Eric Rondolat (Signify): 'We can solve global issues with light'

Doubling the Positive Impact
130 years later: The birthplace of the Philips group has been transformed into an independent listed company with €6.5 billion in sales (2020) and around 39,000 employees in more than 70 countries. The former Philips Lighting went public in 2016 and has continued as Signify since 2018. Rondolat has been the CEO of this global market leader for nine years. The company went through a strategic transformation over the past decade: From a manufacturer of conventional lighting to a service provider that delivers innovative lighting solutions with sustainability as its driving force. Xavier Baeten, Professor of Sustainability & Reward Management at Vlerick Business School, reminisces with Rondolat about the road traveled so far and the lessons learned. They are looking ahead at the roadmap for the next five years: Doubling the positive impact on the environment and society.

What development has Signify experienced from a sustainability perspective? And what triggered the transformation: Cost, risk, or penetrating new markets?
'At the beginning of the last decade, we mapped out the sustainability potential of lighting. In doing so, we considered only one approach: Energy efficiency. We discovered that we could reduce energy consumption by a staggering 97 percent by using LED lighting. At one time, lighting accounted for a quarter of the world's electricity consumption; today, it is only 11 percent. The replacement of the incandescent light bulb with LED also made it possible to control lighting remotely. We then caught a glimpse of the sustainable role lighting could play in the world: The beginnings of the enormous transformation that we have initiated. Ten years ago, a focus on sustainability was not self-evident. We realized that we could only successfully sell sustainable solutions to our customers if we, too, set a good example.
Thus, our recipe for success was to combine our customers' sustainability with that of our company. Eight years ago, we set out to become carbon-neutral and we succeeded in doing so last year. And when we formulated our growth strategy five years ago, the starting point was: Our growth must not be at the expense of the earth but rather has to benefit the planet. We then formulated five domains for innovative and sustainable growth, enabling us to simultaneously enter new markets: Tackling climate change through economic and clean energy, circular economy, food availability, safety and security, and health and well-being. Our purpose ties that together: To unlock the extraordinary potential of lighting for a better life and a better world.'

Where does this drive for sustainability in your leadership come from?
'When I was a child, I was always outside. There were no laptops or smartphones yet, so I played outside on the land or by the water. Growing up with that makes you want to do everything you can to preserve that nature. Back then, we never threw away food at home either. Globally, one-third of all food is thrown away; shocking! Such experiences shape a person, and they form the basis of my ambition to do my part in addressing the challenges facing our planet. As the CEO, but also personally. For example, I have solar panels at home, I drive an energy-efficient car, and I still do not throw away any food. There should be no contrast between what you do at work and at home.'

Many companies have a business strategy and a sustainability strategy, while sustainability 3.0, in fact, calls for the integration of these strategies and for materiality: Areas in which the company can truly have an impact. How did Signify address this?
'We incorporated sustainability into our strategy from the outset. We have one purpose and, therefore, only one strategy for achieving it: We have one job. Our business and sustainability objectives are fully integrated; I cannot name them separately. Our strategy consists of five elements: Customer focus, variation in lighting products and services, growth for sustainability, digitalization, and being a good employer. Sustainability is present in all five elements but is explicitly evident in growth for sustainability. This brings us back to the five material growth areas, in which we invest heavily in innovation and technology to use lighting to solve sustainability problems. We are going the extra mile with our new strategy. Now that we are carbon-neutral, we want to double the pace of the Paris Agreement by reducing the carbon emissions of our customers and our suppliers. Not only by the year 2030 but as early as 2025. We want to double our positive impact on the environment and society.'

How do you go about doing that? Not only from an environmental perspective but also on a social level? In their ESG policies, many companies focus mainly on the 'e' of environment and less on the 's' of social.
'We want to reduce our customers' CO₂ emissions by offering energy-efficient solutions within our climate domain. The focus here is on solar energy: Sustainable and decentralized generation. For example, we are currently developing hybrid systems, equipping lampposts with a battery charged with solar energy during the day to provide light at night. This will relieve the pressure on the electricity grid during peak hours.
Or the food availability domain, for example, that also has a powerful social impact. By 2050, there will be ten billion people on earth. It will require an agricultural revolution to feed them all, and lighting technology can help. We have created lighting recipes using algorithms: by employing sensors and machine-based learning, you can use the right type of lighting with the right intensity at the right time; for example, to grow tomatoes with a high vitamin content. This makes it possible to increase the harvest by a factor of 3 to 5. We have more than 150 lighting recipes in total for various crops, including lettuce and strawberries. This technique can also be applied underground. It is possible to grow crops in an underground area of 700 square meters in a city by remote control: Without pesticides and close to where they are consumed. That will also save water.'

Why did Signify move from traditional reporting to impact reporting, and how difficult is it?
'We wanted to make our social impact visible, to show how much social value we as a company extract and how much value we give back to society: Is it balanced? We look at it from a broad perspective and also take responsibility for what happens in the chain. We have, for example, a program on how to deal with conflict minerals, to ensure that our products do not directly or indirectly finance atrocities in a conflict zone such as the Democratic Republic of Congo through the mining of raw materials.
Our sustainability results are audited quarterly by the same auditors who audit our financial results. Since going public, the long-term reward for the board has also been partly based on sustainability indicators. Everything is measurable and communicated.'

How did you convince the shareholders of the sustainability approach?
'We never had to try and convince shareholders; we are doing this because we feel that it is our obligation. A few years ago, nobody asked us about our sustainability policy; it was up to us to make it visible. ESG is now an important topic for investors too. But it is still not always addressed as a matter of course. When I talk to analysts and investors, I am often the one who starts talking about sustainability. So we still have plenty to do in the financial world. As it happens, even sustainable companies cannot survive without good financial results: You have to demonstrate both. These are not opposing factors; they can actually merge in the long run.'

How did you get employees to participate in the transformation?
'It starts with conviction, with believing. Because there are many hurdles to overcome along the way, and if you do not really believe in it yourself, you easily give in to pressure or quit. Change takes time, so you have to be patient, but you also have to be clear, persistent, and consistent and have the will to make it happen. For example, two years ago, we wanted to remove plastic from the consumer packaging of our lighting. Internally, people said: We cannot do that because we need attractive packaging, people want to see the product, we will lose market share, it is also much more expensive... Nevertheless, we did it, and it turned out well. Sometimes it is necessary to make a decision that is not rational from a business point of view but well-reasoned from a sustainability point of view. Moreover, the awareness of the importance of sustainability is now more deeply embedded in the organization than it was at the beginning: We have brought about the transformation together, we have achieved results, sustainability is embedded in our strategy, and it is part and parcel of people's daily work.'

Does this purpose give you an edge in the job market? And do you select people on their attitude towards sustainability?
'Our proposition in the job market rests on four pillars: We are a market leader, a tech company, a learning organization, and a sustainable business. People want to work for us because they want to make the world a better place. Purpose is especially important for the younger generations; they are more aware of the challenges of our time. We actively involve our employees in sustainability projects, for example, to become carbon neutral. One of the ways we do this is by presenting innovative sustainability projects, which they can then vote on, and we subsequently invest in. For example, in the past, we have invested in forest planting projects in Colombia and in a dam in Vietnam that supports fish migration. In addition, within our innovative organization, we have what we call the ventures. These are business units that have the opportunity to show how they contribute to sustainability while also being viable from a business perspective. A good example of this is Aqualed, an innovative application for fish farming, where lighting increases animal welfare and ensures a better yield in fish farming.'

What innovations can we look forward to in the future?
'A very exciting development is the transmission of data via light. This makes light an alternative to WiFi, which is why we call it lifi: Wireless internet based on LED light bulbs. It is fast, more stable, and safer due to the use of light instead of radio waves, which makes the signal harder to intercept. It can also be used in places where WiFi cannot be installed, and it is more sustainable because it does not expose us to radio waves. In the future, standing under a lamppost will enable you to directly see via lifi on your mobile phone when the next bus is arriving. All kinds of devices can be linked together.
Another development is the extension of the 5G network via gigabit luminaires: An innovation that allows 5G to be transmitted wirelessly from a smart transmitter mast to all smart lampposts in the area. So there is no need to install antennas everywhere; it uses the existing infrastructure: Lampposts are everywhere in the world. This is cheaper and more sustainable than a new network. Who knows, in the future, we may even be able to 3D print these smart transmission towers. That will extend the lifespan from the current 15 years to 85 years. Very exciting!'

Signify is seen as a pioneer in sustainability. What lessons can you share with other CEOs who are still at the beginning of the transition?
'I do not see Signify as a pioneer; we just started early. There is still so much more to do. We are only at the beginning of the journey; we have not yet achieved three percent of what we can achieve. Once we have built an Internet of Things Platform with light, and everything is connected, the possibilities will be endless: We can save an enormous amount of energy, reduce traffic accidents, help solve the world's food problem, optimize workplaces so that we do not have to build new offices, increase people's productivity and well-being, and so on. It just takes time, which frustrates me. I sometimes feel guilty that we are not able to do it faster.
Therefore, leaders must have not only strong convictions but also be tenacious and consistent. A leader must dare to make unorthodox decisions that derive their rationality purely from a belief in the social contribution one can make. That belief must be non-negotiable. That is the lesson we have learned in recent years. Also, it cannot just be something that comes from the top: It must be supported by the team, become a shared philosophy. People then come up with creative ideas spontaneously. I recently visited our innovation teams to talk about the exciting possibilities of breakthrough technology. It was inspiring, and people came up with all kinds of applications: we can do this and that! We also learned something about the Sustainable Development Goals. They are our compass on our journey to sustainability. However, we do not try to realize all 17 SDGs at once. It is too overwhelming. We chose four – only when we had achieved our goals after five years did we add two more. We also consciously share our experiences and lessons to inspire people outside of our company. Fortunately, I know many CEOs who are consciously working on sustainability. Because we cannot do anything as a company on our own, we need to rally all the troops to make our planet better together.'

This interview was published in Management Scope 09 2021.