As the vice president of sustainability for Dutch life sciences giant Royal DSM, Jeff Turner is concerned about what retailers are telling consumers about the food they buy.
Companies are hiding the sustainability story behind what we eat because they don’t think it makes commercial sense to tell that story, he tells Eco-Business.
“A number of times I’ve had senior retail executives tell me: ‘My consumers won’t pay any more for sustainability.’ That’s simply unacceptable,” he says.
Retailers don’t know for sure that consumers won’t pay for responsibly sourced and produced food, nor have they made it easy for consumers to make responsible buying decisions when browsing supermarket aisles, he argues.
“We need to continue to challenge retailers not to hide behind their consumers,” says Turner, who has been in several business and strategy roles for DSM since 2008, and has led the multinational’s sustainability efforts since last year.
He notes that there are cases where retailers are taking a bigger margin on the sustainable products they sell, which means those items become expensive for consumers to buy. “This is bad enough. Even worse, they can take the profit from those higher margins to allow them to more deeply discount the products that are less sustainable,” Turner says.
This is one of the many priorities that preoccupies Turner, who is responsible for sustainability across DSM’s various businesses. The company is the world’s biggest maker of vitamins & micro-nutrients, one of the largest makers of plastic for the automotive, electronics and packaged goods industries, and is the creator of the world’s first truly recyclable carpet, an innovation named Niaga (“again” backwards). “Just about anything you touch or eat has got DSM in it,” says Turner.
Sustainability is “absolutely core” to DSM’s business, and is a big reason why the company recently posted such an impressive set of financial results, says Turner. In this interview, he explains why this is.
How much of DSM’s recently announced financial performance do you think was attributable to sustainability?
The glib answer is that it’s all the same thing, and our business is 100 per cent dependent on sustainability. But to some extent the glib answer is the right answer. Sustainability is absolutely core to DSM. We drive our businesses along three sustainable growth drivers—nutrition, climate, and resource availability—and we connect our strategy directly to the Sustainable Development Goals (SDGs). Today our ‘Brighter Living Solutions’ account for 63 percent of profits, and we continue to see growth.
Many businesses in Asia right now are trying to work out what the SDGs are, and how they’re material to their business. How does DSM regard the SDGs?
Adopting the SDG goals internally, we measure everything from greenhouse gas emissions to gender balance, tracking 12 different internal sustainability metrics.
The sustainability performance of every business, and every function - it’s all connected to remuneration. For example, a proportion of the executive board’s long-term and short-term incentives are linked to emissions reductions, improvements in inclusion and diversity, and employee engagement.
We’ve got to get to a place where our people are thinking about the environmental and social impact of every decision they make.
The second level is value capture. How can you integrate social and environmental impact into your value proposition? How can you better position your solutions according to how they are better for society, and the environment?
The third is advocating and being part of shaping future markets. On a company level, we recognise the importance of carbon pricing as a lever to drive change. Our CEO is co-chair of the World Bank’s initiative on carbon pricing, The Carbon Pricing Leadership Coalition, and speaks about it often all over the world. We think that companies shouldn’t wait for legislation, they should apply a carbon price internally as soon as they are able. DSM, for instance, introduced a carbon pricing scheme in early 2016, and we are aiming to reduce our emissions by 45 per cent from 2008 by 2025.
How does DSM’s carbon pricing system work?
We use a carbon price of 50 Euros per tonne of CO2, as this is generally regarded as the breakpoint above which you can really drive transformation. Below that price, we believe that it has a marginal impact on the choices you make. We apply it to all capital expenditure (capex) decisions above 1 million euros. So now for the majority of all capex decisions, we evaluate one with and one without the carbon price. That stimulates a discussion around whether the decision is future-proof.
How do you build a culture of sustainability in your organisation?
It is a process that never stops. It’s very much a question of transformation, not sustainability. And with any change process, particularly in a large organisation, there are some very clear criteria for success.
First, you have to have a truly engaged and committed senior leadership. You need a CEO like Jack Ma [founder of Chinese e-commerce giant Alibaba] who talks on the world stage and is passionately committed to sustainability. Fortunately, DSM’s CEO Feike Sijbesma and our managing board are also fully engaged. They are driving the agenda within our organisation and publicly.
Second, you need dedicated change agents. Whatever you’re trying to change, you need people whose job it is to drive that change.
Thirdly—and this is the hardest, frankly—you need to engage line management. In any organisation, there’s always some hierarchy between the chief and the ground floor, and you need those levels of leadership to play their role. To do this, you need to have the right targets in place, because what gets measured gets done, right?
The final part is about sustaining progress, and that is done by ensuring that early adopters find themselves a part of a community that is encouraged to grow and develop. And if you get all four of those right, then your chance of change is very high.
It’s an ongoing mission. Even for a company like DSM, we’ve got a long way to go. We’ve got to get to a place where our people are thinking about the environmental and social impact of every decision they make.
Which areas of the DSM business need to be worked on the most to make the company more sustainable?
At the moment, we are evaluating what the Paris Agreement will mean for the business. We are working out what our scenario will be for a 2 degree or 1.5 degree rise in global temperature, not only in terms of our own footprint but the entire value chain.
These are often described as “science-based targets”, but they’re not a precise science yet, and are open to debate. There’s not a standardised methodology by any means, and it’s not easy to create a Paris-compliant strategy for an energy intensive industry like the materials business.
What impact do you think the United States’ withdrawal from the Paris Agreement on climate change will have on the business community?
Without the US, the chances of reducing global warming below 2 degrees Celsius are reduced significantly. It has been reported that the policies that Donald Trump is introducing in the US could be responsible for a 0.2-0.3 degree temperature rise. So that’s a real concern.
But from our point of view it makes no difference whatsoever in terms of our commitments and obligations.
But it does change the way we position our activities in North America. In 2014, we made a major investment in second generation biofuels in the US, turning waste from agricultural production into ethanol. Whereas we might have emphasised lowering environmental impact and carbon intensity in the past, now we might focus on job creation and energy security.. So the language we’re using may change, but our goals and commitment remain the same.
Do you think that consumers care that DSM is a sustainability-led company, or do they expect it?
Consumers are becoming a lot more engaged and aware, but for generations who grew up not thinking about the resource and social impact of their choices and aspirations, it’s very hard for us to change. Emerging generations, however, do care. They expect – even demand – that companies act sustainably and responsibly.
For kids coming through school now, we need to embed sustainability principles in how we teach subjects such as economics, policy and science. It shouldn’t be an additional subject.
At a corporate level, the way we conduct our learning and development programmes, whether it’s management, innovation, or sales and marketing, should build in sustainability-related case studies and scenarios.
For consumers, there’s a long way to go. Even when people are aware and concerned about the environment, you actually have to work very, very hard to make the right choice. Usually, the information isn’t there to guide you, and the way it’s presented, packaged and retailed is very confusing.
What’s your view on the role of retailers in selling sustainable food?
We need to continue to challenge them not to hide behind their consumers. A number of times I’ve had a senior executive of a retailer tell me, my consumers won’t pay any more for sustainability. That’s simply unacceptable. How do you know that? Have you actually given them the choice? Do you retail sustainable products in a way that they are actually likely to choose them?
What may happen is that the retailer will be tempted to take a bigger margin on the more sustainable product, which makes that product more expensive for the consumer to buy.
This is bad enough. Even worse, is if they take the profit from those higher margins to allow them to more deeply discount the products that are less sustainable.
Does such retailer behaviour have an impact beyond sustainability?
We’re very concerned about the trend we see in some areas towards ‘defortification’. If you look carefully at the recipes of very standard packaged foods, you’ll see a trend towards less nutritious ingredients, in order to keep the price point the same, or to make it cheaper. The nutritional quality of food in some areas is declining - and big brands are not immune.
Which part of the company’s operations or sustainability efforts excite you the most?
Niaga - which is the word ‘again’ written backwards. It’s a circular business model for carpets. Carpets are one of biggest contributors to landfill in the world today.
Our big breakthrough is to use a heat sensitive adhesive to connect the backing and surface of the carpet. At the end of the carpet’s life, you can apply heat to it and separate the two, so it enables recycling of any type of carpet. To go one step further, you can make the whole carpet from one polymer – polyester. So just like in nature, we’re just taking one material in different physical forms to make the backing, the glue and the top. Then it’s very easy to recycle.
How optimistic are you that the business community can collectively raise its game to meet big sustainability challenges of our time?
The question is, is the pace of change fast enough, and is the regulatory environment strong enough to drive that change?
Change is never easy. It is not something that sits comfortably in the business community. But once there’s a challenge we rise to it, right? An existential threat forces us to change.
The issue with the SDG agenda—and climate change in particular—is that it doesn’t feel like it’s that bad. One theory is that if the effect of climate science was that the world would get two degrees colder, everyone would quickly move—particularly if you’re in the northern hemisphere.
I think businesses will adapt, but regulation needs to get stricter, and quickly. We are not at all afraid of regulation. In fact we’d rather do business in a strongly regulated market. That’s why we’re so proactive on carbon pricing. We want a level playing field. We’re not going to wait for it. We’re going to future proof ourselves, and I think smart businesses should do the same thing.