feedback received from children is the company’s decision to move away from single-­use plastic inside their boxes (announced in September 2020), a transition that is currently under way, which the LEGO Group is aiming to have completed by end of 2025. Following the comprehensive stakeholder analysis, when it comes to developing and presenting the LEGO Group’s sustainability strategy to the leadership team, Tim Brooks explains that alongside presenting the risks and the opportunities, a core part of the business case embedded in the sustainability strategy is the fact that this is also what the children are asking the LEGO Group to do. Furthermore, when the company’s sustainability strategy was initially presented to the leadership team in 2020, the children’s letters were shared and read aloud by the executives in the boardroom. The exercise demonstrates just how much children really are put at the centre of the business, in line with the company’s promises. Going beyond promises, the exercise also shows how much children are inspiring and influencing the LEGO Group’s strategy and business decisions, every day.

 urpose-Driven Leadership and a Cultural Shift P Towards Sustainability Prior to the LEGO Group formalising their strategy, Tim Brooks explains that the primary role of his business area was to focus on engaging, educating, and mobilising stakeholders internally and externally towards adopting sustainability in their own areas and operations. Since presenting their strategy in 2020, Tim Brooks has seen a significant shift towards more sustainability-focused thinking take place over the last few years, with enthusiasm and momentum growing across the organisation, as well as across the supply chain. Rather than advocating for increased engagement and action, today Tim Brooks’ team are acting more as the coordinators and stewards of the company’s sustainability agenda, providing guidance for stakeholders along the way. As sustainability becomes increasingly embedded into the company’s different business areas, more responsibility is shifting from the sustainability team as a core function, and onto the various business areas throughout the organisation. In turn, sustainability is being more systematically integrated into the different areas of the organisation.

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Reflecting on this cultural shift that has transpired over the years, Tim Brooks describes how the role of his team has also shifted to focusing on providing gentle guidance for the way forward. ‘Although the rise in enthusiasm that we have seen in recent years is great, it can also lead to 24,000+ engaged and passionate employees drifting into different areas. Therefore, our focus now, and the focus of our leadership team, is to ensure we are all working together and moving in the same direction, and not spreading ourselves too thin. As a business, we recognise we do not have unlimited capital, time, and resources – so having clarity around our goals and expectations is incredibly important on this journey.’ To help clearly communicate the company’s goals and targets, many mechanisms have been implemented including the introduction of a carbon price that is used internally to help guide decision-making. Tim Brooks explains that weighing the trade-offs of different opportunities is also a key part of the process. For instance, when it comes to infrastructure, Tim Brooks points out that there are many options that can be considered, such as adding solar panels to factories and investing in recycled materials or investing in new and more sustainable buildings altogether. Currently, the company is acting on many of these initiatives. At the same time, the LEGO Group is also leaning on their partners to share best practice, to leverage expertise, and to work together to optimise the use of available resources collectively. In addition to the four promises that guide the company’s business strategy, core decisions are assessed and made based on four key deciding factors – technological feasibility, commercial opportunities, consumer demand, and sustainability. Understanding that rarely will all these boxes be checked off, to decide the best path forward, Tim Brooks explains that one of the greatest challenges the company faces on this journey is to assess the trade-offs and find the right balance between each of these areas.

Frameworks Leveraged to Build Its Sustainability Strategy When conducting its first materiality assessment, the approach taken was a qualitative one that was designed to gauge stakeholders’ ‘expectations’. Stakeholders were asked questions such as ‘what do you think the LEGO Group should be doing around sustainability’? Building on this qualitative approach, as part of the current strategy planning cycle, Tim Brooks explains that a greater emphasis is being placed on the quantitative side of the strategy. For example, in addition to asking stakeholders ‘what they think’ the LEGO Group should be doing, the assessment is also looking at the ‘actual impact’ of the LEGO Group’s activities. To help quantify this impact, the LEGO Group is utilising a framework that will help guide and validate the data and impact. Together, both the qualitative input and the quantitative validation of the actual impact of ongoing activities will help shape the company’s strategy and direction going forward.

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In addition to utilising a framework to guide and validate the data and impact, the 17 UN SDGs and the 10 principles outlined in the UN Global Compact, several partnerships and commitments like setting Science Based Targets, adopting the 10 Children’s Rights and Business Principles developed by UNICEF, Save the Children and UN Global Compact, joining the Ellen MacArthur Foundation, the LEGO Group’s 12 responsible business principles and the European Commission’s Green Consumption Pledge also served as both frameworks and inspiration for shaping the company’s sustainability strategy and approach.

 raining and Communicating the Company’s Sustainability T Strategy to Employees With a sustainability strategy developed, the next part of the process involved sharing that strategy with key stakeholders, with the goal of informing and bringing them along on the journey. Rather than taking a broad-stroke approach to communicating their sustainability strategy, Tim Brooks, and his team along with the other sustainability teams and the social responsibility team, with the support of the leadership team, took a more strategic and surgical approach to sharing the information with their stakeholders. Tim Brooks understood that not all areas of the business areas, and not all stakeholders, were equally affected by the goals and targets that had been set out. Therefore, when it came to communicating on goals and targets that impacted specific business areas and stakeholders, direct dialogue with those players took place. Where broader messages needed to be conveyed, for the benefit of all employees and stakeholders, communications initiatives were designed and implemented to communicate those messages more widely to all. The approach proved successful, as it enabled Tim Brooks and his internal partners on the journey to effectively communicate and share what was most relevant to specific stakeholders.

 ustainability Challenges and Steps Taken S to Accelerate Change One of the bigger challenges that the company has encountered when developing its strategy is around data gathering, and more specifically determining the commercial value for gathering that information. Tim Brooks advises that while the company has been tracking and reporting on its energy efficiency since 2006, with the first Sustainability Report; as the company’s strategy has evolved, collecting data to measure and track all ESG initiatives, or more specifically the value and impact of those initiatives, has proved challenging. This is where the business case for digitising these processes and making them more automated comes into play. In the past, Tim Brooks explains that the focus was on the associated costs and return on investments, which would be looked at alongside sales figures. Through this lens alone,

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the improvements may have been deemed marginal and therefore not enough to move forward with implementation. Today, guided by the company’s sustainability strategy and promises, the opportunity to move towards automated processes is being looked at through a different lens, which takes into consideration not only the costs of implementation, but also the cost of not engaging. ‘Given the path we are on today, with our various ESG goals and objectives, the business case and the commercial benefits to leveraging technology and digital transformation are clear, and it is the only way forward’. While there is a greater understanding around the benefits of automated processes for data collection, Tim Brooks emphasizes that the company still needs to operate within a competitive business environment, and therefore needs to be mindful of operational costs and resources. Tim Brooks cautions that what also needs to be understood throughout this transitional process, however, is that data does not come free. The time and resources to manually gather data are also expensive. With all these competing factors in mind, Tim Brooks stresses that building the business case for sustainable transformation can at times be one of the biggest challenges. When it comes to the business case, the company’s approach to weighing the trade-­ offs and finding the right balance once again applies. When reflecting on where strides have been made to accelerate its sustainability agenda, Tim Brooks highlights two key areas where the company has made some significant changes to improve and enhance its processes and approach. The first centres around changes made to the company’s approach to insights and consumer research. In 2014, the LEGO Group for the first time set up its own dedicated unit for sustainability insights and consumer research into key sustainability topics. In addition to providing insights about key consumer and market demands, the division was also focused on insights offered directly by children. The structural change enabled the LEGO Group to gain deeper insights on a more strategic level, as well as on a product level, allowing the company to make more informed decisions, and more quickly. Tim Brooks recalls that, at the time, they were the only company to have their own sustainability insights team, a move that not only reinforced the company’s commitment to sustainability, but it also reinforced its industry-leading position as a sustainability-focused organisation. The second area where the LEGO Group has been making progress is around digital transformation of its processes, both internally as well as with suppliers and partners in its supply chain. Finding efficiencies and streamlining processes where possible remains a key priority for the organisation going forward.

Incentives and Industry Recognition In addition to introducing new processes to improve practices going forward, the LEGO Group has also put in place incentives for managers that are linked to the pinnacle KPIs defined under each of the company’s four promises. With the KPIs clearly defined, each member of the LEGO Group’s senior executive team has at least one of the four promises KPIs built into their bonus structures and plans. The

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Planet Promise, for instance, has the KPI of corporate reputation which is monitored as part of the performance of managers, as well as the performance of the organisation. Looking ahead, Tim Brooks foresees that there will be a greater emphasis placed on incentives as the company continues to evolve their plans and strategy going forward. In recognition of the company’s leadership and commitment to addressing climate change, in 2021 the LEGO Group received an ‘A’ leadership CDP climate change rating, placing the company among the top 2% of the 13,000+ companies that submitted data to the CDP in 2021. It’s a reflection of the LEGO Group’s position as an industry leader, and its commitment to building a more sustainable future, for the planet and for society.

Sustainability-Focused Communications and Organisational Structure Recognising the importance of communicating its sustainability agenda and goals, a key priority for Tim Brooks and other teams like the social responsibility team was to establish a clear line of communication with the LEGO Group’s corporate communications area. This led to the creation of a dedicated Sustainability Engagement team within the Corporate Brand Communications team, tasked with connecting audiences with the LEGO Group’s sustainability strategy and its pillars: Environment, Children, and People. Tim Brooks and his team understood early in this process that, to move the dial forward for the company’s sustainability agenda, communicating that agenda to all the different stakeholders – including consumers  – was going to be key. The decision to establish a dedicated Sustainability Engagement Team was another notable industry-leading development at the time. Focused on streamlining processes and resources, the Head of the Sustainability Engagement Team was also part of the Corporate Communications team, drawing a direct line between the two areas and the wider business when it comes to sustainability. The structure ensures that the LEGO Group’s sustainability-focused initiatives are streamlined with the company’s broader initiatives and channels. It also shows how sustainability has been organically embedded across the organisation. The LEGO Group’s Sustainability business area is currently placed under CPO Loren I.  Schuster in the organization. The sustainability business area is at this moment in 2022 comprised of both an environmental responsibility team and a social responsibility team of combined around 90 employees and includes a dedicated Insights group that interacts with all the business areas throughout the organisation on sustainability-focused matters and initiatives. Additional sustainability functions and roles can be found throughout the LEGO Group in many other departments too (e.g., Operations, Innovation, Product Design, etc.).

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 uilding a More Creative and Resilient Society (and Business) B for the Future In line with the company’s mission of inspiring and developing builders of tomorrow, by being a responsible business that is committed to taking care of its people, its partners, and the planet, the LEGO Group has demonstrated that it is leading the way towards building a more sustainable future, for the company and for society. Staying true to its name, with its clearly defined sustainability strategy that is guided by its four purpose-driven promises, the LEGO Group is well poised to realise its ambition to build a more creative and resilient world where children can play well into the future.

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Leonardo

Interviewee:  Renata Mele, Senior Vice President Sustainability with the contribution of Riccardo Angelini Rota, Head Sustainability Planning and Project

Company Overview Leonardo is an aerospace, defence, and security multinational company headquartered in Italy. In 2022, the company employs over 50,000 people and operates in 150 countries globally. Founded in 1948 under the name of Finmeccanica, Leonardo’s origins are rooted in a post-war Italy which saw – under the push for innovation – the reframe of a national industrial base that shifted towards a new framework. This period of industrial growth provided the foundation for the company and its future success. As in the past, today Leonardo leverages its success in technological innovations and the skills of its people. When the company was first established in 1948, it brought together several businesses that were already operating in the aerospace, defence, and security sectors, and merged them together to form the company that would become known as Finmeccanica. In 2016, the company’s name changed to Leonardo, in honour of Leonardo da Vinci who represents a universal symbol of creativity and innovation, as well as a bridge that connects historical, cultural, and scientific traditions – all of which aptly define the company’s origins, as well as its future.

Leonardo’s Purpose and Vision Building on the company’s foundational values of technology and innovation, Leonardo’s purpose is to contribute to the world’s progress and safety by delivering meaningful and innovative technological solutions. Its purpose underpins the company’s approach to value creation, and places sustainability, technology, and innovation at the centre of its long-term strategic vision.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_9

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Driven by this purpose, Leonardo is committed to conducting business responsibly by embedding sustainability throughout its value chain and approach to business. This commitment entails the company’s business model comprehensively, including how it engages its people, how it supports its vast network of partners and suppliers, how it strives to make a positive impact to protect the planet, and how it deals with business integrity. Overall, Leonardo’s ambition to create a better and safer world for future generations is the driving force behind the organisation’s short, medium, and long-term strategy.

Approach to Developing Leonardo’s Sustainability Strategy Leonardo’s approach to developing its sustainability strategy is based on strong collaboration and input from all stakeholders, across the organisation as well as its value chain. Renata Mele, Senior Vice President Sustainability, explains that while Leonardo has been committed to sustainability since 2009, the company decisively accelerated its path towards a sustainable transition in 2020. It is in this year that Leonardo began to fully integrate sustainability into its business model. In 2020, Leonardo unveiled its long-term corporate strategy, through the Be Tomorrow – Leonardo 2030 Plan and the Sustainability Masterplan 2030, with a clear mission: to ensure long-term development and growth for the company that is centred around technological innovation. Leonardo recognises that in a world that is increasingly facing global challenges related to environmental, social, and economic factors –technology, digital transformation as well as the cyber security are key elements to addressing many of these growing challenges. Alongside its long-term strategy, in 2021, Leonardo also developed a structured Sustainability Plan, which maps out a specific set of goals and actions for the short-­ medium term, always in line with the Leonardo Be Tomorrow 2030 Plan. The Sustainability Plan was designed to complement the company’s corporate strategy. And while there are two separate documents, Renata Mele explains that the strategy is developed in a collaborative way, with one complementing and supporting the other and vice versa. Enhancing this framework, from the fiscal year 2020 Leonardo also published its first Integrated Report: showing how the integrated strategy – as well as the integration of financial and non-financial information – is a fundamental driver of the company’s transformation.

Sustainability-Driven Leadership and Competitive Strategy Leonardo’s sustainable transformation was driven by the organisation’s leadership team, starting with the CEO, the Executive Management team, as well as the board members. There was a clear consensus across the board that to remain an industry-­ leading organisation, Leonardo needed to continue to evolve its approach to business, with sustainability being a key driver. This led also to the establishment of Leonardo’s Sustainability and Innovation Committee. The creation of the internal

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board committee enhanced the company leadership’s overview, also binding narrowly the two fields which are key components of the Group strategy: innovation is a key enabler for sustainability, and, vice versa, sustainability is a technology driver. In this perspective, committed to accelerating impactful technological solutions, Leonardo has been progressing towards this ambition by establishing itself as an industry leader that is focused on sustainability. Thanks to its technological knowhow, Leonardo aims to reduce its environmental footprint, improve sustainability of its operations, and develop new products and solutions which enable the sustainability for its stakeholders and more in general for the planet. Leonardo’s Sustainability Plan plays a key role in this, with a focus on driving action towards the achievement of the UN Sustainable Development Goals (SDGs) and strengthening the positive sustainability impacts of the Group globally.

The Evolution of Leonardo’s Sustainability Profile and Journey Leonardo has been committed to sustainability, in a formalised way, since 2009 when the company issued its first Sustainability Report, and in 2020 when the Group began to fully integrate sustainability into its strategy and processes. Reinforcing its commitments, in 2021 the company also developed a new sustainability operating model tied to dedicated internal Sustainability Policy and Procedure. Staying in line with this operating model, the company’s Sustainability Plan is updated annually as explained by Riccardo Angelini Rota, mapping out a specific set of goals and actions for the short-, medium-, and long-term. Technological innovation and digitalisation are the main drivers of the Sustainability Plan and are keys to addressing the challenges of sustainability at the global level and accelerating a sustainable, inclusive transition. As a global organisation, Leonardo’s commitment to sustainability extended beyond its own operations, impacting stakeholders across the globe. Given the company’s international presence – 106 sites worldwide with a commercial presence in over 150 countries – increased attention was placed on international sustainability rankings and indices, as well as on conducting materiality analysis with all stakeholders in different regions of the world. Since embarking on this journey towards a more formalised approach to sustainable transformation, and following the release of the company’s long-term strategy, sustainability became more systematically embedded throughout the organisation’s various business units, processes, and decision-making.

Leonardo Sustainability Objectives and Pillars When reflecting on how much Leonardo’s approach to sustainability has changed since starting on this journey, Renata Mele explains there have been several changes over the years that have impacted different areas of the business. She points to sustainable finance and technology as just two examples of areas that have been transformed for greater impact.

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The changes that have taken place over the last few years in the areas of finance and technology demonstrate there is a clear connection between innovation and sustainability. This connection became further crystallised in 2020 when we published our Be Tomorrow 2030 long-term strategy. (Renata Mele, Senior Vice President Sustainability)

As part of Leonardo’s long-term strategy, and in agreement with the WEF (World Economic Forum) stakeholder’s capitalism framework, the company has identified four pillars of People, Planet, Prosperity, and Governance as key categories represented in the Integrated Report  – to implement the specific actions to guide the company. For each Pillar, Leonardo has set different sustainability targets which are disclosed in the Integrated Report. Under the Planet pillar Leonardo is focused on reducing its carbon emissions and environmental impacts and enhancing integration of circularity in the business model. One example of how the company is reducing its emissions is seen in its SF 6 Project, an initiative that is focused on upgrading the company’s manufacturing processes by reducing the quantities of SF 6 inert gas used, and replacing it with R134a, a gas that has a lower Global Warming Potential (GWP). In 2021, the project led to a reduction of direct emissions of 100,000 tons of CO2e. The Prosperity pillar is devoted to the development of the supply chain and to strengthening the company’s solutions that enable sustainability. One example of a key action under this pillar is how Leonardo is involving its suppliers in initiatives and management models that focus on key aspects such as digital transformation, cyber security, and social/environmental responsibility. The third pillar is related to Governance. For this pillar the Company is focused on establishing and promoting a responsible business model that prioritises governing with integrity. Indeed, for Leonardo it is crucial to enhance its mechanism of control and monitoring. As part of this effort, the Group recently enhanced its trade compliance system by introducing the Human Right Impact Assessment, a tool to define the main risk factor with reference to human rights and the potential impact of the activities carried out by the Company. Other key activities include the continuous training that is provided to employees and to partners to promote a culture of integrity. The fourth pillar is about People. This pillar addresses matters related to gender diversity and inclusion, as well as initiatives aimed at attracting and retaining talent. For this Leonardo contributes to supporting and reinforcing STEM (Science, Technology, Engineering and Mathematics) fields, mostly in high schools. The company is also focused on providing specific sustainability education and training to support and engage their people. Committed to fostering a culture that is driven by the company’s purpose and sustainability-focused agenda, Leonardo launched its first internal training fully dedicated to sustainability and ESG (environmental, social, governance) aspects.

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Leonardo’s Sustainability Plan For Leonardo, the necessary prerequisite for the sustained success of its People, Governance, Planet and Prosperity pillars is to take a long-term vision, while considering the impact of its activities across the entire value chain. Leonardo’s Sustainability Plan as explained by Riccardo Angelini Rota translates this vision into actions, projects, and practices that are measurable in the short and long term, and are oriented towards the achievement of the UN SDGs and to the Group’s sustainability objectives. The company’s Sustainability Plan also sets out to generate shared value for all the Company’s stakeholders. The role of key stakeholders as partners, institutions, and universities on this journey is viewed as pivotal. The actions defined by the Sustainability Plan fall under eight clusters of actions that were identified along the entire value chain and in alignment with the company’s sustainability commitments and the UN SDGs. These clusters are grouped by four key focus areas which include: R&D, operations, solutions and customer support, and social impacts (see Fig. 9.1 for description of the eight clusters of actions identified). In line with the sustainability operative model, the Plan is subject to a process of periodic review and updating and is monitored through specific Key Performance Indicators (KPIs) and data management methodologies that makes it possible to analyse performance, and effectively guide decisions to drive the sustainability strategy forward.

Fig. 9.1  Embedding sustainability into the value chain. (Source: Integrated Annual report 2021)

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With its priorities and actions clearly defined, Leonardo is also focused on supporting suppliers on this journey. In this perspective, the Group aims to develop an interconnected and innovation-driven supply chain that involves 11,000 companies in 77 countries, including over 4000 in Italy alone, with an order value of around 9.2  billion euros. Renata Mele explains that Leonardo has implemented several actions to involve its supply chain including, for example, the LEAP (Leonardo Empowering Advanced Partnerships) programme, an initiative dedicated to engaging and supporting their international network of partners and suppliers. The aim of the programme is to establish a solid and sustainable ecosystem and relationship between Leonardo and its supply chain. The name LEAP was strategically chosen to represent Leonardo’s commitment to work with their suppliers to bring together, and to advance, technological capabilities and innovations – while partnering for mutually beneficial value. Through this initiative, suppliers are increasingly engaged and informed about the company’s expectations and are invited to share their challenges and ideas for the way forward. By clearly communicating their goals from the beginning, Leonardo is committed to working together with their suppliers to address key challenges and to support them on their journeys. In 2021, Leonardo also published the Manifesto for the Sustainability of the Supply Chain, drawn up on the basis of the results of a specific assessment on supplier sustainability (LEADS  – Leonardo Assessment and Development for Sustainability). Building on the company’s social cluster, as an active in the scientific community Leonardo is committed to fostering a culture of science and innovation, both internally and externally. In collaboration with various industry associations, governments, institutions, and academia, Leonardo has spearheaded several STEM (science, technology, engineering, mathematics) initiatives aimed at educating and inspiring employees, partners, and industry leaders who share the company’s passion for STEM.

The Importance of Partnerships and Engaging Stakeholders In addition to launching its long-term strategy in 2020, Leonardo conducts a new materiality analysis with key stakeholders each year. More than 200 stakeholders take part in the annual analysis which set out to identify the most significant areas and issues to focus on, and to define the strategic priorities for the company going forward. The process to engage stakeholders began in 2014 and has evolved over the years. The current approach taken to conduct the analysis is twofold. The first is a qualitative approach that is based on a dialogue with internal and external stakeholders. The second component, developed recently, is data-driven, whereby the analysis considers specific ESG-related data covering a wide range of areas and topics, including corporate documents and mandatory and voluntary regulatory procedures, as well as disclosures and public news related to sustainability. The two-pronged approach is comprehensive and robust, and the data collected is utilised not only for the purpose of identifying priorities and to determine the best

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way forward, but the data is also used for corporate reporting and disclosure that is mandated by government and industry regulations. The qualitative and quantitative results that come from the materiality analysis are then analysed and, together, the findings formed the basis for the strategic priorities outlined in the company’s strategy. Engaging stakeholders, learning from partners, and gaining insights into what mattered most to them is, for the most part, a smooth and seamless process. Renata Mele remarks that stakeholders are generally keen to share their views about issues that matter most to them, as well as to share their perspectives about what the collective priorities should be going forward.

I ncentives for Management Linked to Sustainability Performance To help accelerate the sustainable transformation that was needed to achieve the company’s targets, compensation policies were put in place for top management that were tied to Leonardo’s ESG results. Renata Mele explains there are two clear goals, or KPIs, linked to performance. The first deals with reducing CO2 emissions. The second relates to increasing the number of women working in the organisation who have a background in STEM. These two goals were incorporated into the company’s long-term remuneration of the Chief Executive Officer and management as of 2021, in alignment with the company’s targets to address climate change and gender inequality. Additionally, to recognise strides being made across the organisation and to foster a culture of innovation, Leonardo has introduced an Innovation Awards initiative which recognises remarkable efforts and leadership in the areas of technological advancements and sustainability.

I ndustry Recognition and Positioning as a Sustainability Leader The company’s ESG positioning as an industry leader is very important to the organisation’s business and competitive strategy. Renata Mele explains that Leonardo’s leadership positioning in the industry, which has been reinforced by the international community through major sustainability ratings, indices, and rankings, plays an incredibly important part in shaping and guiding the company’s corporate strategy, sustainability strategy, as well as its sustainable finance strategy. In 2020, 2 years after joining the UN Global Compact in 2018, Leonardo became the only aerospace and defence organisation to join the Global Compact Lead group. Among the company’s many achievements as an industry leader, in 2021 Leonardo obtained the highest score in the Aerospace and Defence sector in the Dow Jones Sustainability Index of S&P Global for the third year running. This

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industry recognition is a testimony of strides the company has made over the years to accelerate sustainable transformation across the organisation and its value chain. In 2021, Leonardo was included in the MIB ESG Index launched by Borsa Italiana. Also in 2021, in recognition of the company’s efforts to transparently disclose their commitments and actions aimed at reducing carbon emissions, Leonardo was confirmed on the CDP (Carbon Disclosure Project) Climate Change A list for the second year in a row. Additionally, in line with the organisation’s commitment to address gender inequality, Leonardo was also recognised on the Bloomberg Gender Equality Index. Furthermore, in 2021, Leonardo was given an A-Band status in the Defence Companies Index on Anti-Corruption and Corporate Transparency (DCI) of Transparency International, a global agency that is focused on promoting transparency, integrity, and accountability with the aim to stop corruption across all sectors of society. Renata Mele sees this as an important step for the company, as it confirms the decisions and progress being made are moving the company in the right direction on this journey.

Transparent Approach to Reporting and Communications To share and communicate its sustainability strategy, internally as well as externally with key stakeholders, Renata Mele advises this process began first and foremost with the publication of Leonardo’s first Integrated Report. In line with the company’s commitment to disclosure and transparency, Leonardo used the GRI Standards as a framework to develop its Sustainability Report. This exercise led to the development of the company’s first Integrated Report, relative to the 2020 fiscal year, which was published in 2021. To consolidate and convey all the key information about both the company’s Sustainability Plan and its Integrated Report, clearly and concisely to their stakeholders, Renata Mele explains that her team works in close collaboration with Leonardo’s communications division. From a communications perspective, there are two key documents. The first one, which was issued in 2021 is titled Accelerating Technology Evolution, outlines the company’s priorities and commitments for the way forward. The second document, issued in 2022, is Sustainability in Action, which reports on the company’s activities and progress along the way. Going beyond promoting their commitments and progress through their own channels, Leonardo’s leadership team also actively promotes the company’s agenda and initiatives at various industry events. By participating in panel discussions and conferences, Leonardo’s leadership team recognises that driving awareness around Leonardo’s efforts is an important lever for driving the company’s sustainability and competitive agenda forward. This commitment to promoting stronger collaboration with stakeholders is a central element of Leonardo sustainability strategy. It is with this focus that Leonardo partnered with key sustainability networks. For example, in 2021 Leonardo joined Sustainability Makers, the Italian chapter of WBCSD (World Business Council for

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Sustainable Development), and CSR (Corporate Social and Responsibility) Europe. Among the other projects, in early 2022 Leonardo powered together with CSR Europe to form the “New Materials and Circular Economy Accelerator” Think Tank with the objective of driving action on circularity of composite materials. The Think Tank – which involved a wide range of stakeholders such as companies and associations from the aerospace, automotive, the chemical and wind sector, the academia and European institutions and projects – took stock of the challenges, opportunities, and key learnings to increase the circularity of composite. Additionally, the company’s role within the UN Global Compact (UNGC), and more specifically the Italian branch of the Compact where Renata Mele was nominated on the board of the network, offers the opportunity for Leonardo to promote their agenda on a global scale, while at the same time enabling Leonardo to interact, deliberate, and share ideas with like-minded organisations globally. With relation to UNGC, Leonardo CFO participates in the Task Force on Sustainable Finance and in the platform on SDG 16, with a focus on anti-corruption issues. In addition to taking part in industry events, Leonardo also organises industry events that are dedicated to promoting the company’s sustainability agenda, specifically for its partners and suppliers. In 2021, Leonardo hosted more than 500 suppliers at the event ‘Leonardo for a sustainably supply chain’, inviting them to join the conversation and to have direct dialogue about their own sustainability goals and challenges.

Engaging Employees and Fostering a Culture of Sustainability For a multi-national organisation that is more than 50,000 employees strong, stewarding a cultural shift that puts sustainability at the centre of the organisation’s core business decisions and operations was no small feat. Renata Mele explains that while the company has been operating on a foundation of technology and innovation since the very beginning, the growing environmental and social challenges facing the business, and the world today, have evolved and escalated over time. Therefore, the need to educate employees about sustainability and what it means for the business, and more precisely what it means for specific business units, was a key part of the process. To achieve this, Renata Mele explains key steps were taken to further engage employees and involve them on this journey. The first step was the development and roll-out of dedicated training sessions. In 2022, Leonardo launched the first sustainability course for all employees, which to date has been completed by over 17,000 colleagues. The second step involved developing a series of initiatives aimed at engaging employees. For example, Leonardo joined the Plastic-Free Association and invited employees to remove plastic waste from areas close to industrial sites. In 2022, Leonardo also launched an industry-leading initiative with Sustain-Able, an online platform that promotes sustainable behaviours through activation of specific challenges. These are just a few examples of many initiatives that helped

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empower employees and foster a sustainability-focused culture throughout the company. Altogether, efforts to educate and engage employees have helped steer an organisational mind shift and foster a culture that is centred around sustainability.

 ustainability Team, Organisational Structure S and a Look Ahead Leonardo’s sustainability team is positioned at the corporate level and is currently comprised of 11 employees. Renata Mele, who is part of this team as Senior Vice President Sustainability, expects this number to grow by the end of 2022. The team is positioned within the company’s Technology & Innovation unit and covers a wide range of functions including stakeholder engagement, the Sustainability Plan management, the environmental strategy, and data analytics. The Sustainability Team leads the ESG data analysis for the company. However, given the company’s approach to Integrated Reporting, the Sustainability Team is not responsible for developing the final Integrated Report. This function is led by the organisation’s Financial Team, and the ESG data analysis feeds into that process. Therefore, similar to the company’s approach to reporting, the company’s Sustainability Team is very much interconnected to the company’s financial division. In addition to the team that operates at a corporate level, throughout the organisation there are 15 Sustainability Coordinators that work directly within the company divisions, legal entity, and corporate units. Renata Mele explains that these smaller groups are responsible for the implementation of the various initiatives that relate to specific competencies and areas, including data collection and development of programmes, among others. With this organisational structure in place, Leonardo’s sustainability agenda is embedded throughout the organisation. Despite the company’s immense size and global presence, the structure allows Leonardo’s Sustainability Team to work effectively within a community environment that encourages collaboration, and facilitates a seamless flow of communication, information, and data across the organisation. When reflecting on Leonardo’s sustainability journey, and the path ahead, Renata Mele emphasises that more and more the company is looking at ESG factors to help shape the organisation’s strategy and decisions going forward. Leaning on the ESG Framework, we are increasingly referring to ESG factors to make decisions about where we need to focus our efforts. As we continue our journey of sustainable transformation, we are collecting data that relates directly to the various dimensions of ESG initiatives, and we are committed to using that data to guide our priorities and investment decisions. Making informed decisions that are driven by data will continue to be a priority for our organisation going forward. (Renata Mele, Senior Vice President Sustainability)

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In 2018, Leonardo celebrated the company’s 70-year anniversary. The occasion provided an opportunity to reflect on the company’s journey and legacy of technological innovation and leadership. Not unlike the company’s namesake – driven by its purpose and a culture of creativity and innovation – Leonardo is continuing to build a legacy that will lead the company into a future of technological and sustainable innovations and solutions.

Mercato Metropolitano

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Interviewee:  Andrea Rasca, Founder and Chief Executive Dreamer

Company Overview Mercato Metropolitano is a Movement, a platform, and an incubator for community-­ driven, sustainable artisans, cooks, craftsman, and artists, to deliver accessible food and accessible culture to all. The company was founded by Andrea Rasca, entrepreneur, and Chief Executive Dreamer of the organisation. The concept for the business began as a pilot project in 2015 at the World Expo in Milan, where a disused railway station was transformed into an urban food market that was imagined with sustainable communities and living in mind. Over a four-month period, the market welcomed over two million guests to its location. What started as a pilot project has since turned into a prosperous business that has been built on a foundation of sustainability and community. In 2016, Mercato Metropolitano opened its first location, Elephant & Castle, in London, England. As of 2022, the company has four locations in the city, with plans to open additional sites by the end of the year. Staying true to its origins and commitments to sustainability, each location resides in carefully selected buildings that were already part of the community, with each site ranging between 2500 and 5000 square meters in space. As of 2022, Mercato Metropolitano employs 100 people directly, and another 400 people when you factor in all the trading partners that make up the broader Mercato Metropolitan community. In 2021, the Mercato Metropolitano reported revenues of over £30 million based on only two locations that were operating during the Covid-19 pandemic.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_10

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The Mercato Metropolitano MMovement More than a business, Mercato Metropolitano is a Movement (referred to as MMovement), that is centred around building a community that understands the importance of accessing nutritious and accessible food for everyone. To define and share the MMovement, in 2018 the company developed a Manifesto to clearly outline a set of principles that guide the organisation. It also outlines how the company is working towards realising its goals to improve communities and the environment. The MMovement has led to the development of several initiatives aimed at realising the company’s goals and ambitions (see Fig. 10.1 for Sustainability Initiatives and Figures for 2020 and 2021). Among the many initiatives implemented to reduce the company’s impact is the company’s efforts to ensure responsible sourcing through its supply chain management processes. From the moment suppliers and trading partners are selected as a trading partners, processes are put in place to help educate suppliers about the importance of sustainability, and to help guide them on the journey. From the onset, suppliers are asked to provide their menu items, and from there a series of questions follow that trace the origins of the ingredients used. Through this process, suppliers are informed about sustainable practices, and in turn they adopt more sustainable practices – reducing their own impact and improving the quality of their products along the way.

Fig. 10.1  Key sustainability facts and figures 2020, 2021. (Source: Mercato Metropolitano Impact Report 2020 and 2021)

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Mercato Metropolitano’s approach to sustainable supply chain management doesn’t only apply to its food and beverage suppliers, but to all their suppliers across all of the organisation’s operations – including cleaning supplies, plastic-free serving supplies (dishes, utensils, etc.). Across the organisation’s supply chain, as well as its internal operations, sustainability is at the centre of every business decision, big or small.

Built on a Foundation of Sustainability Since the beginning, sustainability has been embedded throughout Mercato Metropolitano, with the UN SDGs being used to map and guide business decisions affecting the company’s own operations, as well as the operations of their partners and value chain. Andrea Rasca, Mercato Metropolitano Founder, describes the company as a sustainability-­driven aggregator of local entrepreneurs and farmers. The company supports and fosters small businesses towards becoming entrepreneurs of the future through an incubator business model that gives them a place to grow and market their products. Working together with local entrepreneurs, Mercato Metropolitano helps them choose the best locally sourced products and quality ingredients, which are then used to make healthy meals that are sold at the market. Andrea Rasca emphasises that everything at Mercato Metropolitano  – from the meals that are prepared, to the beverages that are served, to the plates they are served on  – is curated, crafted, and produced with sustainability in mind.

A Company Driven by Its Values At its heart, the Mercato Metropolitano is built on its core values of the right to food and doing the right thing. Also guiding the company forward are its values of inclusive community and storytelling. The company’s values drive every business decision and action in line with its sustainability agenda. The first value of the right to food refers to the accessibility aspect of food. Referring to the Universal Declaration of Human Rights established by the United Nations, Andrea Rasca points out that the right to food was originally defined as having access to adequate food. This definition was later redefined in the Declaration as food that is accessible, nutritious, and compatible with local cultures. Andrea Rasca explains that this definition is the inspiration and catalyst behind the Mercato Metropolitano MMovement. Expanding on the meaning of accessible food, Andrea Rasca explains, ‘To be accessible doesn’t only mean to be affordable. Being affordable is one part of accessibility. Being accessible also means that you can have good quality food whenever you want it, at any time of day. And this is the real ideal of accessibility. We are not there yet, but this is one of our goals.’ In line with this ambition, to provide good food to anyone at any time, Andrea Rasca explains that it is also the company’s ambition to work together with partners

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and city councils to tackle the problem of food poverty in the major cities in which it operates. Andrea Rasca points to the city of London alone where 30% of children are living under the poverty line and do not have access to affordable food during the summer months. To tackle this issue, Mercato Metropolitano strives to offer the other 70% of the population access to affordable healthy meals, which can then help fund meals and initiatives for those in need. Going beyond building social impact initiatives, feeding those in need is a key part of the company’s approach to working with its trading partners, and bringing them along on the company’s sustainability journey. Part of Mercato Metropolitano’s arrangement with its partners includes having a ‘five-pound meal and drink’ offer that competes with the likes of fast-food meal deals on price  – but is healthier. Additionally, the company organises free summer camps for 6 weeks for children below the poverty line. The camps give the children access to nutritious meals when schools are closed for summer. The right to food also refers to having access to nutritious food. The global health issues the world is experiencing, between the rises in chronic diseases, obesity as well as the impact the Covid-19 pandemic has had on these vulnerable groups, sheds light on the fact that societies have become weak because, for too long, food has been treated like a commodity, rather than as a source for good health. Andrea Rasca highlights the important role food plays in creating healthy societies, emphasising that food is at the centre of society, in terms of health and nutrition, but also in terms of climate change and social inequality. The company’s second value of inclusive community is about being a business that is compatible with local cultures. Andrea Rasca advises that when Mercato Metropolitano opens a market, it is opening the doors to the community’s market. The company engages and collaborates with local stakeholders and players within the community to develop projects and initiatives that create value for each stakeholder and for the surrounding community. With this mindfully localised approach, Andrea Rasca explains that no two locations are the same. When we open a location, it’s not like other food halls, which is an industry term I really dislike. Today there are a lot of restaurants that are just selling the same shade of food, or the same sugary drinks. These restaurants do not care about health and nutrition, they care about making money. This is something we are very far away from at Mercato Metropolitano, and it’s what sets us apart. What we want to do is to create a market for a community, with the local people in that community. (Andrea Rasca, Founder and Chief Executive Dreamer)

The company’s third value is centred around people’s stories. Andrea Rasca explains that this value was inspired by a book that resonated with him some time ago entitled “Small is Beautiful Economy: A Study of Economics as if People Mattered”, written by Economist E.F.  Schumacher in 1973. In brief, the book describes an economy that focuses on people, rather than on GDP (Gross Domestic Product) and growth. The underlying philosophy is that if a company doesn’t focus on its people, it will inevitably fail or be responsible for directly or indirectly causing damage to people, to surrounding communities, and to the planet.

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Driven by its core values and commitment to doing the right thing, Mercato Metropolitano’s approach to business revolves around a single question – how do we shift from a culture of cheap food, which doesn’t provide good basic nutrition, to healthy eating for everyone? Fuelled by the passion and vision of its purpose-driven founder, who is fervently committed to answering this question, Mercato Metropolitano is on a mission to transform an industry, shift mindsets, and change behaviours as it strives to create a more sustainable future for all.

Mercato Metropolitano’s Sustainability-Focused Principles Focused on quality and responsibly sourced ingredients, community, and engaging its visitors from near and far, Mercato Metropolitano is driven by its sustainability-­ focused principles of MM Community, the FarMM, and MM Stories. MM Community is at the heart of the business. With this principle, Mercato Metropolitano is committed to ensuring everyone in its surrounding communities is able to access the market and its initiatives. Before opening their doors in any community, the company sets out to first understand the social and environmental needs of each community in which it operates, and then – as a first order of business – aims to work in close collaboration with neighbouring organisations and partners to address those very needs. The FarMM represents a not-for-profit division of the organisation whose aim is to empower and protect the movement, and to build healthy and strong societies for today and for years to come. Leveraging the power of food, the FarMM team is focused on driving the movement forward by creating meaningful connections between trading partners, communities, city councils, charity partners, and suppliers throughout its value chain. Understanding the power of communication and sharing one’s journey to inspire and drive change, the MM Stories principle is focused on empowering Mercato Metropolitano’s small business partners by sharing their stories with its customers and stakeholders. Committed to achieving the sustainability goals it has set out, Mercato Metropolitano acknowledges that educating and informing stakeholders on this journey is key to realising its ambition to transform the food industry to be healthier, more accessible, and more sustainable for all.

Sustainability as a Competitive Strategy Putting sustainability at the heart of the business is what sets Mercato Metropolitano apart in what can be a highly competitive food industry and business environment. And while environmental, social and governance (ESG) matters are factored into every decision, setting out to build a business that receives ESG certifications, or evolving into a large corporation was never the goal. Andrea Rasca explains the aim of the business from the start was to build an ethical company because it is the only

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way to do business: ‘Unfortunately, today sustainability means a lot of things, and can also mean nothing. For me, there is only one synonym for sustainability – and that is ethics. It’s about doing what is right. At Mercato Metropolitano doing what is right aligns with the SDGs. It also aligns with the right to access good, quality food. When I built this company, it was built on the SDGs – therefore the strategy came first, not after.’

The Triple Bottom Line and Measurements of Success As a community-focused business, the company is invested in supporting its surrounding communities. A portion of profits are directed to supporting the company’s various charitable events. There are no questions or discussions about the cost of being a sustainable business. The company’s approach to the triple bottom line is straightforward, Andrea Rasca explains, ‘Our view is clear. If you are a sustainable business, you will be profitable. It really is that simple.’ Andrea Rasca advises that financially the company has a strong EBITDA, so business is going very well. Putting the financials aside, Andrea Rasca credits the company’s ethical and sustainable approach to business as a key driver for its success. ‘Delivering good quality and healthy food to people is not something that is of interest to banks. The reality is that banks are only interested in financial performance, and whether the company pays its interest rates.’ While the company’s social and environmental agenda and initiatives, which include feeding 500 kids that are below the poverty line every summer, or feeding 28,000 people in need during the Covid-19 pandemic, are not of interest to the banks, for Andrea Rasca it is these very initiatives that are the most important indicators and measurements of success for the company.

Engaging the Value Chain Focused on building strong relations throughout the value chain, Mercato Metropolitano established the FarMM, a dedicated team of personnel whose responsibility it is to engage, educate, and onboard suppliers. Before bringing a company onboard as a trading partner or supplier, the companies must go through a host of processes and procedures to verify where products come from, and how they are sourced or grown. If a prospective supplier does not meet Mercato Metropolitano’s expectations, in terms of quality and sustainable business practices, they are encouraged to change course and adopt more sustainable processes to be considered as a partner. Using this thorough and meticulous approach, Mercato Metropolitano ensures each partner that becomes part of the company’s the value chain shares its sustainability-driven values and goals.

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Performing a Stakeholder Analysis Becoming part of Mercato Metropolitano’s value chain is only the beginning of the journey for the company’s partners and suppliers. To ensure expectations are met on a continuous basis, Mercato Metropolitano has developed a ‘sustainability scorecard’ that tracks their partners’ performance across a range of criteria including revenue, quality of products, and sustainability-focused activities and initiatives. The scorecards are reviewed monthly to assess how their partners are contributing to Mercato Metropolitano’s MMovement and agenda. Andrea Rasca emphasises that for Mercato Metropolitano, measuring a company’s impact and contributions towards the MMovement is really the only performance measurement that matters to the organisation.

Risks and Opportunities When considering the risks and costs associated WITH not engaging, Andrea Rasca emphasises the company’s position is very clear – if companies do not engage, they will not survive. ‘When it comes to sustainability, there is only one way forward. If we do not take actions to be more sustainable, businesses and societies will not survive the threats related to climate change.’ For Mercato Metropolitano, being sustainable is especially important given the company operates within the food sector. Not only is sustainability good for business, it is also good for the health of the people and community the company serves. Given the products the company sells are consumed by people, and in turn becomes part of their bodies and minds, Andrea Rasca stresses that unlike the apparel industry, the food industry has a responsibility to provide healthy and quality options for consumers. Committed to being a responsible business and earning the trust of its customers, Mercato Metropolitano wholeheartedly accepts this responsibility and challenge. More than this, the company is steadfastly committed to raising the bar and leading the way forward for the industry.

 rameworks and Assessments Used to Guide the Company’s F Approach to Sustainability Mercato Metropolitano’s approach to business was inspired by the UN SDGs. Acting as the company’s north star, the SDGs are used as a framework that help define the company’s own short-, medium-, and long-term sustainability targets. To understand the needs of its stakeholders and communities, in 2021 Mercato Metropolitano worked with Cerved Rating Agency, an EU-certified rating agency based in Italy, to conduct the company’s first ESG assessment. The assessment consisted of 100 questions that focused on various matters related to sustainability. Following the assessment, the company scored high on its overall sustainability performance. For Andrea Rasca, the results were not surprising as they confirmed

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what the company was already doing well in terms of social and environmental practices. The findings also highlighted areas of focus for improving, which primarily included the company’s use of energy. Given that each of its locations is situated in old buildings which have been refurbished and returned to communities in the form of Mercato Metropolitano markets, bringing energy to these sites in a sustainable way has been challenging. Finding more sustainable ways to power its sites is an area the company is striving to improve upon going forward. Another area the company’s leadership is focused on improving in the coming months is around governance. While Mercato Metropolitano was founded on purpose-­driven values, ensuring its sustainability policies and practices are implemented and adhered to, internally and throughout its value chain, remains a key focus as the company continues to expand and grow. While governance and transparency are, of course, an important part of this journey, especially for stakeholders, Andrea Rasca explains that he doesn’t place a lot of importance on measurement. Despite a rise in calls globally for better measurement and tracking of an organisation’s impact, for Andrea Rasca, the greatest barometer of how the company is performing goes back to its core values. ‘I’m not a big proponent of measurements. For me, what is more important is to ask: “Am I doing the right thing?”, “Are we paying everyone a living wage?”, “Are we feeding kids and people in need”?, “Are we incubating purpose-driven businesses and projects”? If I can answer yes to each of these questions, then for me these are the most important measurements of success.’

The Importance of Sustainable Partnerships When setting out to develop and formalise its sustainability agenda and strategy, Andrea Rasca worked in collaboration with sustainability expert and adviser Paolo Taticchi, Professor of Strategy and Sustainability at UCL School of Management in London. Furthermore, as part of the company’s efforts to drive sustainability forward, internally but also throughout its value chain and the communities where it operates, Mercato Metropolitano has formed several local partnerships that share the company’s values. Additionally, as an industry leader that is committed to contributing to the global sustainability movement and agenda, in 2019 Mercato Metropolitano joined the UN Global Compact, reaffirming its commitments and alignment to the UN SDGs.

 ngaging and Empowering Employees to Be Part E of the MMovement Mercato Metropolitano’s approach to employee engagement starts at the point of entry. The process begins at the very beginning when new employees are onboarded. Upon joining the organisation, new employees take part in classes that outline the

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MMovement and values. And while this introduction begins when employees first join the organisation, it doesn’t end there. Just as the company’s approach and strategy is continuous and fluid, so too is its approach to training and educating employees along the way. Employees learn early on that sustainability is embedded throughout the company’s culture. The company’s approach to training and education takes place not only with employees, but also at the value chain level through efforts put in place by Mercato Metropolitano’s FarMM team whose focus is to drive the company’s sustainability agenda forward, internally as well as along the value chain.

Purpose-Driven Leadership A true businessman in training and practice, Andrea Rasca understands that to really drive change and make a difference with key stakeholders, you need to engage each stakeholder in a meaningful and relevant way. ‘If you want to change things and you are talking to people who need to feed their kids, then you do not talk to them about sustainability. You talk to them about how the changes can help them make more money. So, in some ways, you have to hold their hands and show them – and they will see first-hand that if they do things properly, they will make more money. When our trading partners make more money, we also make more money – it’s a win-win.’ Andrea Rasca explains that striving to do the right thing in business is what inspired him to create Mercato Metropolitano. By creating the company, Andrea Rasca was focused on forging a group of customers that share the company’s value system. Since opening its first location in 2016, Mercato Metropolitano has garnered over six million customers that visit its locations each year. With a strong customer base in place, Andrea Rasca explains he is now in a better position to buy the best ingredients and pay the right price for them. By helping smaller businesses and entrepreneurs, whom Andrea Rasca refers to as friends, grow – Andrea Rasca is positioning his own company to grow. As Andrea Rasca stated, sustainability is a win-win approach that many organisations still do not seem to understand today.

Sustainability-Driven Incentives At this stage in the company’s journey, ensuring employees are well-paid is the first priority. Incentives or bonuses linked to sustainability performance have not been introduced at this point. Andrea Rasca explains that prior to establishing bonuses linked to the company’s sustainability goals, specific KPIs need to be defined for each goal, and then clearly communicated throughout the organisation. Defining the company’s KPIs will be an outcome of the ESG Matrix that is currently underway. Bonuses linked to ESGs, therefore, are something that will be considered further along on this journey. When it comes to incentivising the company’s trading partners, Andrea Rasca advises the scorecard initiative that has been implemented to outline expectations

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and track progress throughout the value chain, which serves as an incentive plan of sorts for the company’s value chain. Partners and suppliers who meet the defined KPIs will receive a commission for contributing to the company’s overall sustainability goals and objectives.

Industry Recognition and Rewards Mercato Metropolitano has made great strides towards realising the company’s sustainability goals and ambitions, garnering the attention of not only its customers and communities, but also the wider hospitality industry. Since first opening its doors in 2016, Mercato Metropolitano has been recognised as a sustainability leader that is defining a new way of doing business in an industry, and city, that is flooded with restaurants and markets that are conventional in their approaches to business and menu offerings. Recognising the company’s efforts and accomplishments, Mercato Metropolitano was named one of London’s Best Employers by the Mayor of London in 2021. The mayor’s office also rewarded Mercato Metropolitano with a grant that sponsored the opening of an additional market within the city. The recognition is a testament of the company’s commitment to building a responsible business that puts the interests of communities first. And while the recognition received is appreciated, Andrea Rasca highlights that the greatest recognition of all comes from the more than six million consumers that visit Mercato Metropolitano every year. For Andrea Rasca, that’s the ultimate reward.

Reporting and Sharing Its Journey with Stakeholders Every year since 2016, when the company first opened its doors, Mercato Metropolitano has developed and published an annual Social Impact Report. The 2020 and 2021 annual reports were merged and published in one report, due to the Covid-19 pandemic. The Reports, which are shared on the company’s website, outline details around Mercato Metropolitano’s initiatives, projects and progress related to environmental, social, and governance matters. As a leader who is unwaveringly committed to sustainability, when reflecting on challenges encountered along the way, especially in relation to tracking and reporting the company’s progress, Andrea Rasca concedes that doing the right thing requires real commitment and effort. Moreover, for a large portion of the organisation whose core responsibilities are to drive sales and make profits – this journey can even feel like a burden at times. This can be especially true for organisations that do not have sustainability embedded into their culture and approach to business. When you begin this journey, thinking about sustainability at every junction can certainly be challenging. At every step we need to think about what kind of ingredient did a supplier use, or what kind of fork are they using – and are they aligned with our zero-plastic policy,

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or our zero-waste policies. Of course, it would be easier to not have to think about this level of detail. Given sustainability is embedded in everything we do however, we find ways to work with our partners to the right thing. At our Elephant & Castle location alone, we have 45 different partners, each one with different ingredients that need to be considered through this sustainability lens. Add to this the measurement aspect – the process can be exceptionally challenging, for sure. (Andrea Rasca, Founder and Chief Executive Dreamer)

Approach to Marketing and Communications As the company’s Chief Executive Dreamer, Andrea Rasca’s vision guides the company’s every business decision and action, including its marketing and communications efforts. Andrea Rasca explains that everything at Mercato Metropolitano is driven and implemented internally by design. To truly share the company’s values that are threaded throughout the fabric of the company, Andrea Rasca stresses the messaging needs to come from those who are living the journey from within. It’s the most authentic form of communication there can be. Working with external agencies who also promote consumer goods and products that are harmful to the planet is of no interest to Andrea Rasca. For all these reasons, Andrea Rasca works closely with his own marketing and communications team to tell the company’s stories and to share his vision. By driving the communications and marketing machine internally, Andrea Rasca and his team are well positioned to swiftly steer, control, and adapt key messaging along the way. Proud of the company’s path and growth so far, Andrea Rasca accredits his team – emphasising that, to date, not one pound has been spent on advertising. All the growth the company has experienced on its journey thus far has been achieved organically  – be it via its own social media channels, its employees and trading partners who are the company’s ultimate brand ambassadors, or via what is perhaps the oldest and most effective form of marketing, word of mouth.

I mplementing the Company’s Sustainability Agenda and Policies To manage the company’s food and non-food-related waste, Mercato Metropolitano has formed several partnerships with organisations to ensure all waste is managed as sustainably as possible. For remaining food items that are still edible, the company has partnered with Good to Go, a company that works with restaurants to offer consumers last-minute meals at a discount via their app. For all remaining food and non-food waste, Mercato Metropolitano works with Veolia, an environmentally conscious waste-management company. Veolia’s approach to waste management is to reduce the negative impact of waste on the environment and on people’s health through sustainable practices. Through these partnerships, Mercato Metropolitano can track and measure the company’s impact, in line with its zero-waste policy.

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A Sustainable Organisational Structure While sustainability is embedded throughout the culture of the organisation, among the over 150 employees across the organisation is the FarMM team, a group of five employees whose primary focus is to steward the Mercato Metropolitano MMovement, policies, and agenda forward, across the organisation as well as its value chain. Andrea Rasca emphasises that ensuring Mercato Metropolitano, and its trading partners are moving together towards the company’s sustainability goals is the single focus of this team. As an aggregator of small businesses and entrepreneurs, Mercato Metropolitano’s organisational structure encompasses its broader ecosystem of business partners and suppliers who are aligned with the company’s values and goals.

 ommunity Events Aimed at Educating and Engaging C Stakeholders on This Journey In addition to keeping stakeholders informed with its annual Social Impact Reports, Mercato Metropolitano also organises various community initiatives and events throughout the year that are aimed at educating employees, customers, and stakeholders on this journey. Examples of events include ‘cinema sessions’ that feature movies about sustainability and provide an open forum to discuss the related issues among colleagues. An annual community event is also hosted over a dedicated weekend each year, where members of the community are invited to interact and learn about sustainability directly from Mercato Metropolitano employees and partners. Attendees are invited to cook together with chefs, watch movies and interact with local city council representatives and University faculty members about sustainability matters. All events are organised with the Mercato Metropolitano Movement in mind, and are designed to inform members of the community, shift mindsets and behaviours, and to inspire change. Reflecting on the importance of sustainability to the business, and to all businesses today across all sectors, Andrea Rasca emphasises it’s vital to the company’s long-term success. ‘For all of us who are part of the Mercato Metropolitano Movement, sustainability is intrinsic in our way of thinking and being. Guided by our sustainability-driven values, doing the right thing is easy. More than that, I firmly believe it’s the only way forward – for our business, for the industry, and for the future of our planet.’

Sage

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Interviewee:  Elisa Moscolin, Executive Vice President, Sustainability

Company Overview Sage is the leader in accounting, financial, HR, and payroll technology for smalland medium-sized businesses (SMBs), serving millions of customers around the world. Headquartered in Newcastle upon Tyne, England, it was founded in 1981 by David Goldman, who wanted to create quotes quickly for his print company and keep track of his accounts. Goldman worked with a team of Newcastle University students to develop accounting software for small businesses. What began as a start­up in a pub over 40 years ago has grown into today’s multinational organisation. In 2022, the company employs over 11,000 people globally and supports SMBs in more than 20 countries across the UK and Ireland, mainland Europe, North America, South Africa, Australia, and Asia.

Purpose and Values Sage’s approach to business is driven by the company’s core value of doing the right thing. Guided by this value, Sage is committed to being a responsible business that strives to have a positive impact on people, society, and the planet. The company’s purpose is to help business flow by knocking down barriers so that everyone, can thrive, starting with the millions of SMBs served by Sage, its partners, and accountants. At the heart of Sage’s approach is its desire to support and empower SMBs with innovation and technology, and to help set them up for long-term success.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_11

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Knocking down barriers also means the business is using its time, technology, and experience to tackle digital inequality, economic inequality, and the climate crisis.

Sage’s Sustainability Journey Elisa Moscolin, Executive Vice President of Sustainability at Sage, describes the company’s approach to sustainability as being firmly guided by its purpose and values. ‘At Sage, sustainability is defined of doing the right thing for our shareholders, costumers, colleagues, and broader society. I think that in its simplicity, ‘doing the right thing’ is the best definition of sustainability that I have ever come across. It’s what is driving a lot of our business decisions and that puts sustainability at the heart of who we are and how we operate.’ Sustainability has always been part of Sage’s ethos, and in recent years the company has begun to formalise its approach and practices in a more structured and proactive way. Last year, it published Knocking Down Barriers, its Sustainability and Society Report 2021, and the first step was to look at what the business was already doing in relation to sustainability. Sage identified several activities that, although not formally labelled as environmental, social, and governance (ESG), were aligned to the sustainability agenda, including building a diverse workforce, focusing on cyber security, managing risk, and reducing the company’s carbon footprint, among others. Supporting SMBs to align with Sage’s environmental, social, and governance (ESG) commitments, by helping them remove barriers, is another key focus for the company on this journey. Additionally, efforts to reduce the company’s carbon footprint have also become a greater priority in recent years. Sage’s aspiration to support the communities in which it operates has been at the heart of the long-standing work of the Sage Foundation, which celebrated its sixth anniversary in 2022. Over this period, it has built trusted, action-oriented volunteering and fundraising programmes with colleagues and partners, providing time, investment, discounted products, and financial literacy training to local communities where Sage has a presence. The Foundation’s expertise and experience in responding to the needs of a broader stakeholder group, that extends beyond shareholders, was the starting point to reflect on the role of Sage as a sustainable business and engine for a thriving and sustainable economy. The process to formalise many of the ESG-related initiatives already under way at Sage began, mainly, with the company’s Secretariat team. The initial focus, as it is for many businesses, was on compliance. Staying on top of industry and regulatory requirements around non-financial disclosures, which Sage set out to implement before regulations became compulsory, was a priority. In line with these efforts, in 2021 Sage published its first TCFD (Task Force on Climate-Related Financial Disclosures) report ahead of the regulatory requirements. What began as a compliance effort evolved into a topic the company deemed important to address from a broader governance standpoint, as well as from a wider

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society and reputational perspective. With growing stakeholder expectations that businesses play their part in tackling global sustainability challenges, there was increasing appreciation across Sage’s leadership team that addressing ESG matters was becoming increasingly important. At this early point in Sage’s sustainability journey, the Secretariat and Corporate Affairs teams were all involved in shaping the company’s initial sustainability strategy, informed by a materiality assessment that considered key insights provided by our stakeholders.

Conducting a Materiality Matrix Assessment When first developing its strategy, in 2021 Sage conducted a materiality matrix assessment with key stakeholders. Given this was the company’s first assessment, the approach taken was fairly top line. The primary aim was to gain a better understanding of the broader issues that were most material to Sage’s key stakeholder groups. In parallel to this external assessment the sustainability team also conducted interviews with members of the company’s executive leadership team and colleagues throughout the organisation to identify issues that mattered most to Sage internally. Speaking transparently about the materiality assessment, Elisa Moscolin explained this was the first time the company ventured in this space. She added, the steps taken were proportionate to the maturity of the organisation on its sustainability journey. As Sage progresses further along this path, it intends to expand and strengthen its materiality assessment leveraging best in class insights and tools to help inform the strategy and business decisions.

Assessing Risks and Opportunities Elisa Moscolin sees risks and opportunities as two sides of the same coin. She explains that a robust sustainability strategy should make a business more resilient and capable of managing risks. Understanding how a sound sustainability strategy can help mitigate risks, Sage is supporting their customers by providing innovative solutions to help their customers manage their own climate-related risks, building a more loyal and resilient customer base, and possibly expand and capture a new market. It’s clear that if we do not support SMBs to really become more resilient and more sustainable, their own businesses might become less viable and competitive. Therefore, it’s not just the right thing to do to help them transition, it’s also the smart thing to do as a business. So that’s where we see probably the biggest opportunities. (Elisa Moscolin, Executive Vice President of Sustainability at Sage)

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Understanding the importance of sustainable transformation, Elisa Moscolin advises that Sage’s customers are keen to embark on this journey and to work together. As lean organisations with limited resources, however, they should be able to turn to Sage for support, guidance, and expertise. For SMBs, this transition needs to be as simple as possible.

Sustainability as a Competitive Strategy When considering how sustainability impacts Sage’s competitive strategy, Elisa Moscolin observed that it plays an increasingly important role in an industry that is moving at a fast pace and is seeing more players competing for market share. Elisa Moscolin points out that many of the larger organisations are already further along on their journeys, likely due to this increase in regulations. However, SMBs are often left out from the conversation. Sage’s main customer base is SMBs. The company realised early on in its journey that SMBs were largely missing from the global sustainability conversation and saw this as an opportunity to play an integral role in helping SMBs during this transformational journey. It was clear to Sage’s leadership team that increased regulations driven by sustainability are likely to impact businesses across all sectors, and across all regions of the world. Developing a sustainability strategy aimed at supporting and servicing this segment of the market was a key driver for Sage’s competitive strategy and overall business approach. We realised early on that SMBs were missing from the global sustainability narrative, and yet they are the backbone of the economy. SMBs make up 90% of businesses globally. Unless we help them shift towards more sustainable practices, we will likely never be within reach of achieving the global goals and the sustainable world we are striving to create. (Elisa Moscolin, Executive Vice President of Sustainability at Sage)

Committed to supporting SMBs on their journey, the company conducted a research assessment to better understand the challenges and ambitions of this segment, specifically in relation to sustainability. Sage spoke to 11,000 SMBs in 9 markets globally  – including the UK, US, Canada, Spain, and South Africa. Over 80% said environmental sustainability is important to them, but almost 30% said that while it is important, other priorities come first. SMBs are faced with a resurgence in demand post pandemic, supply problems, rising wages and skills shortages. Sage quickly realised that it’s vital to line up behind ambitious sustainability and climate targets. Whilst recognising the realities of most small businesses, and what they will need in terms of support and advice, so that they can prioritise climate action sooner rather than later, is also key. Cost, time, lack of skills and a perceived lack of return on investment are the biggest barriers to change – particularly for the smallest companies. These are the barriers that Sage wants to remove, thereby enabling SMBs to embark on their own sustainability journeys and thrive. Sage came to realise that it has two roles to play: on one hand, as a FTSE100 company and one of the biggest tech companies headquartered in the UK, it is important that it walks the talk and becomes as sustainable as it can be. On the other

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hand, it has a role to play as an enabler for SMBs to make their own sustainability journey. The latter is where Sage can have the highest impact and shift the needle towards a more sustainable economy. Elisa Moscolin explains that ‘walking the talk’ refers to how Sage is contributing to global sustainability efforts. Sage is contributing, for instance, by being a responsible employer, and by providing and fostering an inclusive work environment that is representative of the communities it serves. Walking the talk also means Sage is taking steps to reduce its impact on the environment. The tech industry has a less material operational carbon footprint than some other sectors, such as oil & gas, transport, or manufacturing. Consequently, Elisa Moscolin observed that the tech industry experiences less pressure to adopt sustainability practices aimed at reducing carbon emissions. On this point, Elisa Moscolin recognises that: “While of course it’s important we play our part to address climate change, if we really want to make a difference we need to work with our customers. This is where, from a sustainability perspective, we feel we can offer the most value. We believe that how we can really shift the needle is by helping and supporting SMBs on their own journey towards sustainability. We can do this by using technology to make sustainability simple and providing advice and insight that our customers can rely on to make informed business decisions that will help them thrive”. Another area of focus within the company’s sustainability strategy, that is very closely tied to the core of the business, is the topic of becoming a trusted digital network. To gain that trust Sage is aware that it must drive digital transformation while addressing digital inclusion, data protection and privacy, cyber security and the ethical use of data and AI. The company clusters these topics under the banner of technology for good. By this, Elisa Moscolin explains, Sage is recognising and committing to use technology – the heart of Sage’s business – as a force for good. Data is empowering people across the globe to run businesses, develop skills and thrive. Over the next decade, an estimated 70% of new value created in the global economy will be based on digitally enabled business models. If everyone is to benefit from technology and the opportunities it creates, sustainability and the ethical and responsible use of technology must be at the forefront of Sage’s thinking. The company’s goal is to knock down barriers to ensure everyone has an equal opportunity to thrive in the new era of digital transformation. Some examples of how this can be achieved include making Sage’s cloud products accessible to people with disabilities, supporting existing and prospective Sage customers to have confidence in the way they approach data security or providing valuable business insight, using data that can guide responses to broader social and economic challenges.

Approach to Reporting and the Triple Bottom Line As Sage is still at an early stage of its sustainable transformation journey, when it comes to reporting, Elisa Moscolin recognises that there is still some work to do to integrate sustainability performance with the company’s financial performance. This is indeed reflected in its non-financial disclosures, which are aligned with its

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financial disclosures, but not yet integrated. Underscoring the importance of being transparent about where companies are on their journey, and the work that remains to be done is a key part of the process. When I first joined the company in early 2022, I was surprised by how much progress had already been made in such a short time. While there is still more work to do, there is a deep understanding throughout the organisation that sustainability needs to be linked to our core business. There is also a clear understanding that sustainability is linked to the bottom line. If we continue to do the right thing and further push the boundaries of how to use our data and technology for good, and support SMBs on their journey, then we are not only on the right track but also on a fast track toward authentic sustainability.

Experienced in supporting organisations to integrate sustainability into core business strategies, upon joining Sage Elisa Moscolin was charged with leading the company’s sustainable transformation journey. The first step for Elisa Moscolin and her team was to review the strategy and connect with Sage’s leadership team and Board of Directors on their sustainability vision and ambition. In her experience, making tangible progress can take time, and yet Elisa Moscolin discovered at this early stage that Sage has already linked ESG targets to executive renumeration and long-term incentive plans. Elisa Moscolin highlights that, for an organisation that is only formally 1 year into its journey, these are already big accomplishments. By integrating ESG targets into management long-term incentive plans (LTIP), Sage is already making great strides towards sustainability. Most companies take years until they feel comfortable enough to set ESG targets into remuneration frameworks, let alone LTIP. Elisa Moscolin points out that this is another example of how the company is walking the talk, or in the case of its swiftly revamped long-term incentive plans, running the talk. Looking ahead, Elisa Moscolin alludes to more bold and ambitious plans that are coming for the organisation, a clear sign that Sage’s leadership team is steadfastly committed to leading the way forward for the industry.

Engaging the Supply Chain An important aspect of Sage’s journey toward Net Zero is engaging the company’s suppliers. A material proportion of Sage’s footprint is attributable to its scope 3 emissions in the supply chain. To engage suppliers effectively and efficiently, Elisa Moscolin and her team have developed a sustainability supply chain strategy working closely with Sage’s procurement team. The supply chain strategy clearly outlines Sage’s targets and expectations for suppliers, but it also recognises that this is a journey. Sage is committed to take them along this journey and leave no one behind. While the strategy is ambitious, it recognises that suppliers will need tools, resources, and support along the way. All these aspects have been factored into the plans. Strongly embedded in the strategy are initiatives to provide training and support. Rather than simply outlining ambitious SBTis (science-based target

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initiatives) and holding suppliers accountable, Sage aims to guide suppliers by working closely together with them to help them achieve the goals. Elisa Moscolin points out this is especially true for smaller organisations who may not have the same access to resources as larger enterprises. There is a very strong drive globally for businesses to address scope 3 emissions in line with the Paris Agreement goals. At Sage we believe there is a risk that smaller businesses will be excluded from accessing supply chains because they may not be able to adapt as quickly as larger organisations who have more resources to put behind these goals. With our strategy, we are striving to be very mindful that we need to get there together, and we have a responsibility as a larger organisation to support SMBs along the way. (Elisa Moscolin, Executive Vice President of Sustainability at Sage)

A Strategy Built on a Foundation of Purpose and Values At the heart of Sage’s sustainability plan is the company’s core value of doing the right thing, as well as its values of being bold, trustworthy, simple, and human. To accelerate its sustainability agenda and achieve its ambitious goals, Elisa Moscolin stresses it is necessary to make bold decisions. What this means is that sometimes the company will set ambitious targets knowing that it’s the right thing to do, but without certainty on how they will be achieved. Elisa Moscolin recognises that there is a fine balance between ambition and credibility, and it is important that although the company may take time to figure out how to deliver on its bold commitments, those commitments are authentic and backed up by real actions. Transparency against progress is what, in Elisa Moscolin’s view, will draw the line between authentic and bold commitments vs. greenwashing. Another important value guiding the company is trust. Earning the trust of colleagues and customers to support, and contribute to, the company’s agenda and commitments is a key part of Sage’s journey. For Sage, there are multiple dimensions of trust that are vital to the success of the business. The first level has to do with being a trusted tech company. Given tech companies handle a lot of sensitive data about their customers, Elisa Moscolin emphasises that Sage has a responsibility to earn their customers’ trust. The second level is about trusting its people. Underscoring the importance of trust for the organisation, Elisa Moscolin explains, ‘We want people to trust our products and we want them to trust us to do the right thing. As a tech company, we need people to have trust in our products – trusting that they’re going to work and be reliable. We also want them to trust that we will leave our values and do the right thing through our business decisions, actions, and leadership.’ The third value that is central to Sage’s approach to business is human. The company strives to be a tech company with a human touch. Guided by this value, the company appreciates that behind every technology, there are human beings. Elisa Moscolin says she has her own personal interpretation of this value, which she feels aligns very well to the sustainability strategy: ‘I always say to my teams: we are human beings before we are colleagues. A company that is human is a company that

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acknowledges the very important role business plays for humanity: from providing employment, to innovation, development, economic growth to name a few.’ The fourth value is around simplicity. Elisa Moscolin recognises this is something most large corporates struggle with, and Sage is no exception. However, the company is committed to simplifying and removing friction to help its customers thrive. This is also applicable to sustainability, and Elisa Moscolin’s team is indeed exploring how Sage could help make sustainability simple for SMBs, by removing barriers for them to engage with the sustainability agenda.

Purpose-Driven Leadership Sage’s purpose to help business flow, by doing the right thing, is embodied by its leadership team. Elisa Moscolin mentioned that when she first joined the organisation in early 2022 her discussions with senior leaders focused a lot on the company’s values, in addition to performance. When probed around the leadership’s commitment to sustainability, Elisa Moscolin remarked: ‘My interactions with the management team and board, since I joined, reassured me that Sage’s commitment to doing the right thing and knocking down barriers is authentic. This is the type of leadership team that a sustainability professional dreams to work for: leaders who are willing to take bold decisions, and who keep asking you “how” rather than “why” we need to focus on sustainability.’ Elisa Moscolin highlights that the progress achieved to date is a testament to the organisation’s leadership and their ongoing commitment to doing the right thing. Furthermore, she emphasises that having the full support of the leadership team is incredibly important on this journey: ‘Sustainability is to some extend a cultural mind shift that begins with, and is driven by, the company’s purpose-driven leadership team.’

 efining and Designing Key Sustainability Pillars D and Initiatives As part of its sustainability strategy, Sage has outlined three key pillars to guide the company’s business decisions going forward. The first pillar defined is Tech for Good, which focuses on removing barriers to digital inequality  – for innovation, enterprise, and social benefit. The second pillar is Fuel for Business, which aims to inspire the next generation of entrepreneurs and businesses across all sectors and all segments of society. The third pillar outlined in the strategy is Protect the Planet, which focuses on environmental sustainability. (See Fig.  11.1 for Sage’s Sustainability Pillars). To support the three key pillars, Sage has put in place several initiatives and targets under each area. Elisa Moscolin emphasises that sustainability is not a project that has a start and end. To the contrary, it’s a reiterative process that takes time and a willingness to try, to fail, to learn, and to continuously improve. She also reflected

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Fig. 11.1  Sage’s sustainability and society strategy’s three key pillars. (Source: Sustainability Report 2021)

on the concept of double and dynamic materiality and how a sustainability strategy needs to continuously evolve to respond to emerging trends and material issues, while also taking a long-term view and consistently delivering year over year. With this continuous approach, Elisa Moscolin points out that Sage’s strategy, in its current form, marks the beginning of the company’s journey, not the end. Sage is indeed building on the work done so far and evolving its strategy to drive further alignment with business priorities and stakeholder’s expectations.

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Recognising the importance of engaging the entire organisation on this journey, Elisa Moscolin and her team are making plans to upskill and engage more colleagues throughout the organisation about the company’s sustainability agenda. Elisa Moscolin acknowledges that central sustainability teams are typically small compared to the size of the agenda. Therefore, engaging all the business areas is a vital step to drive awareness and transformation throughout the organisation. It is also important to truly embed sustainability into the fabric of the organisation and integrate it within the business strategy and operations. With the aim of engaging each business area and involving them in a meaningful way, a steering committee has been formed which includes representatives from the different areas including members of the senior leadership team. Various working groups (or squads as Sages likes to call them) feed into the SteerCo on a 6-weekly basis. Squads lead the organisations sustainability-focused activities, in line with the company’s key pillars. For instance, the squad focused on the ‘Protect the Planet’ pillar counts on experts from the property, procurement, health and safety, product, communications, and public affairs teams who all lead on different aspect of the Sage’s climate change agenda. Elisa Moscolin stresses it’s an example of how sustainability is driven by the business and is integrated into the operations.

Approach to Training and Education Elisa Moscolin says that an important step to make progress on the journey will be to provide more in-depth training across the business. ‘It is important that organisations have the right expertise in the right place. Certainly, companies need a strong central team of sustainability subject matter experts, but this team alone cannot deliver on such a vast agenda by itself. Sustainability is a bit like HR or Risk, you need a central team to set the strategy, provide direction, tools, frameworks, and policies that guide the business; but the company also needs people across the organisation, from board to shop floor, to understand this agenda and have the skills they need to drive it.’ While Sage is still at an early stage of transformation, Elisa Moscolin says she was pleasantly surprised to find lots of colleagues across Sage who already had a good degree of understanding of sustainability, and strong appetite to learn more. Training colleagues in all areas of the business will be one of the central team’s priorities in the next year. Some trainings will be designed to provide a broader overview of the company’s sustainability strategy and goals, while other activities will have to be more specialised, delving deeper into topics that are most relevant to certain areas of the business. For example, the risk management team will need training and upskilling around TCFD, whereas other teams may only need general information about ESGs. However, Elisa Moscolin points out that education and skills alone are not enough, stating, ‘Ultimately sustainability is a leadership exercise and as such, it takes investment in taking people along with you in the journey’. Elisa Moscolin said she was pleased to be given the platforms and space to do so upon joining the

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organisation. A good example of this was a leadership conference that took place in France in July 2022, just a few months after Elisa Moscolin joined Sage. On this occasion, Elisa Moscolin had the opportunity to directly engage 200 leaders across the organisation. It marked the first of a series of sessions that will be planned over the next year. Beyond formal training initiatives being organised in the coming months, Elisa Moscolin points out that it is interesting to see the increasing frequency of more informal training that is already taking place. Many colleagues are interacting and educating each other about various sustainability-related initiatives, demonstrating an eagerness to take initiative and to help drive the agenda forward. Elisa Moscolin says the passion and enthusiasm from colleagues is great to see, and it is a positive sign that momentum is growing throughout the organisation. Also interesting is the number of people across the organisation that have demonstrated a keen interest to work with the sustainability team. Building on this momentum, Elisa Moscolin decided to open her Sustainability Team meetings to anyone interested in learning more about how they can play a pivotal role in accelerating sustainability within their own departments. Elisa Moscolin points to colleagues from the communications and transformation teams who currently join her sustainability team meetings as an example of how sustainability is being integrated into different areas of the organisation. She believes it’s a testament to the progress that has been made, and to the cultural transformation that has been fostered by the organisation’s leadership team in recent years. ‘At Sage, we are focused on the job that needs to get done and we are not very concerned with reporting lines or hierarchy. We work in squads and try to be really focussed on outcomes. While we still have our central sustainability team, we are finding a lot of enthusiasm building across the organisation, and this is fantastic to see.’

Frameworks Used to Develop Sage’s Sustainability Report Sage published its first Sustainability and Society Report in 2021. The initial report provided a baseline overview of where the company is, as well as a look at where it is heading. To develop its report, Sage used the GRI (Global Reporting Initiative) standards, as well as the SASB (Sustainability Accounting Standards Board) Framework. As part of its reporting and disclosure practices, in 2021 Sage also completed its first TCFD Report. While Sage’s sustainability report was developed separate from the company’s annual report, the two documents were produced in parallel. Elisa Moscolin emphasises that aligning the two reporting processes and timelines was an important step. By aligning its financial and non-financial reports the company is signalling the importance of value generation beyond profits. Going forward, Elisa Moscolin explains that Sage will continue to align its report with the GRI standards and SASB standards while keeping an eye on the rapidly evolving reporting landscape. At the same time, a more streamlined and strategic

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approach will be applied to how the company discloses information. Understanding that different stakeholders have different needs, Elisa Moscolin and her team will be looking at tailoring Sage’s disclosure to different audiences, with the goal of streamlining the information and making it more digestible and relevant to each group. For example, investors prefer data, and customers and colleagues tend to relate more with the narrative, although of course there will be variation of this depending on the individuals. The team will explore how to tailor the different disclosures and use different platforms with each stakeholder’s interests in mind. Understanding the needs and interests of each group in turn will help shape how information is distilled and shared in the future. Sharing the company’s year-on-year progress and challenges, in a concise format such as a scorecard, will also be an area of focus for the development of Sage’s sustainability reports going forward.

Approach to Non-financial Disclosure and Communications When it comes to the design and communication of the company’s sustainability reports and data, Elisa Moscolin and her teamwork in close collaboration with Sage’s Corporate Communications group, as well as the company’s Investor Relations team. Elisa Moscolin explains that much like how the company’s sustainability strategy is continuously evolving, so too is its reporting journey. The sustainability team at Sage has a big ambition around non-financial disclosures: aligning to best in class reporting practices and driving transparency in the sector. Sage also wants to be the voice of SMBs when it comes to reporting and make sure that future regulatory and disclosures requirements drive transparency without posing an excessive burden on SMBs. For example, Elisa refers to ISSB (International Sustainability Standards Board) and highlights that as they develop global sustainability reporting standards, a simplified version better tailored to SMBs’ needs and areas where they will have most impact is needed. At the same time, a rethink of incentives to free up capital by SMBs to invest in emission reductions will also be needed. Sage is working with different partners to help create that simpler and clearer disclosure environment for SMBs. Sage is committed to knocking down barriers to help everyone thrive, and this includes helping SMBs on their own sustainability journey. One of the ways the company is showing this commitment is through its Masterclasses for customers and partners. The sessions feature discussions with CEOs from different organisations and provide an opportunity for customers to hear and learn first-hand from industry leaders about various business topics and challenges. In one Masterclass session the CEO of CALM shared insights about how to retain and support talent, focusing on the human side of the business. Sage wants to simplify the journey to Net Zero for all SMBs, to allow them to continue focusing on building their business whilst also reducing their carbon footprint – helping them to thrive in the present and be fit for the future. Elisa Moscolin recognises that “We have a lot to learn but we want SMBs to know they are not alone in their journey to Net Zero. We are here with them and are committed to

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using technology and our expertise to remove barriers for SMBs and make carbon accounting as simple and as accurate as possible.

Sage’s Purpose-Driven Foundation and Initiatives Long before setting out to formalise the company’s sustainability journey, Sage was engaged in socially minded initiatives aimed at creating value for the communities the company serves. Driven by its purpose and values, in 2015 Sage established the Sage Foundation. The aim of the foundation is to help break down barriers to digital and economic equality and to protect the planet, giving time, resources, and investment to help communities thrive. Over the last 7 years, Sage customers, colleagues and partners have raised almost $3  million to support non-profit organisations across the world. Sage colleagues have also participated in almost one million volunteering hours to support causes they care about the most. Through Sage Foundation’s strategic partnerships, colleagues, customers, and partners give back to their local communities through impactful and innovative programmes focussed on knocking down barriers to entrepreneurship, tackling economic inequality in the developing world and bridging the skills gap, with a particular focus on STEM learning and resources. The foundation also offers discounted software, free financial management tools, and training to charities, social enterprises, and other non-profit organisations. Supporting and building upon the great work the Sage Foundation has been doing will continue to be a key focus for the company’s strategy going forward.

Sustainability Team Structure Sage’s Sustainability Team is led by Elisa Moscolin as the Executive Vice President of Sustainability who reports into the Chief People Officer. The team is structured around four centres of expertise: (1) non-financial disclosures, (2) climate change, (3) strategy execution, (4) foundation and partnerships. It is a newly formed team that is growing and counts on people with deep subject matter expertise. Elisa Moscolin said, ‘Your sustainability strategy is only ever going to be as good as your team. To me, building a diverse and dynamic team with the right mix of skills and expertise is the single most impactful thing you can do as a leader to drive sustainability in any company.’ Elisa Moscolin reflected on the fact that far too often, sustainability is just a label added at the end of another job title. This often results in amateur approaches to sustainability that can expose companies to high reputational risk. Sage has decided to invest heavily in building capability in this space and putting the right people in the right place – underscoring the company’s commitment to this agenda. The central Sustainability Team also has the support of approximately 30 colleagues who are based in different areas and functions across the organisation. The

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team also works very closely with Sage Foundation, supporting key initiatives that are important to the company and in line with its sustainability strategy and pillars. Looking ahead, Elisa Moscolin says that she wants to continue building Sage’s sustainability capabilities, and support everyone in the company by helping them to understand the basics of sustainability, and the role they play in delivering lasting change. The newly structured central team will continue to work in close collaboration with the cross-functional team members who play an integral role in implementing the sustainability strategy across the organisation.

Sage’s Sustainability Journey So Far and a Look Ahead Reflecting on where Sage is on its sustainable transformation journey today, Elisa Moscolin underlines the great progress the company has made in a relatively short period of time. There has been a significant cultural shift towards integrating sustainability into all areas of the business. Elisa Moscolin is inspired and encouraged by the enthusiasm and momentum that she has found since she joined the organisation over the past year. She commends the company’s leadership team for fostering this purpose-driven culture and for the strides that have been made on the journey so far. As sustainable transformation is very much a journey, Elisa Moscolin stresses that it is important for organisations who are just beginning to engage with sustainability to understand there will no doubt be challenges, especially in the early days. In Elisa Moscolin’s view, it takes a lot of resilience and grit to drive change in this space. She also believes that challenges can also be turned into opportunities: a good example is resources challenges. The reality is that the central sustainability team will always be small compared to the size of the agenda. This has pushed them to work more collaboratively with colleagues in cross-functional roles. This cross-­ functional approach has helped accelerate sustainability into other areas of the business – illustrating that, at times, even challenges can lead to great opportunities on this journey. Like many of its customers, Sage’s own journey as a company began as a small business. The entrepreneurial spirit and foundation that built Sage remains at its core today, and it is the catalyst behind its ambition to support SMBs looking to build and grow their own businesses today, and for years to come. Looking ahead, Elisa Moscolin underlines that Sage’s approach to sustainability will continue to be driven by its commitment to serve and support customers and SMBs on this journey, with the ultimate goal of being a sustainability leader and enabler for the sector. Guided by its core principle of doing the right thing and its purpose-driven leadership, Sage is well on its way towards realising its bold and ambitious goals for the future.

Saint-Gobain

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Interviewee:  Emmanuel Normant, Vice President for Sustainable Development, Saint-Gobain

Company Overview Saint-Gobain is a French multinational corporation with its headquarters based in Courbevoie, France. Originally a mirror manufacturing company, Saint-Gobain is known today as a world leader in the design and manufacturing of high-quality materials for the construction and building industries, including mirrors. Founded in 1665, the company’s origins can be traced back to the King of France, who was one of the company’s first customers. In 1678, Louis the XIVth commissioned the production and installation of mirrors for the famous Hall of Mirrors at the Palace of Versailles. At the time, the greatest mirror craftsman in the world was based in Venice, Italy. Determined to build a palace that would be the envy of the world, the king’s Finance Minister Jean-Baptiste Colbert enticed Venetian talent and expertise to France, establishing a royal mirror glass factory in France that would later form the company that is known today as Saint-Gobain. Over 350 years later, glassmaking remains at the core of the company’s area of expertise. In 2021, Saint-Gobain reported revenues of 44 billion euros and employed over 166,000 people, with operations in 75 countries around the world. The company’s primary operations are focused on building and construction, which makes up approximately 80% of the company’s revenue. The other 20% focuses on mobility and industrial markets.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_12

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Saint-Gobain’s Purpose, Vision, and Values Saint-Gobain is guided by its purpose of ‘making the world a better home.’ The company’s vision is to be the leader in light and sustainable construction. Saint-­ Gobain’s purpose and vision are embedded in sustainability, which is at the core of the company’s approach to business. Also at the core of the company’s approach are its shared values, which are embodied in nine Principles of Conduct and Action. Making up the Principles of Conduct are the values of professional commitment, respect for individuals, integrity, loyalty, and solidarity. Values that define the company’s Principles of Action are respect for the law, caring for the environment, worker health and safety, and respect for employee rights. Guided by its purpose and values, Saint-Gobain is on a mission to design, manufacture and distribute materials and solutions that are key ingredients in the well-­ being of individuals and the future of all.

Approaching and Designing a Sustainability Strategy Given Saint-Gobain’s longstanding history which dates to the middle of the seventeenth century, the organisation’s Chief Sustainability Officer Emmanuel Normant points out the company is a sustainable business by definition. ‘When we think about our approach to sustainability or developing a sustainability strategy, this is not something that we just decided to do one day. In fact, it’s a lengthy process, and it also depends on what one means by sustainability. If we look at our history, our company has lasted for more than 350 years. Therefore, Saint-Gobain has clearly been able to integrate sustainability into the way we operate. That is part of what defines sustainability.’ In 2015, the organisation set out to formalise its commitments and approach to sustainability as it began to develop its first Sustainability Strategy. This did not mark the start of Saint-Gobain’s sustainability journey, however. In 2003, Saint-­ Gobain joined the UN Global Compact, a move that reinforced the company’s ongoing commitments and leadership position in the marketplace. In 2019, Saint-­ Gobain strengthened its commitments by becoming a signatory of the UNFCCC’s Climate Neutral Now Initiative, pledging to become carbon neutral by 2050. By joining the UN Global Compact, Saint-Gobain viewed its participation as a Principle of Conduct and Action, and also as a chance to assess sustainability through a lens that looked at both the associated risks and opportunities. Understanding the important and fragile relationship society has with nature, from the very beginning, respect for the environment was always central to Saint-­ Gobain’s strategy. Also central to the company’s sustainability strategy is the respect and safety of its employees. Ensuring the safety and well-being of its employees has been paramount to Saint-Gobain, and remains an integral part of the organisation’s values today.

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When reflecting on the company’s approach to sustainability, Emmanuel Normant emphasises that its approach has as much to do with what the company can offer in terms of solutions, as it does with what it produces. ‘Sustainability is engrained in the service we provide as well. We are not simply producers and manufacturers of sustainable materials for building and construction, but by developing high quality glass and a range of building materials, we are also bringing sustainability to the building, for instance in the form of energy efficiency. What this means is that issues related to energy and climate change are by design. What we are selling in fact is not materials, but we are providing insulation and glass which is sustainable in design and performance.’ This recognition that quality and design deliver sustainable solutions is in part what formed the heart of Saint-Gobain’s sustainability strategy. It is this approach to sustainability that defines what the company is today. While the idea of sustainability is gaining more traction in recent years, across all industries, for SaintGobain it has been embedded in the company for some time. The company’s sustainability strategy was first brought to light in 2015 during COP 21 (2015 United Nations Climate Change Conference). Saint-Gobain’s CEO at the time, Pierre-­ André de Chalendar, was leading the French Think Tank called Entreprises pour l’Environnement. The Think Tank was the French World Business Council for Sustainable Development. In the lead up to the COP 21, Chalendar recognised that it was important for organisations to be seen not only as part of the problem, but also as part of the solutions. The company’s CEO also understood that to have a meaningful impact, Saint-Gobain needed to evolve its approach to sustainability to have more substance. It was during this period that Emmanuel Normant was appointed as the company’s first Chief Sustainability Officer. Having been with the company since 2002, Emmanuel Normant previously led the Insulation division of the company. In his new role, Emmanuel Normant was well positioned to bring all its stakeholders along on the company’s sustainability-focused journey. Working in collaboration with key stakeholders, Emmanuel Normant set out to establish the company’s first targets to address climate change, focusing primarily on reducing CO2 emissions, non-recyclable waste, water, and energy consumption by 2025. Between 2015 and 2019, much of Saint-Gobain’s sustainability strategy and agenda was driven by the CEO and a team of internal experts. At this early stage in the process, the topic of sustainability in general was a topic that mattered primarily to the CEO and the leadership team, and it had not yet been filtered more broadly through to the rest of the organisation. As the Chief Sustainability Officer charged with the task of driving the company’s sustainability agenda forward, Emmanuel Normant knew that for meaningful transformation to transpire in the coming years, two key changes needed to take place. First, the company needed to define and communicate its purpose. Defining the company’s purpose involved approximately 20,000 people within the organisation. The process led to the concept of ‘making the world a better home.’ The process also led to sustainability being top of mind for all employees across the organisation. The second action that needed to be taken to drive the sustainability agenda forward was to commit to carbon neutrality by 2050. What may not have been obvious

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to many at the time of making this announcement was made was that Saint-Gobain was an energy-intensive company. Committing to becoming carbon neutral was therefore a significant commitment for the organisation. When reflecting on the decision to make this commitment, Emmanuel Normant stated ‘we decided to make the commitment without really knowing how to achieve it at the time. What the commitment did achieve, however, was that it created very strong momentum internally. This is something that cannot be underestimated.’ With this bold commitment, Saint-Gobain’s leadership team was able to engage the rest of the organisation and bring them along on the journey. Managers across the organisation understood that the company was serious about its approach, and that sustainability was very much a way of doing business. For the first time, sustainability was no longer a matter for the leadership team alone. Everybody was thinking about sustainability in their own divisions and roles. In July 2021, Benoit Bazin became the new CEO of Saint-Gobain. Prior to becoming CEO, Benoit was the COO since 2019. Being a part of the leadership team throughout this transitional period, Benoit understood very well the organisation’s approach to sustainability, and supported the strategy from the onset.

Sustainability as Part of Saint-Gobain’s Competitive Strategy When looking at Saint-Gobain’s position in the marketplace, sustainability has given the company a competitive advantage in the market. According to Emmanuel Normant, sustainability is embedded in the way the company presents itself and positions itself as the global leader in light and sustainable construction. Business decisions and projects are based primarily on a criterion of sustainability. In addition to providing building materials, the company is focused on providing sustainable solutions for each building and construction project. When it comes to building its competitive advantage, the company competes primarily through the performance of its products. Given its focus on quality and design, Saint-Gobain does not claim to offer the cheapest service, nor does it aim to compete on price. There are other players in the market that are more competitive in terms of price. With a focus on quality and performance, sustainability is very much integrated into Saint-­ Gobain’s core business and competitive strategy. Committed to providing the highest quality and performing products, Saint-­ Gobain invests significantly in research and development, and in experimenting with different resources and materials. Speaking about the significant role sustainability plays in the organisation’s competitive strategy, Emmanuel Normant states it is integral. ‘No doubt our sustainability strategy has shifted the way we position ourselves in the marketplace. Today we present ourselves as a solution provider rather than a provider of specific types of materials. It is an important distinction for us that gives us a key competitive advantage.’ Additionally, Emmanuel Normant explains that what sets the company apart from most of its competitors as well is that it offers an array of products, materials, and solutions, whereas most of its competitors use less diverse materials, offering a

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limited range of materials or products. Given the company’s breadth of offerings, Saint-Gobain identified its ability to deliver multiple solutions to its clients as a key strength and differentiator in the marketplace. This realisation became the catalyst for a programme the company launched internally, called ‘Solutions for Growth.’ The programme focuses on identifying case studies that can then be shared to promote the company’s unique capabilities and offerings. An example of a case study is the retrofitting of a new home in France, or building a multi-generational home in Germany. The case studies would highlight all the different solutions Saint-Gobain provides, as well as the sustainable benefits of those solutions.

 aint-Gobain’s Sustainability Profile (Before Developing S a Sustainability Strategy) Prior to formalising the company’s sustainability strategy, Saint-Gobain’s organisational structure followed a traditional structure, in that the company was organised by main lines of products, and main global lines of product. For example, there was an insulation division, glass division, plasterboard division, and distribution sector division, among others. With this siloed structure in place, global product lines were servicing construction projects that were happening at a local level. To streamline this activity, in 2019 the organisation underwent a restructure that moved away from global lines to regional lines, with each country having its own CEO and the product lines reported directly to the CEO of each country. Sustainability is also shaping the way Saint-Gobain engages its different stakeholders. Understanding the importance of communicating the benefits of a sustainability strategy, Saint-Gobain is focused on quantifying the benefits, by tracking and measuring activities such as energy consumption and water conservation. Additionally, the company has reported that 72% of its sales are providing sustainable benefits to customers. This is a key point that has been communicated in the company’s new Sustainability Strategy, which was published in October of 2021, during the company’s Capital Market Day. The primary aims outlined in the strategy are to maximize benefits to customers, while at the same time minimising the company’s own footprint.

Reporting and the Triple Bottom Line In July 2021, Saint-Gobain published its fully integrated Sustainability Report, bringing together the company’s 2020 sustainability and financial reporting into one unified document and triple bottom line. In 2022, the company issued the second edition of its Integrated Report, which was based on the company’s 2021 results and progress. Going beyond integrating sustainability into the company’s Annual Report, Emmanuel Normant explains that sustainability has also been factored into many of the organisation’s targets that have been set internally. For instance, sustainability is

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a key consideration when establishing KPIs for manager compensations, which include KPIs linked to safety at work – in line with one of the key focus areas for the company. Additionally, Saint-Gobain operates with an internal price of carbon, and pushes for R&D and investments aimed at decarbonization. Each of these initiatives is established in alignment with the company’s broader 2030 and 2050 goals, which the company has publicly disclosed within its Reports.

Engaging the Supply Chain When it comes to engaging its supply chain, there are two main factors Saint-Gobain considers. The first focuses on ‘responsible purchasing’, which considers social issues, such as human rights and child labour issues, and the second aspect focuses on the environment. For a company to do business with Saint-Gobain, it must at a minimum meet the base requirements and policies set out in the company’s procurement policies. In terms of environmental standards at the supply chain level, Saint-­ Gobain’s procurement processes outline specific environmental standards for their suppliers. To ensure suppliers are indeed operating responsibly in line with Saint-­ Gobain’s expectations, the company has partnered with EcoVadis to perform audits across its supply chain. As part of Saint-Gobain’s efforts to reduce its carbon footprint, in 2017 the company completed its first scope 3 assessment, followed by its second assessment in 2021. Currently, the company is working on digitizing the assessment process, with information being inputted directly by suppliers. Furthermore, Saint-Gobain is working closely with its largest suppliers to guide them towards decarbonisation and establishing Science-based targets, in line with their own strategy. By working together and helping their suppliers on this journey, Saint-Gobain will be better positioned to reach the scope 1, 2, and 3 goals it has set out to achieve.

Defining What Matters – Performing a Materiality Analysis When developing its sustainability strategy, Saint-Gobain conducted a materiality assessment which involved several key stakeholders. Referring to the GRI framework as a guide, the assessment was carried out internally and included interviews with key stakeholders, both internally and externally. The company’s materiality assessment is one that continues to evolve with the support of internal ambassadors who are dedicated to engaging with various stakeholders across the organisation. Through this systematic approach, the company’s materiality assessment is updated on an annual basis. The process also involves external stakeholders and third-party auditors, as well as a comprehensive review by the Board of Directors. The beginning-­to-end process enables the company to review and evolve its leadership positioning, as well as identify areas where the company can make the greatest impact.

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To understand both the risks and opportunities associated with sustainability, the company has in place an internal process that focuses on these issues, and the materiality assessment plays a part in this process. Given sustainability is embedded across the organisation, Emmanuel Normant points out that the organisation today is not asking itself whether it needs to engage; rather, it is asking how to best engage. Saint-Gobain’s approach to sustainability reporting followed the Global Reporting Initiative (GRI) framework, but the processes were led internally with the support of third-party experts. On the topic of climate change, the company engaged in talks with its taskforce that focused on climate financial disclosure. Saint-Gobain became a listed company on the French stock exchange and in turn follows the French and EU reporting and disclosure regulations. The company’s materiality assessment brought to light the areas of greatest impact for the organisation, in turn paving the way for developing the company’s sustainability strategy (see Fig.  12.1). At its core, Saint-Gobain’s sustainability strategy is twofold: maximizing its impact and minimising its carbon footprint.

Fig. 12.1  Materiality matrix. (Source: 2021/2022 Integrated Annual Report)

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The strategy centres around six key pillars which have been identified, and each pillar has a specific set of KPIs which have been defined and disclosed. The six pillars identified are: business ethics; employee engagement and diversity; health and safety across the supply chain; climate change; circular economy and inclusive growth. The first three pillars focus on building trust with stakeholders, while the remaining pillars focus on contributing to common good. Altogether, the six pillars guide the organisation’s actions and commitments to creating a better living space that considers and ensures the well-being of individuals, society, and the planet.

Implementation and Training To communicate its approach and strategy internally throughout the organisation, Emmanuel Normant and his team organised internal training sessions with all managers. The sessions covered all matters of sustainability, including environmental and social topics. The company also worked with a third party to provide more advanced training on some specific topics. Internally, Saint-Gobain has its own School of Management, where sustainability is a key focus. In addition to training the managers and employees across the organisation, training also occurred at the Board of Directors level, with industry experts providing half-day training sessions that delved deeper into specific topics and areas. To provide support and training at the supply chain level, as well as with its customers, many of whom are small artisan craftsman, Saint-Gobain works closely its suppliers and customers to educate them on sustainability-related matters, such as energy efficiency. Through each of these touchpoints and initiatives, sustainability really is something the company approaches holistically with each of its stakeholders.

 Warm Reception – How the Strategy Was Received by A Key Stakeholders Since the company began its journey to develop a formalised sustainability strategy in 2015, it has made a lot of progress and has been well received by each of its key stakeholders who play a pivotal role on the company’s journey. By putting the stake in the ground and making the bold commitment to become carbon neutral by 2050, the company captured the attention and support of the industry, as well as its own key stakeholders – from its board of directors and employees through to its suppliers and customers. Over the last few years, momentum, and interest around the topic of sustainability have grown throughout the organisation. Over the years, it has become a priority not only for the leadership team, but for all employees. The organisation has made significant progress and there is a sense of pride that each member of the company is contributing to this progress.

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 hallenges to Developing and Introducing C a Sustainability Strategy When developing the strategy, Emmanuel Normant advises there were no major barriers or challenges that were encountered along the way. The one challenge the company faces today, however, is determining how to empower managers to act. Managers may ask themselves ‘what is the impact of my action’ or ‘do I have the right to take action.’ Emmanuel Normant explains that the biggest challenge is trying to help all employees understand their role and the significance of their actions on this journey. ‘What it comes down to really is a question of understanding the importance of their actions and their contributions. A key part of this is communication. We need to work on simplifying the story so that they understand what it means to them, and empower them to make decisions and to act.’ Emmanuel Normant finds that the same holds true with their external stakeholders, namely their suppliers and their customers. Concise communication is key when speaking about sustainability, which can sometimes be complex.

Approach to Communication and Disclosure Regarding its approach to communication and disclosure, Emmanuel Normant stresses how storytelling and simplified communication is key. Having clearly defined focus areas, like the six pillars for instance, helps significantly in communicating key messages to stakeholders, both internally and externally. When it comes to the company’s approach to disclosing its sustainability activities and practices, Emmanuel Normant points out that as a listed company disclosure of environmental and social performance is required and has been for some time. Given the level of details that needs to be reported, and the scope of the reporting, the challenge once again is to present the information in a way that is simplified, while still maintaining the substance of the reports. Focusing on the key pillars and the company’s steadfast approach to minimizing its footprint while maximising its impact are always key messages that are highlighted at each communication touchpoint. Understanding that benchmarking the company’s activities and its industry-leading positioning is also of key interest to investors, Saint-Gobain is committed to disclosing and highlighting the progress it is making around sustainability, as well as its vision for the future. The company’s approach to sustainability is also a key focus of the marketing and communications group at Saint-Gobain. The ‘Solutions for Growth‘ programme was driven by the company’s marketing team, for the purpose of sharing case studies and telling stories about the company’s sustainability initiatives. Emmanuel Normant explains, ‘to help bring these stories and case studies to life, the marketing team is very much dialed into each division of the company. We think working in close collaboration with the marketing team is the best approach to communicate and market the work we are doing at Saint-Gobain.’

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Sustainability-Driven Incentives and Awards To help keep sustainability top of mind among managers for the long term, in 2016 Saint-Gobain introduced an incentive of 20% that is tied to CSR (corporate, social, and responsibility) to the company’s long-term compensation plans. Additionally, manager’s annual compensation plans also include safety at work criterion (5%), as well as an additional 5% CSR criteria which was recently introduced. This criterion is defined locally, but in general applies to efforts related to reducing the company’s impact on climate. To reward the efforts of employees who embody the organisation’s values, the company also has Value Awards which are awarded at an annual ceremony. At the annual ceremony the entire Saint-Gobain executive team, including the CEO, recognise remarkable efforts of individuals, teams, and projects that are focused on the Environment (Emerald), Health (Ruby), and Safety (Diamond). Saint-Gobain has also been recognised for its efforts globally by the industry, having received several awards and accolades, including being named a top employer for the last 10 consecutive years. In 2021, the annual Glass Focus Awards recognised Saint-Gobain as the winner of its Health & Safety and Sustainable Practice awards. Recently, in 2022, the company’s gyproc plaster factory in Norway was presented with the Renewable Energy Award 2022, and its CertainTeed plant in North America received three manufacturing leadership awards in recognition of the company’s innovation in digital transformation. As the company continues to implement and evolve its sustainability practices, the focus going forward is on improving and innovating processes.

Sustainability Team Structure Emmanuel Normant leads Saint-Gobain’s sustainability team and is based at the company’s headquarters in Courbevoie, France. Emmanuel Normant has two teams that report into him. The first team is comprised of 15 people who are focused primarily on the Environment, Health, and Safety (EHS) issues, at a plant and production level. A second team is comprised of approximately 15 employees shared with marketing who work on product stewardship and market sustainability. Working in close collaboration with each of their stakeholders, the central sustainability team is responsible for stewarding sustainability strategy, training, benchmarking, and communications initiatives for the company.

Yamamay

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Interviewee: Barbara Cimmino, Head of Corporate Social Responsibility and Innovation

Company Overview Founded in 2001 by two Italian families, Cimmino and Carlino, Yamamay is an underwear, corsetry, lingerie, swimwear, clothing, and accessories company whose Headquarters is based in Gallarate (VA), Italy. In 2011, Yamamay became part of Pianoforte Group, a group of retailers brought together by the Cimmino and Carlino families. As of 2022, Yamamay has 622 retail locations and employs more than 880 employees across 41 countries and the world. The company reported revenues of over 117 million euros based on its 2021 fiscal year. The name Yamamay, which is a palindrome that reads the same way forward and backward, was inspired by a 1923 book the company’s co-founder Gianluigi Cimmino read, which beautifully described a Japanese silkworm called Bombix Yamamay. The silkworm, which has been cultivated in Japan for more than 1000 years, was imported to Europe for its tussar silk production. Known for producing a natural white silk that is very strong and elastic, the Bombix Yamamay’s silk is very rare and expensive. Given its long legacy – in many ways the Bombix Yamamay symbolises sustainability. It also evokes the preciousness of the time it spends transforming potential into value, while being close to the environment. To Gianluigi Cimmino, the name seemed fitting for a company devoted to producing beautiful, high-quality undergarments, lingerie, pyjamas, and swimwear that would look and feel good.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Taticchi et al., Sustainable Transformation Strategy, Springer Business Cases, https://doi.org/10.1007/978-3-031-26696-6_13

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Yamamay’s Purpose and Values Yamamay was built on a vision and purpose that places the well-being of its customers at the centre of the business by offering high-quality products that are produced responsibly and sustainably. At its core, the company’s purpose is to take care of its customers’ well-being by creating quality products, that last. Driven by its purpose, Yamamay strives to create sustainable and long-lasting growth while also having a positive impact on the environment, on society and on the economy. Guided by a philosophy of creating and sharing new value with people and communities, Yamamay is committed to contributing to resolving global issues and creating a better and more sustainable future – for its stakeholders, for communities, and for the planet. At Yamamay, sustainability represents one of the values the company wants to create for communities. As the company continues on its sustainability-focused journey, its long-term agenda and business decisions are driven by the company’s holistic view of sustainability. This holistic and focused approach is defined by its four key pillars of governance, product, people, and planet.

Developing a Sustainability Strategy and Report When first setting out to develop its sustainability strategy and processes, Barbara Cimmino, Head of Corporate Social Responsibility, and Innovation, explains she had the full support and endorsement of the company’s Board of Directors. Conducting its initial supply chain audit proved challenging however, as the company’s Director of Production is based in China, and most of its manufacturing also takes place overseas. In turn, gathering information from suppliers was a difficult task. It became clear to Yamamay’s leadership team that to further develop and define its sustainability strategy and goals; a different approach needed to be considered. Committed to better understanding the needs and challenges of suppliers, with the support of KPMG who guided Yamamay on the development its first Sustainability Report, in line with GRI standards, in 2019 Yamamay issued a SAQ (self-assessment questionnaire) to its suppliers. In 2020 and 2021, the company conducted audits which were performed with the support of third-party organisations. Barbara Cimmino stresses that having the guidance and oversight of third parties significantly elevated the quality of the audit, as the process shed light on several aspects of sustainability that were not previously considered. As Barbara Cimmino points out, having the expertise of a third party to lean on was an important and appreciated step on the company’s journey. As Barbara Cimmino explains, the initiatives captured essentially marked the beginning of the company’s formalised sustainability journey, setting the foundation for the company to build upon going forward. Over the next year, the company turned its attention from its supply chain to its internal operations. Looking more closely at what the company was already doing within its own operations around environmental, social and governance efforts

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became the focus. Taking into consideration the processes and initiatives that were already underway, in 2020 the company issued its first official Sustainability Report, for the year 2019, which mapped out the company’s progress, initiatives and short, medium, and long-term sustainability goals. The move allowed Barbara Cimmino and her team to work in close collaboration with the Director of the Supply Chain, who fully supported the company’s transition towards sustainability and digitisation. With this change, Barbara Cimmino and her team were able to gain a deeper understanding of the needs of suppliers and partners on this journey.

Yamamay’s Sustainability Profile Since it was founded, Yamamay has been focused on reducing the environmental impact of its product. In 2014, the company introduced its first eco-sustainability line. A carbon footprint assessment was conducted for these products, which became certified in 2021, and again in 2022. While the company designs and sells clothing, it does not directly manufacture its products. All production takes place at the supply chain level. Working in close collaboration with its supply chain, Yamamay has strived to improve production processes to be more responsible and transparent. Barbara Cimmino, Head of Corporate Social Responsibility, and Innovation, highlights the changes that have been implemented throughout the organisation preceded the Strategy on Sustainable and Circular Textiles introduced in 2022 by the EU Commission, for 2030. The EU strategy outlines regulations around sustainable production within the fashion industry. Anticipating the impending EU regulations, many modifications were made to the company’s processes to ensure it was well positioned to lead the way forward, rather than to follow the regulations that were coming. Updating the company’s internal processes and operations was the first step towards sustainable transformation. With its internal processes transformed in line with the company’s sustainability goals and agenda, Yamamay turned its attention to the activities of its suppliers and partners. As the company’s production takes place entirely through third-party facilities, ensuring sustainable practices and policies are in place and adhered to is paramount for Yamamay. When looking externally at the company’s supply chain, identifying current practices, and accessing the information that is needed to inform Yamamay’s leadership team about production practices across its supply chain remains the company’s greatest challenge. Committed to improving its products and minimising their impact, Barbara Cimmino highlights that as of 2022 more than 53% of the company’s swimsuits are made with recyclable fibres. At this stage in the company’s journey, ensuring its products are being developed through a sustainability lens is an expectation that has been widely promoted and adopted throughout the organisation. To understand, assess and monitor the impact of the products the company produces, Yamamay established a Product Lifecycle Management (PLM) process that explores a products lifecycle from the design stage, all the way through to the end of production. The process allows Yamamay to find efficiencies in terms of processes, time, and costs; ensures that the highest quality standards are met; and improves planning and decision-making along the way.

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In addition to reducing its impact on the environment, Yamamay is also committed to taking care of its people. At Yamamay, its people are its most valuable resource. Since the company’s inception, it is the passion, talent and contributions of its people that have been the engine driving the company’s growth and innovation over the past two decades. It is also because of the shared values and enthusiasm of its people that Yamamay has been able to establish, and bring to life, a business strategy that has been built on its sustainability-focused purpose and values. Understanding the importance of establishing a positive work environment where employees can thrive, Yamamay has always been committed to attracting, developing, and retaining talent by creating a stimulating, inclusive and safe working environment, and community. A culture of respect, belonging, freedom, and collaboration is fostered internally throughout the organisation, as well as externally with partners and suppliers along the company’s value chain. Also key to the organisation’s commitment of ensuring the health and well-being of its people, partners, and suppliers, Yamamay operates with the highest standards that respect human rights and worker’s rights and freedoms. The company also operates in full compliance with international standards, declarations, and legislations related to human rights and freedoms, across all the territories and regions in which it operates. In addition to the steps taken to reduce the company’s environmental impact, supporting issues that matter to employees and customers is key to Yamamay’s social sustainability strategy. Over the past 10 years the company has established several initiatives aimed at promoting cancer prevention for women’s health, adding men’s within the last 2 years Cancer Awareness programmes have been introduced and implemented at the company’s Headquarters. Since 2013, Yamamay has partnered with and supported LILT (Lega Italiana per la Lotta Contro i Tumori), an organisation that promotes breast cancer prevention through its “Nastro Rosa” (Pink Ribbon) initiatives. During the month of October, with the support of LILT volunteer doctors, Yamamay launched a campaign that drove awareness about breast cancer prevention across the organisation. As part of the initiative, employees were offered free check-ups and ultrasound screenings. In 2021, Yamamay also partnered with ANT (Associazione Nazionale Tumori) Foundation, Italy’s National Cancer Association. Through the partnership, male employees were offered free check-ups. Together each of the initiatives that were developed supported Yamamay’s commitment to support the health and well-being of its people.

Engaging the Supply Chain Gathering information from suppliers proved especially challenging when Yamamay set out to develop its second Sustainability Report in 2021. Throughout the process it became clear to Barbara Cimmino that for the company to reach its own sustainability goals, more needed to be done to bring suppliers along on the journey. At this stage in Yamamay’s journey, a concerted effort was made to better engage the company’s suppliers and partners throughout the value chain, with the aim of sharing

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and communicating about the importance of sustainability – not only for Yamamay, but also for their own businesses. Committed to further engaging their suppliers and partners and bringing them along on the journey, in addition to the initial supply chain audit that was conducted, in 2021 Yamamay began to work with Process Factory, a sustainability consulting firm that specialises in sustainable textiles. With support from Process Factory, Yamamay established processes to gather a significant quantity of quality data to be assessed. Committed to improving its approach to gathering information from its supply chain, in 2022 Yamamay digitised its processes with the aim of simplifying the process for suppliers. A platform was developed that enables suppliers to easily input figures and data needed for Yamamay to conduct a comprehensive assessment of activities across its supply chain. The improved process provides a much more accurate picture of the impact the company’s supply chain has across various dimensions of sustainability. The process has also enabled Yamamay to better track, measure, and report on progress being made on this journey. In addition to digitising the company’s supply chain management processes, Yamamay also invested in resources to train their partners and suppliers. Given many of the company’s suppliers are in different regions across Asia, several virtual meetings took place to connect with suppliers in different regions and countries. From the onset, Barbara Cimmino stresses that Yamamay’s suppliers were incredibly supportive of the company’s efforts to transition towards more sustainable processes. When we began to engage our suppliers, we were encouraged to see how collaborative and supportive they were of this transformation. We recognise that this is a lot of work for everyone, so it is nice to see the positive response and level of engagement across our supply chain. (Barbara Cimmino, Head of Corporate Social Responsibility and Innovation)

According to Barbara Cimmino, improving processes to gather information and engage suppliers is perhaps the single most important step the company took on its journey towards sustainable transformation. Barbara Cimmino acknowledges that without a dedicated supply chain that is aligned with the company’s goals and objectives, Yamamay’s own short, medium, and long-term goals could not be achieved. In addition to better understanding the impact of its suppliers’ activities, with its improved and digitised processes, Yamamay is better positioned to efficiently report on the company’s progress to stakeholders on an ongoing basis.

Approach to Developing the Company’s Sustainability Reports When developing the company’s Sustainability Reports, Yamamay uses the GRI Framework. Barbara Cimmino explains the biggest hurdle the company faces when it comes to reporting is a lack of standardisation for sustainability measuring and reporting across the industry. Different stakeholders have different expectations and

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requirements for measuring environmental, social and governance factors, be it banks, credit ratings or certification providers, each group has a different set of questions and parameters making the process burdensome for many organisations. Given the variances in reporting requirements, Barbara Cimmino advises the company is pushing for a more standardised approach to reporting for the industry in Europe. Looking ahead, Barbara Cimmino is hopefully that the new Corporate Sustainability Reporting Directive (CSRD), which was introduced in Europe in 2021, will also lead to greater mobilisation and positive changes for 2024, and beyond. Being an active participant at various industry events is one way the company is playing an active role in influencing and leading change. Yamamay is an active member of UNIVA (Unione Industriali della Provincia di Varese), an industrial association for the Varese region. Barbara Cimmino herself also sits on multiple Boards including SMI (Sistema Moda Italia), Unione degli Industriali della Provincia di Varese, Comfimprese, and Euratex (European Apparel and Textile Confederation). Barbara Cimmino recognises that having an ongoing and active presence at industry events is important to help drive awareness and influence change beyond the organisation itself.

Evolving Towards Social Sustainability From the very beginning, when the company was first founded in 2001, given the nature of its business-– which is driven by product and manufacturing processes – Yamamay has always been committed to reducing its impact on the environment. While the company has always operated with sustainability in mind, it was in 2018 when the company’s approach and processes became more formalised. The company’s Sustainability Chart was the first document that was developed to communicate the organisation’s commitments to reduce its impact. Once processes to reduce the company’s environmental footprint were identified and established, over the years Yamamay’s strategy evolved to also include social initiatives. In 2021, building on the momentum that had grown around sustainability across the organisation, the company updated its purpose, values, and mission to align with a revitalised vision and ambition for the future. ‘What is interesting is that our vision coincides completely with the outcomes of the materiality analysis we conducted. The assessment reaffirms that we are on the right path towards creating the more sustainable business and future, in line with our company’s vision.’ Recognising the rapid pace in which sustainability transformations occur, Barbara Cimmino explains the company conducts a materiality analysis on an annual basis. In line with the findings of the company’s most recent assessment, which was conducted in 2022, focusing on the wellness of employees and customers is the company’s primary focus and priority. Taking care of employees became an even greater priority during and following the Covid-19 pandemic that arose in 2020 and 2021. During this period, Yamamay revamped its three-year industrial plan, placing sustainability and digital transformation at the centre of the plan. At

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Fig. 13.1  Materiality matrix. (Source: Bilancio di sostenibilità 2021)

the beginning of 2022, to align with the purpose and objectives of its industrial plan, Yamamay started a Sustainable Balanced Scorecard (SBSC) process. With its revamped industrial plan and SBSC in place, the company has adopted a more integrated approach to business operations and decision-making. And while the company’s reporting processes are not yet integrated, Barbara Cimmino emphasises its approach to business is very much an integrated one that is driven by its sustainability goals and agenda (see Fig. 13.1 for Yamamay’s 2021 Materiality Matrix).

The Importance of Measuring and Reporting Progress The company’s approach to reporting provides a comprehensive overview of its sustainability-driven goals, actions, and progress. Integral to the reporting process are efforts to track and measure progress along the way. Barbara Cimmino stresses that measurement is incredibly important for keeping stakeholders informed on the company’s progress. Measurement is also key to obtaining certifications recognising the company’s efforts to operate responsibly, internally as well as externally along its supply chain.

Certifications In 2022, Yamamay received ISO 45001 certification. The certification recognises and reinforces the company’s commitments to putting the health, safety, and well-­ being of employees and customers first. The certification, which covers the company’s activities at Headquarters as well as in each of its retail locations, underscores

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the company’s commitment to putting the health and safety of its employees and customers at the top of its agenda. Establishing strong relationships with employees and customers by offering a safe and comfortable place to work and shop, physically or digitally, is key to Yamamay’s business strategy and positioning.

Approach to Education and Training To drive the company’s sustainability strategy forward, in 2001 Yamamay with an internal programme developed by the Yamacademy to train employees in different divisions and regions across the organisation on various topics, including the company’s sustainability goals and agenda. Barbara Cimmino emphasises the Yamacademy, which exists since 2002, plays an important role in changing and shaping the culture of the organisation, shifting mindsets, engaging employees, and elevating their commitment and collaboration. It has also increased the organisations’ ability to be agile and to adapt. Following the Covid-19 pandemic, which significantly altered the way organisations work, Yamamay developed and introduced an Academy training App, which was designed to support digital as well as in person training programmes. The hybrid approach to training has elevated the company’s ability to provide more efficient and timely training on a continuous basis. Previously training occurred primarily during monthly or bi-monthly conference calls. The move towards digital has strengthened the company’s ability to communicate and exchange information in a much more timely and relevant way.

 amamay’s Partnership with the Diana ODV Luisa Y Romano Association When the company set out to formalise its approach to sustainability in and around 2016, from the beginning a key priority for the organisation was to form a foundation within the organisation that would provide a constant platform to build and share Yamamay’s social impact initiatives. Building on the company’s sustainability-­focused values, in 2017 Yamamay formed a partnership with Diana ODV Luisa Romano, an association that supports women and children in Italy, and particularly in the Lombardia region, who, for various reasons, do not qualify for access to government funding. To help raise funds for the association, Barbara Cimmino explains Yamamay takes its un-sellable prototypes and products that are created during the pre-production and creative process, and in partnership with Cooperative Sociale, an Italian charitable organisation, the products are regenerated in an upcycling process and then donated for fundraising efforts. In addition to supporting neighbouring families in need, the Diana ODV Luisa Romano partnership enables Yamamay to forge meaningful connections with its surrounding community that extend beyond a business transaction or relationship. The partnership also allows Yamamay to develop social projects that are aligned with the company’s sustainability values and ambitions. Furthermore, the

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partnership ignites a level of engagement with the company’s employees, leveraging their creativity and channelling their talents towards purpose-driven projects that have a positive impact on surrounding communities. More than supporting local communities, our partnership with Diana ODV has allowed us to engage our people in a way that wouldn’t be possible if we were only focused on our day-to-day business. Leveraging our community’s passion, creativity, and talent for good, in a spontaneous yet natural way, is incredibly motivating for our community – it also builds morale across our organisation.(Barbara Cimmino, Head of Corporate Social Responsibility, and Innovation)

Steering and Governing the Company’s Sustainability Agenda As a family-owned and run organisation, up to 2021 the company’s Board of Directors were made up of four family members who were all male. Driven by its sustainability values, Barbara Cimmino acknowledges the company’s leadership team and structure itself needed to evolve to be more diverse and inclusive. With this objective in mind, in 2021 Yamamay added a new independent member to the company’s Board of Directors, who would be the company’s first female and independent Board Member. Committed to accelerating the company’s sustainability efforts at a leadership level, the newly appointed Board Member was distinctively chosen for her expertise in ESG and sustainability. In addition to evolving the company’s internal governance structure and processes, as a key player in the Italian Fashion Industry, Yamamay spearheaded the creation of a small industry organisation that is focused on identifying the risks the industry faces if it does not adapt and shift towards more sustainable practices. Barbara Cimmino explains that in general, the fashion industry in Italy is primarily focused on what it needs to do in the short term – to keep up with new or impending EU regulations, rather than looking further down the path at what the medium and long-term sustainability risks are, and what actions must be taken to mitigate the impact of those risks, for businesses and for the industry. The pandemic has really brought to light how quickly businesses can be impacted by risks related to not engaging with sustainability. With the pandemic, as well as the current war in the Ukraine, we are facing a possible recession this coming Fall. Amidst the rising global issues, we are facing, for me it has become abundantly clear that having a dedicated group that is considering the risks, and is cooperating with our Board, is something that is fundamentally important to the future of our organisation, and our industry.(Barbara Cimmino, Head of Corporate Social Responsibility, and Innovation)

Barbara Cimmino highlights that equally important to the future of the business is measurement. Digitising the supply chain process was one step the company took to strengthen its approach to measuring the impact of its own operations, as well as its suppliers.

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Committed to Producing Quality and Sustainable Products As a family-run business that is focused on providing quality products for its customers, Yamamay’s values have always been rooted in sustainability and good quality standards. Given the intimate nature between the products they create and their customers, Yamamay has always been focused on producing high-quality products. Emphasising the importance of producing quality garments for their customers, Barbara Cimmino stresses the products are made with the understanding that they are the first items of clothing that touch a person’s skin. For this reason, the highest production standards have been set to ensure Yamamay products are free of chemical toxins. More than this, with its clearly defined manufacturing agreements and requirements, Yamamay has established rules and expectations that go beyond compliance of not only chemicals, but of all areas related to environmental, social, and governance matters. Products are also tested before distribution and selling to ensure all components meet the company’s quality manufacturing standards. In addition to producing high-quality garments, ensuring the items are comfortable and feel good is also an important part of the production process. Barbara Cimmino explains that by tracing the materials that are used, and how the garments are made, Yamamay can ensure the products are being made with the comfort of the customer in mind. Being focused on quality has led the company to gain a deeper understanding of their customers’ needs, and to produce items that can best address those needs. This approach has led Yamamay to collaborate with suppliers in an open innovation system that invites them to engage with their projects. As the company does not directly manufacture products, its approach to innovation is driven by the partnerships it has formed with universities, associations and with other like-minded organisations who are focused on accelerating sustainability practices throughout the industry. This collective approach to addressing sustainability issues has led to the development of a purpose-driven community that is working towards a common set of goals. Barbara Cimmino explains that this idea of sustainability, which is driven by a close-knit community, is referred to as ‘bene comune’ – a community that benefits from new value that has been created and shared together.

Approach to Marketing and Communications While Yamamay has been operating with sustainability in mind since the company was founded, Barbara Cimmino points out that, to date, the company has not yet adjusted its strategy to integrate sustainability into its branding and communications initiatives. Up to this point in the company’s journey, Yamamay’s marketing efforts have been primarily focused on showcasing its products in glamorous locations around the world. Given the natural connection between the garments Yamamay makes, and the beautiful locations where they are worn, incorporating sustainability messaging into the company’s communications strategy is a natural evolution for the organisation’s marketing and communications strategy. Describing the direction

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of Yamamay’s marketing efforts going forward, Barbara Cimmino explains, ‘We have always been very strong at storytelling through our marketing and communications campaigns. As we continue this path towards a more sustainable future, going forward we will be focusing on communicating the values of experiences that reconnect with nature – with our products being the means to help spread this message. This will be our key focus going forward.’ Reinforcing key messages that support the company’s key pillars of people, planet and product will continue to be a focus for the organisation’s approach to communications going forward. Under the planet pillar, one example of how sustainability is starting to be weaved into the company’s communications initiatives can be seen in a campaign that was launched in 2021 that promoted its M.A.R.E mission, an initiative supported by Yamamay’s partnerships with the One Ocean Foundation and the Centro Velico di Caprera. Together with its partners, Yamamay sponsored a scientific mission that took place between April and July 2022. The company’s marketing campaign tells the emotional story of the scientists’ journey as they embarked on a mission to collect samples of zooplanktonic organisms – natural bioindicators of environmental pollution – to monitor the presence and distribution of marine contaminants in the Tyrrhenian Sea. The mission also collects DNA samples of marine organisms with the aim of reconstructing biodiversity in the areas visited along the journey. In line with its values and commitments to the planet, with its purpose-driven partnerships and communications efforts, Yamamay remains steadfastly committed to supporting initiatives aimed at protecting our seas, and the planet, for future generations. The initiative builds on a partnership Yamamay established in 2018 with the One Ocean Foundation, which supports scientific research that is focused on reducing the impact of industries on oceans and spreading ocean literacy. The partnership represents one of many initiatives Yamamay is supporting to measure and reduce its own environmental impact, while also contributing to the global sustainable development movement SDG 14. Driving awareness of issues that are important to employees and customers aligns with Yamamay’s people pillar. Barbara Cimmino points to stories that promote Breast Cancer Awareness as an example of how the company will look to incorporate sustainability into their communications strategy in the future. Finding the right balance between promoting Yamamay’s products, alongside its values, will be a key focus for the organisation going forward. While promoting the company’s sustainability commitments is important, Barbara Cimmino acknowledges that doing this well requires new skills and personnel, and also requires a cultural mind shift – and both things can take time. Of course, supporting its product pillar, as a business that is devoted to making beautiful, high-quality products for its customers, Yamamay’s products will continue to be central to the company’s overall marketing and communications initiatives and efforts. Barbara Cimmino recognises that establishing strong sustainability-focused branding can also attract a new generation of greener consumers who are increasingly looking to businesses to address the many global environmental and social

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issues facing the world today. As a company that is driven by its sustainability values, Yamamay understands the importance of not only adopting sustainable practices, but of also communicating and promoting its efforts to this next generation of environmentally and socially conscious consumers.

 rameworks Used to Develop Its Sustainability Strategy F and Agenda When setting out to develop the company’s sustainability agenda Yamamay looked to several resources including the UN Agenda, the European Green Deal and the Laudato sii, the UE Strategy on Sustainable Textiles and the Taxonomy Regulation to establish a framework that would define the company’s goals and objectives. The UN Sustainable Development Goals (SDGs) were also referred to when defining the company’s own short to medium to long-term goals and targets. As Yamamay’s agenda has evolved it has aligned its goals with 12 of the 17 SDGs, including SDG 14 ‘life below water’, which is defined as ‘conserve and sustainably use the oceans, seas and marine resources for sustainable development’. Aligning with the SDGs demonstrates the company’s commitment to contribute to the global effort that is working towards addressing these important issues. Yamamay’s sustainability agenda is also aligned and shaped by the regulations that have been defined by the EU Commission. As Barbara Cimmino points out, once regulations have been introduced there is nothing more a company can do, they need to be ready. For this reason, it is important that companies take the necessary steps and actions to be prepared and adapt in advance of the impending regulations.

Yamamay’s Sustainability Team Structure Yamamay’s sustainability agenda is stewarded by the company’s Sustainability Team. The team is led by Barbara Cimmino as Head of CSR and Innovation. Reporting to Barbara Cimmino is a team of three employees who are specialised on the impacts of products on the planet, and on corporate communications. Each year the team also includes an Intern who supports the company’s communications and social media channels, as well as sustainability-focused projects the company works on in collaboration with different universities. Yamamay’s Sustainability Team works in close collaboration with the company’s many stakeholders, internally and externally, to continuously evolve and drive its sustainability agenda forward. Reflecting on Yamamay’s sustainability journey so far, Barbara Cimmino is proud of how far the company has come, and the progress it has made so far. She also remains optimistic for the way forward. Stressing the importance of sustainability to the company’s overall business and competitive strategies, Barbara Cimmino remarked, ‘For Yamamay, sustainability is a key driver for our competitive positioning in the marketplace. Our sustainability focused approach to business

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also enables us to share the value we create for our people, our customers, and our planet in more meaningful, relevant, and impactful ways.’ With its sustainability agenda defined, continuing its path towards sustainable transformation, and leading the way forward for the industry remains a top priority for Barbara Cimmino and the rest of the leadership team at Yamamay. And much like the silkworm after which the company is named – creating a long-lasting legacy of producing quality products, while caring for people and the environment along the way, is an ambition the company is well on its way towards realising.

10 Golden Rules to Lead the Sustainable Transformation of Business

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The remit of this book is not only to share interesting stories of sustainable transformation, but also to summarise the learnings from these experiences with the goal of advancing theory and practice in this field. By spending time with the sustainability and management teams of the organisations studied, the authors have identified successful practices that can help managers and organisations lead the sustainable transformation of business. Based on the insights and learnings shared, in this chapter the authors present the 10 golden rules to lead the sustainable transformation of business.

Rule 1 – Monetise Your Sustainability Strategy Until now, many companies have approached the topic of corporate sustainability as a matter of compliance, green marketing or risk management. Nonetheless, it is evident today that the business case for sustainable transformation is greater and more articulated, and it should include the exploration of business opportunities and the monetisation of sustainability initiatives. Several stories in this book have underscored the above, confirming the elements of the business case and the potential economic value created through corporate sustainability. For example, when the bank ABN AMRO started its journey of transformation approximately ten years ago, its agenda was predominately aimed at addressing the pressure coming from different stakeholders of the business. Today, the bank has adopted a more strategic approach based on a solid materiality analysis. The approach taken has helped the bank focus more on business opportunities rather than business risks. Enel, Formula E and Mercato Metropolitano also offered interesting stories that demonstrate the economic value of business models with sustainability at the core.

Rule 2 – From Creating Shared Value to Impact In the previous book “Corporate Sustainability in Practice” the author offers a modern definition of corporate sustainability, which they defined as follows: Corporate sustainability is an integral approach to business aimed at enhancing competitive positioning and profitability through the sustained creation of shared value, co-creation

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practices with stakeholders and the integration of ESG factors in decision-making. (Taticchi and Demartini, 2021)

It is clear from the stories presented in this book that companies are increasingly understanding the definition above; and moving away from approaches based on traditional Corporate Social Sustainability (CSR), which is often viewed as being peripheral to the core business. A new form of capitalism is emerging, that instead of being shareholder-centric is stakeholder-centric. The case studies described signal organisations embracing shared-value creation; and shifting from the management of negative impacts towards the desire or producing and managing positive impacts on the planet and society. The “net-positive” logic proposed by Andrew S.  Winston and Paul Polman  – which suggests that for companies to thrive they must give more than they take – appears to be understood by business today.1 In this context, particularly inspiring are the stories of Bayer AG, who, with its new sustainability strategy, committed to becoming an ‘impact generator’; and Enel, who evolved its approach from focusing solely on environmental compliance and social philanthropy to fully embracing a deep transformation that focuses on shared-value and social impact creation. Another very interesting case is Mercato Metropolitano, a for-profit organisation that has put social impact at the core of the business model since day one, who has achieved remarkable growth and recognition in a highly competitive and crowded sector.

Rule 3 – Sustainability Education Is Key for Success Sustainability transformation is complex, therefore driving change, especially in large organisations, can be challenging. The upskilling of employees, managers, and executives is key for success and a clear enabler of all sustainability agendas and change management programmes for sustainability. Also key in today’s evolving business environment is for companies to attract and hire new talent that can bring ESG skills into their organisations. The value of sustainability training is evident in the stories of ABN AMRO, Avon, Consilient Health, Enel, Leonardo, Formula E, and Saint-Gobain, all of whom trained all divisions and functions on the foundations of sustainability and also made an effort to invite practitioners and experts from other industries to offer new and external views on corporate sustainability. Also noteworthy are the examples shown by Mercato Metropolitano, who actively engages in educational activities with several stakeholders, including their customers; and by SAGE, who, in addition to formal training promotes informal training and educational activities, including masterclasses for customers and business partners, as well the sharing of knowledge between peers.

 Source: Polman, P. and Winston, A. (2021) Net Positive: How Courageous Companies Thrive by Giving More Than They Take. Boston, Massachusetts: Harvard Business Review Press. 1

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 ule 4 – You Need to Foster a Culture of Sustainability That R Starts with Engaged Leaders, Sustainability Champions and Having the Right Governance in Place Several scientific articles and industry studies suggest that companies leading the sustainability transformation are often led by very engaged and passionate leaders who have bold visions and enable change. The case studies presented in this book confirm and underscore the important role played by sustainability champions in driving and accelerating change. What is also interesting to note is that while sustainability teams are structured very differently within organisations, very often governance evolves. As companies engage with more strategic initiatives and take sustainable transformation more seriously, sustainability leaders work closer with CEOs, leadership teams, and key decision-makers. In this context, interesting stories in the book include Avon – with highly engaged leaders; a Sustainability Steering Group representative of all business areas; and ‘an army’ of sustainability champions spread in the organisation; ABN AMRO – who identified ‘Green Experts’ and ‘Sustainability Champions’ keen to help steward and bring various green initiatives to life across the organisation. When it comes to smaller organisations that are leading on sustainability in their industries, the real push for change came directly from the CEOs, as is the case with Consilient Health and Mercato Metropolitano. Equally important to having engaged leaders, is having engaged employees. Fostering a culture that is centred around sustainability is key, as was seen in the example by the LEGO Group which demonstrated how the launch of the company’s sustainability strategy helped drive momentum and enthusiasm across the organisation.

 ule 5 – Sustainability Disclosure Needs to be Robust R and Transparent Companies need to leverage sustainability disclosure strategically. In fact, when used correctly, sustainability disclosure becomes a fantastic tool for engaging stakeholders and for aligning the organisation internally towards common objectives. A balance is of course needed in terms of sharing commitments and celebrating achievements. Sustainability leaders use established frameworks, at times a combination of them; and help the reporting practice advance by building sectorial and cross-sectorial alliances. Notable examples of how frameworks and alliances helped guide companies with their disclosure are the stories of ABN AMRO, who produced its first integrated report based on the IR framework in 2015, as well as Saint-Gobain who produced one in 2021. The large majority of organisations studied produce sustainability reports based on the GRI framework and committed to net-zero using the GHG protocol and by registering science-based targets.

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 ule 6 – Sustainable Transformation Is Data-driven R and Digitally Enabled Gathering data which support decision-making is key for managing successful and impactful sustainability agendas. A common challenge faced by almost all the organisations studied in this book, and that needs to be addressed, is the ability to produce quality ESG data in a timely, robust and cost-efficient manner. To this end, there is great value in aligning sustainability with digital transformation initiatives, as was seen with Avon, Consilient Health, and Yamamay. Each of these companies made concerted efforts to align their digital transformation with sustainability transformation initiatives, leading to immediate operational and manufacturing efficiencies and improvements across their organisations.

 ule 7 – Executive Pay Linked to ESG Performance Is R the Booster Organisations that are keen to accelerate their transformation often introduce economic incentives linked to ESG performance in the context of executive pay. This practice seems to spread and to offer solid results. Therefore, the authors fully encourage it. Avon, Bayer AG, Enel, the LEGO Group, Leonardo, and Saint-Gobain are examples of companies that have successfully integrated ESG criteria in executive pay.

Rule 8 – Innovation and Sustainability: The Means and the End In the words of Ernesto Ciorra, Head of Innovability at Enel, sustainability is the end game, and innovation is the means to get there – the authors can’t find a better way to put it. In this context, Enel is the greatest example in this book of an organisation that has been able to orient all innovation efforts towards sustainability, up to the point of merging the two functions and attaining the achievement of innovating the growing field of sustainable finance by launching the world’s first SDG-linked bond. What is also interesting to observe from the examples shared is that, more than ever, innovation today means co-creation with other stakeholders. The stories of Bayer AG, ENEL, and Yamamay offer examples of the remarkable effort, and importance, of working with suppliers to improve the sustainability of value creation and supply chain processes. Also of particular interest is the case of the LEGO Group, where the goal of building momentum with suppliers was the inspiration behind the launch of a Supplier Sustainability Summit aimed at aligning suppliers to the corporate ESG agenda, and fostering collaboration between suppliers to address common goals. Co-creation is also the aim of strategic partnerships, as was seen with Yamamay and the partnership they formed with the One Ocean Foundation and Centro Velico

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di Caprera, among many others. Innovation and sustainability were at the heart of this partnership, which supported a mission to monitor the presence of marine contaminants in the Tyrrhenian Sea.

 ule 9 – Corporate Sustainability Planning Should Be In House, R But Green Marketing and Communication Could Be Partially Outsourced When organisations try to integrate corporate sustainability into their competitive strategy and core business, they build strong sustainability teams led by experienced leaders that work closely with CEOs, Boards and Managing Directors to make it happen. Making it happen, or to use the words shared by Sage, ‘walking the talk’ is an incredibly important part of the process, and it’s one that needs to start with a company’s leadership team. While consulting firms are often used to support specific planning activities (e.g., materiality analysis or sustainability disclosure), core planning remains controlled in house. Green marketing and communication, however, which very often calls for specific skills not available in house (and is perceived as less core to the strategy), can generate good results even if partially outsourced. Several companies studied in this book work with multiple external advertising, marketing, and communication agencies specialised in sustainability, including ABN AMRO and Bayer AG.

 ule 10 – Build Your Own Storytelling Aligned R with Your Purpose Sustainability transformation can look very similar from the outside. Almost all companies today are engaging with net-zero, EDI (equality, diversity, and inclusivity) and sustainable branding initiatives, yet to stand out it is important that companies find their own voices and storytelling narratives. A clear definition of an organisation’s purpose can help identify long-term ambitions and targets, as well as help the organisation to align towards them. Corporate purpose today is the basis of storytelling for many companies, and this often leads to the use of customised frameworks for corporate sustainability. Having said that, most corporate sustainability frameworks used by companies today reflect a triple-bottom-line approach to sustainability, and a clear reference to the SDG agenda. Many of the companies studied in this book have been able to define inspiring purpose statements, such as Bayer AG’s “Health for all, hunger for none”, Enel’s “Open power for a brighter future: we empower sustainable progress”, Formula E’s “Leveraging the power of motorsport to accelerate sustainable human progress”, the LEGO Group’s “to inspire and develop builders of tomorrow”, or Mercato Metropolitano’s “Right to food and doing the right thing”. Companies that are

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guided by a clearly defined purpose, core values, and vision are well positioned to drive sustainable transformation forward for their organisations and industries. With these 10 golden rules, this book aims to inform and help guide companies that are beginning or continuing their own journeys towards sustainable transformation.