Sustainability, Responsibility and Political Control within the Chain

Sustainability, Responsibility and Political Control within the Chain
As one of the participants in the round table on sustainability, international climate objectives and responsibility within the chain puts it, ‘In the past, we were the polluters and sustainability was regarded as a bad problem.’ Nowadays however, that image has been overturned and the directors have come to realize that they can offer products ‘that will help the world move forward’. To fulfill their responsibility properly, however, they will need to be given time and scope. ‘We need to move away from one-dimensional thinking.’

What actions should companies take in response to the international climate objectives? As a director, do you simply tackle the most urgent issues, or do you take initiatives to go that little bit further? And how do you approach this with your partners further up or down the chain? Do you present them with a “fait accompli”? Or do you work together to develop a solution? These are the issues for discussion during a round-table meeting chaired by Marc-Jan Reumers, partner at Kearney consultancy. Joining him around the table are the directors of a number of companies operating in the “middle” of the chain. The suppliers of raw materials are situated upstream of their organizations and the food industry and consumers are located downstream. We have David Fousert (CEO of the potato starch company Royal Avebe), Marco Eikelenboom (CEO of the European division of the paper company Sappi) and Harold Poelma (CEO of the Netherlands division and President of the global cocoa and chocolate business of the agro-food company, Cargill). All three of them are opportunity-driven. All three of them are also convinced that they have something to offer to the world. ‘We are part of the solution.’

The participants in the round-table discussion, which is being held in high summer amid scorching temperatures, are energetic and good-humored. Their jackets come off and their sleeves are rolled up. They are genuinely up for this, and sustainable initiatives soon start flying across the table. They all share the view that as industrial players, they must take responsibility themselves. Each of them appears intrinsically motivated to do the right thing – not just for the company, but for the planet as well. ‘Don’t forget, I've also got kids myself.’ They are not the type of directors that ‘seek refuge’ in catchy slogans and small-scale innovations. The European Green Deal? It is a positive thing that the initial step has been taken, but please give us business leaders the scope we need to develop the most effective solutions. The government? On a basic level, the government is not actually needed in order to bring about additional change.

Can you explain how important the topic of sustainability is for you and your company?
Eikelenboom: ‘It is very important, which is why I, as CEO, take responsibility for the sustainability portfolio myself. Within our company, we have already been thinking strategically about sustainability for several years. Previously, it was primarily regarded as a risk, as a bad problem. We were the polluters and were therefore the problem. Nowadays however, we regard sustainability as an opportunity, a challenge and a happy problem. We have come to realize that we can form part of the solution and that we can offer products that will help the world move forward. By 2030, for example, single-use plastic will be banned throughout the EU. For the paper and packaging industry, this will bring unprecedented opportunities and we want to be ready to fill that gap in the market. And more importantly, this has become something of a North star for us – paper as an alternative to plastic! In the past 20 years, we have never looked at our business model that way before!

What topics are of importance for Cargill?
Poelma: ‘At Cargill, we form the link between the farmer and the food industry. It goes without saying that we are now working hard to reduce our scope-3 emissions, also known as indirect emissions. It is therefore a case of collaborating with chain partners, upstream as well as downstream. One of the topics that is extremely important to us and our customers, is deforestation. Our aim is to reach zero deforestation by 2030. One of the things we are doing to achieve that, is running programs with the West African cocoa farmers that we work with and their cooperatives. The aim of those programs is to try to help them obtain the biggest possible yield from their farms in a sustainable way. That in turn will help prevent further deforestation. The world is constantly changing. The food pattern of large groups of people is also changing. In particular, there are currently a large number of initiatives relating to the consumption of meat. One of the things that we ourselves are doing is making further investments in alternative forms of protein and in new products that will ultimately have a smaller ecological footprint.’

Can I assume that Avebe is also focusing on this right now?
Fousert: ‘This is actually something that affects the very core of our cooperative. Globally speaking, we are going through a plant-based revolution and as a company, we are certainly contributing towards that. The starch potato has been our raw material for over 100 years. We used to operate primarily in the conventional food industry, such as in the production of soups, snacks and noodles. However, nowadays we are seeing a shift towards other segments, such as substitutes for animal-derived ingredients. That is an area that provides us with a great many opportunities.
That transition has now progressed significantly. The strategic plan of our cooperative is now entirely based on two components – increasing sustainability and growth through innovation. Our ambition is no longer to achieve growth by volume, but to focus on providing added value. Our members, all of whom are farmers in the northern part of the Netherlands or in Germany, are increasing the sustainability of their operations on a day-to-day basis. For us, the advantage is that they are actually the owners of Avebe. Taking measures to improve sustainability, on the other hand, must be done in a way that is in keeping with the individual business operation of the grower. That is why we are running programs related to CO2 reduction, reducing crop protection and increasing the yield per hectare of ground. The fact that the current political and social debate is focusing on the switch towards extensive agriculture actually represents a missed opportunity. But you can also make agriculture even more intensive by acting responsibly. How can you extract such a high yield from fertile soil? And what must you do to ensure that that fertile soil actually remains fertile and retains its biodiversity? One of the ways you can do that is by developing better and more resilient varieties of potato. Varieties that require less crop protection, fall victim to diseases less rapidly, use less water and provide a higher yield of starch and protein. That is what we are doing, and I have a positive feeling about it. We are therefore on track to achieve our targets for 2023 – a 12-percent reduction in CO2 emissions and a 20-percent reduction in water consumption. Right now, we are in the process of looking ahead towards our new strategy and we have the advantage that as a result of our products, we are increasingly being seen as an alternative to animal, petrochemical and synthetic products, which in turns makes the chains more sustainable.’

In which areas of your companies can the biggest gains be achieved?
Fousert: ‘A lot more can still be gained in terms of energy and water. 80 percent of a potato is made up of water and we currently extract that water and discharge it. Of course, it would be better and more logical to retain the water within our processes, as that would drive down our water consumption.’
Eikelenboom: ‘At the moment, our biggest source of concern is our need for energy. As a company, we are not yet self-sufficient enough and we need a large amount of energy within our production process. In simple terms, you make paper by first making a tree very wet and then drying it until the very last droplet of water has been removed. Those processes need a lot of water and a lot of heat. As far as water is concerned, we’re doing fairly well. The water we pump back into the river Maas or into the Albert Canal is cleaner than the water we extract from them. As far as the heat is concerned though, further gains still need to be made. We can partly achieve that using our by-products. One of the by-products of the process used to produce pulp is biodiesel, and you can actually build a fantastic energy company around that.’
Poelma: ‘Heat is also the biggest challenge at our company. Some of our production processes involve drying, heating and roasting. Using electricity to do that is unfortunately not efficient. In the case of the Netherlands, it is extremely important to stay competitive compared to other countries. If there are countries where the energy costs are considerably lower, that is certainly something you would think about, but on a global level that is not a solution, of course. By implementing the Green Deal, Europe has put in place a very ambitious agenda, but it is also important that we keep our operations running. It won’t benefit our climate if companies leave, so it is a case of maintaining an ongoing dialog with the policymakers.’

What are you doing to generate enthusiasm for the transformation?
Fousert: ‘Sustainability is not something that we do on the side. I can even go as far as saying that it has now become part of our DNA and that there is an intrinsic motivation to approach things differently, among our members and our employees alike. I also try to encourage initiatives and to be transparent in that regard. All initiatives, whether big or small, play their part in bringing about a play-to-win mentality. As a director, one of my main tasks is to encourage that approach and to ensure that there is sufficient entrepreneurial scope to develop initiatives.’
Eikelenboom: ‘Making sure there is a certain entrepreneurial scope is down to our politicians. The targets now in place for 2030 are extremely ambitious. That may all be very well, but we need to provide business owners with the scope and the time to propose solutions. Occasionally, it is a case of not looking at what you have to do, but at what it is possible to do. Let me give you an example: we are developing a packaging product that will be a substitute for plastic. That product is almost fully production ready. It is 97% recyclable, but that final three percent is proving to be difficult. The reason for that is because in the coating, we are using a polymer that is not completely degradable. Our project will be rejected, based on that remaining three percent, despite the fact that the previous product was 100 percent non-recyclable. This is unfortunate, because it means that insisting on a perfect solution is standing in the way of a particularly good alternative. I would say: count your blessings and give us the time to develop our product further. In a few years’ time, we will have an excellent biopolymer on the market, I guarantee it. Give us that entrepreneurial scope.’

All three of you have to fulfil the needs and requirements of customers further along the value chain. A number of those customers have already drawn up fairly far-reaching commitments as far as their climate objectives are concerned. What does that mean for you? And did they consult with you?
Eikelenboom: ‘Certainly, we consult with one another on a continual basis. Nestlé, Danone and Unilever are not simply dumping their packaging problems at our door. Quite the opposite, I think that we at Sappi must also be realistic – in the future, businesses will use less packaging. Not only do we need technological innovation, but we also need to work towards achieving social innovation – we too will need to get used to the new reality. We are going from “more, more, more” to “better, smarter, different”. That will require innovation from everyone, from across society and from our stakeholders, as well as within the company itself. Everyone will need to change. We need to accept that and we will also need to accept that the change will not be painless. There is always a limit, of course, and you need a critical value, but less packaging can also mean better packaging. It is true to say though that our customers are issuing some quite far-reaching statements.
Fousert: Customers dumping their problems on us is not something I see happening much at all. In actual fact, we often initiate co-creation processes to come up with a solution. In addition, we must also remember that the food industry is home to a large number of new customers who have only recently become involved in that market. There are now many new players, especially in the area of plant-based meat substitutes and plant-based dairy products, and they are bringing new opportunities and a feeling of excitement. They expect a sustainable solution as a matter of course. If you cannot offer that, they won’t even talk to you. That in itself is also motivating and inspiring.
Poelma: ‘I think it is important to look upstream as well as downstream within the chain to find out what is possible. Customers want us to tell them how the raw materials are produced, where they come from and what the working conditions are like at that location. These days, our customers are increasingly demanding transparency and traceability.
We have been investing in our partner cooperatives and their cocoa farmers for many years now and the effect of this is there to see. The earnings per hectare of the farmers taking part in our Cargill Cocoa Promise are higher and their emissions footprint is lower, without giving rise to additional deforestation. When you can come up with figures like that, it is a win-win situation, including for the customer. After all, a customer is happy if the chocolate they buy generates 30 percent fewer emissions. Creating a transparent chain is really important, as is collaboration and co-creation within the chain. A whole host of great initiatives have already come into being. For example, at our production facility in Sas van Gent, we are collaborating with a start-up that is making plant-based proteins using by-products from our factory as a culture medium.
Eikelenboom: ‘That is another thing that makes these times so interesting: by-products are starting to take on a whole new value of their own, and there is no longer any such thing as waste.’
Fousert: ‘Waste products have become value streams.’

Based on that perspective, how are you addressing the responsibility in your interactions with policymakers?
Fousert: ‘I sometimes miss the integrated approach. The world of politics is frequently too one-dimensional, in that the focus is solely on CO2 emissions, biodiversity or water wastage. But if you take steps in the area of water quality, that may have a negative impact on CO2 emissions. That is something we need to take into account a bit more.
For me personally, it means that I have to do a lot of talking and explaining. I would like to hold discussions with those policymakers about how we are going to structure the primary sector and the entire chain for the future. I would also like there to be more emphasis on an integrated approach and future opportunities. Plans for the future should also include a financial aspect because, in my view, sustainability can only be achieved if it is also financially sustainable.
Poelma: ‘Looking at certain components in isolation is a short-sighted approach. European politics sometimes sets targets that conflict with one another and that leads to choices that may have significant consequences. Let me give just one example: farmers tend to change crop if they are subjected to stringent reductions in the use of pesticides. In itself, reducing the use of pesticides is justified, but further along the chain, it may cause a shortage of certain raw materials. I see it as my task as CEO to alert policymakers to this. From our position within the chain, we can observe the consequences of certain legislation or regulations.
Fousert: ‘It strikes me that policymakers often lack knowledge, especially with regard to chains. Whenever I talk to members of the Dutch House of Representatives or with members of the Provincial Executive, that is my most important message – we need to consider the chain as a whole. If you remove a small part of the chain upstream, you may end up with nothing at all downstream. In discussions with politicians, it also strikes me that they tend to think in terms of new solutions. New start-ups must therefore take up a role within the national protein strategy and must help the Netherlands obtain the plant-based proteins it needs, even though Avebe is the largest producer of home-grown, plant-based proteins in the Netherlands. That fact is simply ignored. We are part of the solution.’
Eikelenboom: ‘Of course politicians only have a limited time to spend on a given matter, so we need to help them out a little. Although I do notice that there is always a sense of mutual trust. And what I am saying is not only in order to represent the company’s interests. I am also the father of three sons, so politicians do not need to constantly remind me that the clock has reached five to twelve. I am already aware of that myself. I do have an eye for the bigger picture, of course. When I tell them that, it is always an eye-opener.’

You actually have quite a positive story. As a concerned citizen, my question is still – are things advancing fast enough?
Poelma: ‘That is a very difficult and important question and unfortunately, we are faced with all sorts of circumstances that lie beyond our control. Not all that long ago, the Netherlands took the conscious decision to shut down a coal-fired power station. But now, it is back online again. We are also having to cope with massive inflation, and affordability has already become a problem. You need to keep consumers on board during the transition. It will be hard to get their support if they are the ones who are presented with the bill. So maybe it would be a good idea to slow down a bit now and again. A better approach would be to move more slowly and keep everyone on board, rather than blazing ahead but leaving people behind.’
Eikelenboom: ‘My slogan is: “Don’t complain, sustain.” We must accept that we have a responsibility. Europe is a genuine pioneer in that regard and that is something we can be genuinely proud of. Within the Sappi Group, we actually look at Europe as a whole. In America and Africa, people are more inclined to adopt a wait-and-see approach. They will look and see what Europe is doing first and not follow in Europe’s footsteps until later. One of Europe’s most important export products takes the form of laws and regulations. I actually like the sound of that. It means that in Europe, we will be able to set the new standard for sustainability in the world.’
Fousert: ‘In my view, the government should play a larger role in the area of education. Why not make it clear where the problems and challenges lie? Think beyond the Dutch borders alone, what has a real impact on sustainability? One of the ways of doing this could include introducing a sustainability score on products, just like we currently have the Nutri Score. It would then be possible to show how products score with regard to factors such as CO2 emissions, water use and biodiversity. And if I look to the companies themselves, I think that we need to be careful not to get involved in greenwashing. Within Avebe, there has since been a significant impact, but that is not always easy. We need to establish the actual footprint of products. For example, we have several products that are highly attractive from a commercial point of view, but only achieve moderate scores for their footprint. This is something that features regularly in our discussions nowadays. Should these products be part of our future? It is a case of not shying away from those kind of discussions and not being afraid to take responsibility.’

This article was published in Management Scope 07 2022.

This article was last changed on 31-08-2022