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EXECUTIVE PERSPECTIVE: Monetizing sustainable development

23 May 2017

We sat down with Claus Stig Pedersen, Head of Corporate Sustainability Affairs at Novozymes, the world’s largest industrial biotechnology company.  Novozymes sees significant long term growth potential in the recent adoption of the United Nations Sustainable Development Goals.  This interview explains why, and how Novozymes intends to capture the opportunity.

How are SDGs (Sustainable Development Goals) relevant corporate performance generally?
Claus: For the first time 193 countries have agreed to relatively specific goals for global development in the next 15 years. Those needs can in many cases only be met through business solutions. There is a large business opportunity, even if the goals only materialize by 50%. It’s also a great source of long term policy guidance for business.

How does a business monetize the opportunity?
Claus: At this point, it’s based on policy guidance and expectations. The first 60 countries have presented or are presenting their plans over the two years since the SDGs were adopted. It is in these plans where we will see specific policy goals. From these goals, nations will develop proposals and allocate funds to achieve them. Businesses can then propose solutions to engage with policymakers and markets to deliver solutions which help grow a business, and the sustainability of the world. Novozymes has been working closely with Danish policymakers on this process, in part to help plant the seeds for real business opportunity downstream.

How can you distinguish authentic use of SDGs from greenwashing?
Claus: There are different levels of integration of SDGs in a business. One is where a company looks at the SDGs and says “we are already doing much of what the SDGs are asking for and isn’t this terrific!”. Where this is based on poor evaluation, documentation and performance, then it is likely be to greenwashing. After this stage, you will see companies using the SDG priorities to translate into forward leaning corporate strategy and innovation. Again, the proof is in the result here. Does a company follow through on its supposed alignment with the SDGs. This will also take time to verify. But at the end of the day, we really need methodologies to really measure the impact of business solutions in an SDG context, where actual impact is determined and compared and evaluated for the degree of impact on achieving an SDG. Once we have this capability, then we will be able to fully distinguish greenwashing from authentic contribution to the SDGs.

Is executive compensation at Novozymes tied to SDG performance? How specifically?
Claus: The SDGs are linked to our executive leadership team’s variable compensation through the operational targets that drive improvement annually. See “Taking action on UN goals” in our UNGC Communication on Progress here in The Novozymes Report 2016. The operational targets bonus is released if the financial performance target is met, in which case the bonus payout is determined by the share of operational sustainability targets met. In terms of the sustainability targets, ~35% are related to environmental and ~60% related to social performances. The remaining 5% relate to overall sustainability performance, measured for example by our target on reaching Dow Jones gold medal class.

How does a company decide where to focus its SDG efforts?
Claus: A company should focus on where its efforts are both material for improving the health of the business, but also where the change can significantly move the needle on SDGs. In a sense, this is about “double materiality”, where action matters both to the business and the planet. That is the sweet spot for SDG innovation and business success.

What should the future look like for how company performance is evaluated ten years from now?
Claus: In ten years I think we will have the methodology and framework to really measure corporate contribution to SDGs. I hope that at this time, businesses will be evaluated and rewarded based on their contribution to sustainable development. It should be very difficult to be a free rider, and very lucrative to be a major contributor to SDG progress. There is nothing that really prevents us from doing this, except for political will. Businesses have a key role to play by helping to de-risk the political process and give politicians the courage to move the needle and change.

Any opinions Expressed in "Executive Perspectives" are those of external parties and not those of Thomson Reuters.

Topics

Corporate Governance, Executive Perspective

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