By Dieter Holger and Olivia Bugault
If Solvay SA wasn't serious about sustainability, Ilham Kadri
says, she wouldn't have taken the chief executive job last
year.
On her first day at the helm of the nearly 160-year-old Belgian
chemical company, Ms. Kadri says, she started to work on a 10-year
sustainability road map for the firm that was unveiled earlier this
year. Her bonus is tied to the plan, which includes phasing out
coal use and cutting a quarter of Solvay's freshwater intake by
2030.
Her belief in sustainability is rooted in her childhood. She
says wastefulness was a luxury she couldn't afford as a young girl
growing up in Morocco without tap water or a refrigerator at home.
Decades later, the 51-year-old Ms. Kadri is one the few women of
color at the head of a large company.
Solvay landed at No. 52 in The Wall Street Journal's new list of
the 100 most sustainably managed companies, notching high marks on
air quality, employee health and safety, and human rights and
community relations. To produce the ranking, the Journal's research
analysts screened a universe of more than 5,500 publicly traded
companies on various environmental, social and other factors, using
publicly available data and an analysis of hundreds of thousands of
news articles about the companies. To be included, a company had to
meet minimum data-disclosure standards in key categories including
the environment, workplace, social issues and business
model/innovation.
Ms. Kadri, who at one time worked on wastewater-recycling and
desalination projects in the Middle East, says that using less
water to make chemicals will save money and help Solvay remain
profitable. The company makes ingredients for products ranking from
lithium batteries to implanted medical devices.
"Sustainability is profitability," she says.
Growing consensus
CEOs increasingly are embracing the idea that a company's
environmental, social and governance practices will play a role in
its future success. For example, a quarter of CEOs now strongly
agree that investing in climate-change initiatives could lead to
significant new product and service opportunities for their
businesses, up from 13% in 2010, according to a 2020 survey of more
than 1,500 global CEOs by PricewaterhouseCoopers LLC, an accounting
and consulting firm.
"Don't underestimate the impact of one CEO or one major company
making a decision," says Alan McGill, global sustainability
assurance leader at PwC.
Meanwhile, the pandemic and social unrest over racial justice
have sped up the pivot to sustainability at many companies this
year after both fronts exposed inequality in the economy, says
Rebecca Henderson, a Harvard Business School professor.
"Five years ago, the argument was all about trying to persuade
CEOs to take sustainability concerns and move them into the
mainstream of the business," she says. Now "everyone I talk to has
the sense they ought to be," she says.
Christian Klein, the 40-year-old chief executive of German
business-software giant SAP SE, is among the CEOs whose bonuses are
tied to green targets. In the case of SAP, which came in at No. 67
in the WSJ research team's ranking, that includes a
fast-approaching goal of achieving carbon neutrality in direct
emissions by 2025.
Years ago, it was much more difficult to convince shareholders
that sustainability leads to profitability, says Mr. Klein, who
became CEO earlier this year after more than two decades at the
company, most recently as chief operating officer.
"That's not a contradiction anymore," he says, adding that the
business world is realizing that the customers of tomorrow won't
just care about price but about who is leading on environmental and
social issues.
He says he is now focused on finding ways for the thousands of
businesses world-wide that use SAP's software to lower their
environmental impact, including in their supply chains and
manufacturing.
"We believe we can have a huge impact," Mr. Klein says.
The top leadership at Linde PLC, the industrial-gas company that
landed at No. 62 on the WSJ team's list, also sees a clear business
case for sustainability. Linde was formed by the merger of Linde AG
of Germany and U.S. gas producer Praxair Inc. in 2018.
CEO Steve Angel, who previously ran Praxair, says that for the
last 17 years he has focused on making manufacturing more efficient
and cleaner, which has translated into cash and emissions savings
for both the company and clients.
Mr. Angel sees no conflict between Linde's short-term profit
goals and its longer-term sustainability targets, including
achieving zero waste at 450 sites and more than doubling low-carbon
energy use by 2028.
"I don't spend any time during the day worried about an
either/or trade-off," he says
Mr. Angel says he is aiming to turn Linde's clean hydrogen
business into a multibillion-dollar revenue powerhouse, serving
companies that want to wean themselves of fossil fuels. Hydrogen
produces near-zero emissions when consumed in a fuel cell. Most
hydrogen today is produced from natural gas and other fossil fuels,
including the $2 billion in annual revenue that Linde already
generates from its hydrogen business. Linde says it wants to make
more hydrogen using sun and wind power, or as a byproduct of
natural-gas production.
Electric-equipment maker Schneider Electric SE, meanwhile, has
been shifting toward sustainability ever since Jean-Pascal Tricoire
became chairman and CEO some 14 years ago.
"Your business should go in the direction of the mega trend," he
says. "If your business is going against sustainability, you're
bound to fail."
Schneider Electric is one of many companies in the Journal
team's ranking whose green efforts have drawn investors. In a note
published in May by Credit Suisse, the bank says that Schneider
Electric was among the 15 most popular European companies in the
109 ESG funds it tracks.
The French company, No. 85 on the WSJ list, in 2005 began
setting sustainability targets and performance trackers that are
renewed every three years and linked with managers' bonuses, Mr.
Tricoire says.
"At that time, it was a very lone crusade in our industry," he
says.
Talk vs. action
Still, there appears a gap between talk and action when it comes
to hiring CEOs and executives based on their sustainability
experience.
Last year, about 15% of 4,000 job postings for nonexecutive or
senior executive positions mentioned sustainability, but only 4% at
most required actual experience in it, according to a report by the
United Nations Global Compact and executive hiring consulting firm
Russell Reynolds Associates.
"Businesses are doing a great job embedding talk of
sustainability into descriptions about their company, but are
falling short in driving decisions about which leaders to hire
based on it," the report says.
Russell Reynolds CEO Clarke Murphy says he expects that to
change in the coming years.
"I don't think this is just chat, chat, chat."
Mr. Holger and Ms. Bugault are reporters for The Wall Street
Journal in Barcelona. Email them at dieter.holger@wsj.com and
olivia.bugault@dowjones.com.
(END) Dow Jones Newswires
October 12, 2020 16:55 ET (20:55 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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