Monday 23: Lego, Adidas, BASF and HIP Investor: sustainability as a business driver

The mid-morning sessions at the Sustainable Brands Conference at IESE saw speakers from Lego, AdidasBASF and HIP INVESTOR. One thing they all had in common was that they currently all are using tools to understand and manage their businesses impact on the world and on their consumers.

LegoTim Brooks, VP of Environmental Sustainability at Lego, focused Lego’s journey to integrating a sustainability focus in their business thus far. Tim began his speech with the fact that in 2019 there will be more Lego people in the world, than real people. In this context, Lego is very engaged to eliminate its potential negative impact.

Lego’s focus on sustainability is a top down decision which is backed up by Lego’s commitment that 20% of management’s bonus is directly evaluated on the managers environmental and social goals. Lego has set goals to make their Supply Chain and Packaging have less of an environmental impact. For example, their new factory in China has 100% LED lighting and solar panels on the roof. Lego has a goal to be using 100% renewable energy by 2020.

20% of management’s bonus is directly evaluated on the managers environmental and social goals. Lego has a goal to be using 100% renewable energy by 2020.

While it was clear that Sustainability is a key goal of Lego, it is not without its risks. In its search for sustainable materials, Lego does not want to compromise on durability or quality. Maintaining that special sound a Lego box makes when shaken, or that all yellow Legos are the same yellow, or that bit of shine that certain Lego’s have is very important to Lego.

Lego’s Project Greenbox shrunk packaging by 18%, saving 4,000 truckloads and 7,000 tons of material per year.

Tim ended on a positive note that this focus on sustainability has also had very strong business implications. Their Project Greenbox was a big success. The project shrunk packaging by 18%, which saves Lego 4,000 truckloads a year and 7,000 tons of material. From a process innovation perspective as well, this project forced the company to find a way to take the air out of the packaging and see greater pallet utilization.

AdidasGerd Manz of Adidas gave an overview on how their business strongly links Sustainability with Innovation. In thinking about Sustainability they focus their priorities on Product and People. From a Product perspective, they are concerned with water, materials and energy and on the People side Adidas is driven to empower people, improve health and inspire action.

Adidas believes that by focusing on sustainability they are inherently making their business more innovative. Innovation is bringing higher efficiency, stronger and longer relationships with partners, more diverse pool of ideas and faster knowledge transfer.

Adidas believes that by focusing on sustainability they are inherently making their business more innovative. They currently have a Future Team made up of 100 people globally who are always asking Why? Their goal is to innovate across the whole value chain and always connect innovation to customer desires. Innovation is bringing higher efficiency, stronger and longer relationships with partners, more diverse pool of ideas and faster knowledge transfer.

Adidas also believes that to drive sustainability its important to work in a consortium and to have strong partners. They are putting this belief into practice with the Sport Infinity project. Adidas is also part of the EU Horizon 2020. This network helps increase and speed up the processes that drive sustainability.

Next up, Peter Gräve from BASF, one of the biggest chemical companies in the world, spoke about their thorough and unique approach to incorporating a culture of sustainability.

BASF has done a complete bottoms-up analysis of all 60,000 products in their portfolio to give each a sustainability ranking

Their process begins with understanding that there will continue to be big pressures on the environment and food consumption due to increased population and more people living in cities. What makes BASF’s approach unique is that they have done a complete bottoms-up analysis of all 60,000 products in their portfolio to give each a sustainability ranking. They called this process ‘Sustainable Solution Steering’. The description is below:

  • Accelerator Product: Substantial sustainability contribution in the value chain
  • Performer: Meets basic sustainability standards on the market
  • Transitioner: Specific sustainability issues which are being actively addressed
  • Challenged: Significant sustainability concern identified and action plan in development

As a result of this, BASF channels more R&D to Accelerator Products and is considering dropping some of the Challenged Products.

Two specific projects they are working on are worth mentioning. In the automotive sector, they are currently focusing on minimizing ecological impact through fuel additives, light weight plastics, catalysts and integrated coasting processes. A second interesting project is that they have created the first compostable coffee capsules for all those Nespresso lovers out there.

Peter summed up by saying that BASF realizes that sustainability is key and that their systematic process is a result of truly looking to understand the needs of consumers.

Last speaker of the mid-morning session was R. Paul Herman, CEO of HIP INVESTOR. Paul has significant experience in analyzing how sustainability can create profitability and lower risk.

Citing the fact that today in developed countries we have evolved to be a technological and service-based economy and as a result 84% of assets are intangible. Paul is suggesting that we need a new model to value companies.

Research shows that more sustainably-focused companies have higher ROE and less risk

How to do this? Paul outlined 3 key steps through which companies can better market the sustainability of their brand: Transparency, Performance and Visualization. First companies need to be transparent. For example, reporting revenue by segments, diverse boards and linking executives pay to environmental goals. Second, Paul’s research shows that more sustainably-focused companies have higher ROE and less risk. Third, visualization of your company’s sustainability focus is key to success. If investors can’t see it, then they can’t invest in it. He cited Infosys, an Indian multinational providing IT solutions and IT services, who has but a Human Capital Value asset on their balance sheet.

To wrap up the mid-morning sessions, the themes of sustainability leading to innovation, the importance of partnerships and clear communication of your firm’s approach to sustainability were highlighted.

Jessica Fallon, SB Barcelona 2016 Volunteer, MBA Class of 2017, IESE Business School