Harold Van Den Broek (Heineken): 'No Blank Cheques On ESG Designation'

Heineken is in the process of implementing the much-discussed EverGreen strategy. Can you tell me how that strategy came about?
‘Let me start by saying that Heineken has been selling beer for 159 years. In those 159 years, there have been different ‘seasons’, as we call them. Developments and changes in the world that we as a company had to respond to. To give an example: industrialisation which provided huge economies of scale for our brewery and offered quality guarantees. It also provided opportunities, and Heineken expanded rapidly. Or another example: marketing. Freddy Heineken devised a pioneering marketing strategy at the time, with enormous impact on our operations: ‘I sell conviviality’ was Freddy’s motto. Throughout this century and a half there have always been these pivotal moments. When Dolf van den Brink took over as CEO from Jean-François van Boxmeer three years ago, we reflected deeply internally on where the world of the new generation was heading. We came to a number of important conclusions. We identified, for one, that the ESG objectives should play a substantial role in our business operations going forward. It has become an additional pillar of the strategy. We of course want to grow, make a profit, and create shareholder value, but with Evergreen sustainability and responsibility have become an integral part of our business operations.’

With the EverGreen strategy Heineken is entering another proverbial ‘new season’?
‘Yes. I think the choice for this also stems from the family values we continue to uphold. In those 159 years, we always tried to contribute socially as well. It is in the DNA of this company. As a company, we want to play a role in the world. And that not only from a competitive point of view.’

Undoubtedly, you also have a personal motivation to carry out that sustainable agenda. Can you put that into words?
‘I think everyone in the executive team is intrinsically motivated to work on this. We are in the middle of life, I too look around me, I enjoy going for walks, by the sea or in the mountains, and I can appreciate the beauty that the earth has to offer. Hence, I think we should be very careful with this planet, with life on earth. Our EverGreen strategy was not formulated by a consultant. It came about after discussions with hundreds of employees in this company. They all provided input, and also concluded that sustainability is important. This strategy is deeply embedded. We have a deep conviction that it should be part of the next phase of the success of this company.’

Let us focus specifically on your role as CFO. Traditionally, the CFO focused predominantly on the financial aspect, with communication aimed towards the shareholders. How do you see that role in the year 2023?
‘The position of Chief Financial Officer has slowly but surely evolved into the position of Chief Value Officer, and I in fact find that a better description. I believe the future belongs to stakeholder value creation, and thus certainly not only to shareholder value creation. As a company, you will obviously have to take good care of all your stakeholders; from your employees to your shareholders, to the entire environment in which you operate. I think it is important that, as a CFO, your priority should be how to utilize the available resources in the right way to achieve this. I am constantly making trade-offs: how much should we invest in growth, how much should we invest in achieving our ESG goals, how do we make sure that it is also cost-competitive? At what point should we engage in which trends?’

Can you give a concrete example?
We are, for example, currently looking closely at our transport methods. Beer is heavy to transport, and we need to run large trucks in order to do so. Electrification is not yet an option everywhere, only in cities. Elsewhere, the distances and volumes are often just too big. That is why we are now looking at hydrogen-powered trucks with our procurement and logistics department. We are also willing to invest in this so that pilot projects can get off the ground. And there are suppliers who are getting better and better at large electric transport, parties we are happy to work with. In my role as CFO, it is important to identify where the opportunities and possibilities lie and where we occasionally need a push. To name another example: we are investing in low-carbon fertilizers with about six other companies. We created special partnership structures for this. I am willing to invest in that as well. I think a CFO should be open to these kinds of initiatives and make capital available for it.’

Is that the key role of the CFO these days?
‘I see it as one of the roles. Another significant role of the CFO in my view is to put pressure on the organisation. We cannot do everything. As CFO, I remain interested in a good cost-benefit analysis. I do not lay blank cheques on the table just because something carries a ESG or SBTi (Science Based Targets initiative, ed.) label. I engage in dialogue first; I start by asking questions. What is the aim of this investment? How can we get a minimum return from it? What is the right level of phasing? Based on the answers, you make a trade-off. Some solutions are not currently viable, such as hydrogen trucks, but sometimes you invest in them anyway because you believe in the potential, in the possible solution, or to learn from it.’

In this, you mention one of your most difficult tasks: making the right decision. Let us look at those trade-offs. How do you ensure the balance: leading the company in the right direction financially on the one hand and investing in the sustainable agenda on the other...
‘It is easier said than done. There is short-term pressure and there are significant long-term expectations. Those need to be aligned. Incidentally, this is also what makes this profession fun and interesting: to guard that balance. It all starts with belief in your own strategy. The moment you become the pawn of short-term goals, you need to immediately go back to that strategy. The adage goes: Hocus pocus keep the focus. Especially in times of great volatility, it is extremely important to stay focused on the things you agreed on with each other. You should not deviate from those agreements at speed, as that would expose your strategy as not having longevity. We consistently measure all considerations against the strategic planning process. That way, you can make a very clear trade-off between financial objectives, organisational objectives and sustainability objectives. You should rarely, if ever, allow strategy to depend on short-term fluctuations. Incidentally, I was recently at a roadshow and there, too, I noticed that investors generally support this course. Provided, of course, that we do so in a responsible and realistic way.’

Being an international brand will undoubtedly have advantages. I can imagine there are also disadvantages. Is everyone in the company on the same page?"
‘In a large company, there are always different perspectives. At the same time, we have been working on sustainability in this company for many years. Back in 1994, we presented our first sustainability report. The process towards the EverGreen strategy has also been going on for years. Surveys show that 96 per cent of our people understand and support EverGreen. That is something of which I am quite proud. Globally, of course, there are differences. Some countries, especially in emerging markets, have recently invested heavily in infrastructure. In such countries, you occasionally see a little less urge to switch to green energy soon, for example. They have just made an investment that still needs to pay off. But make no mistake, countries like South Africa and Mexico are also struggling with the consequences of climate change - even more so. We do not need to explain to them that we need to work on the water balance in our operation or what the value of solar energy is.’

How do you ensure that your people also make the right trade-offs? I assume most have grown up and been educated with the idea of ‘growth’ and ‘profit maximisation’. Presumably, they want to be successful in that regard too. How do you ensure balance there?
‘It starts with clearly articulating why you want to achieve something. Then, you should clearly state your goals, the ‘what’. A third step is to make clear who is responsible for what. This allows you to hold people accountable for the progress made and also mobilise people if things are not going fast enough. There has to be available budget, of course, in order for people to do a good job. And finally, there has to be constant dialogue. Where do we want to go, how are we going to achieve this, what do we need for this? In this way you create an organisation that learns from each other. Over time, we built a huge body of knowledge within the company. We need to use this. People know who to call for specific challenging issues.’

You gained a wealth of experience in sustainability over the past period. You must have some tips and tricks for fellow CFOs. What would you advise them to do?
‘It starts with making objectives clear and concrete, and clearly communicating them outwardly. Furthermore, keeping an open mind is important. Let yourself be fed and inspired by others. The world knows far more than you do. Try not to be too proud and inward-looking. We are also more than willing to share our acquired knowledge. Good practice helps everyone. Furthermore, it is important to clearly define responsibilities. We try to work in a process-oriented way: from problem definition to solution and taking that solution to the market. Also, you need to work together as much as possible. We really try to bring parties together. It helps enormously if you can tackle an energy problem together with other organisations, work together on standardisation. In the end, we all need the same. We work together extensively with parties in the chain. For instance, our procurement organisation is hard at work building groups of companies that jointly tackle sustainability goals. That leads to great new developments in the field of refrigeration or low-carbon fertilizers. Those kinds of solutions lead to substantial changes in the value chain.’

There are probably things where you think: ‘Hmm, we could have done that differently’… Would you be willing to share those with me?
‘What has really been a lesson for myself is that I may have been a little too cautious initially. At first I thought: this is a very complex matter, I will let the specialists chew on it first. There is so much going on, there will be so many regulations. It is tempting to wait until someone presents a manageable summary. I should not have done that. If you do not delve into what is going on now, you will very quickly run into a knowledge gap. A second lesson is that communication is extremely important. That includes the story you tell externally. One of the things I am concerned about is that society thinks that the solutions can be achieved overnight. That it is a matter of making resources available. But it is not that simple. Ultimately, it takes a systemic change – both in your company and throughout the entire value chain. This too presents a significant communication challenge.’

Heineken has very clear targets for 2030 and 2040. By 2030, you want to have met the targets on scope 1 and 2 emissions; by 2040, ‘scope 3’ must also be in order. How important is meeting those targets for yourself?
‘Those targets are extremely important to me. If we were not aware of it before, the climate news of the past few months woke us up. So yes, I am fully committed to meeting those targets. But I do try to find the right balance. As CFO, I have to make sure that the company can continue to bear the burden. I will not be writing blank cheques. Nor do I think I need to. In fact, I am convinced that pressure ultimately creates creativity and solutions. I believe that we now have a very, very clear understanding of how we will achieve our scope 1 and 2 goals by 2030. We know what the solutions are, we know what they cost, we know what the roadmap is, we know how to go about it. For scope 3, it is a slightly different story. In all honesty, I do not yet have a full picture of how we should go about meeting our 2040 targets. But we are learning at a tremendous pace. That is the beauty of this kind of process: I know far more now than I did a year ago. And that encourages me.’

This interview was published in Management Scope 07 2023.