How ‘inclusive capitalism’ can create prosperity for people, planet and profits for Firmenich
EXCLUSIVE: Fragrance & flavour company Firmenich is using an "inclusive capitalism" business model to deliver benefits for profits, the planet and people in a way that is causing others to "rally" behind the concept of sustainability.
In January 2019, Firmenich and L’Oreal were named as the only companies to achieve CDP triple “A” status for climate change, water security and forests; recognition that the businesses are continuing to scale up environmental action to contribute to both the Paris Agreement and the Sustainable Development Goals (SDGs).
For Swiss-based Firmenich, the accolade is recognition of a deep-rooted belief that companies can deliver prosperity for society and the planet while the company grows, including the wider aspects of environmental stewardship.
Firmenich first started engaging with CDP on climate-related data 10 years ago, but expanded its reporting stance in 2015, to capture water, and again in 2017 to cover forestry.
According to the company’s chief executive Gilbert Ghostine, the triple-A status is the reward for a journey that has helped uncover action points for the firm’s sustainability strategy and kickstarted a move to engage the wider value chain on the need to drive environmental action.
“We feel very proud that our journey on sustainability was acknowledged by CDP. It’s significantly rewarding for us,” Ghostine told edie. “When we started this journey, we didn’t have as much awareness in this space, but as we increased disclosure, we started uncovering areas to address and fix in order to reach excellence.
“When we achieved this recognition, we were thrilled. But we took the opportunity to write directly to the CEOs of our global customers and of our suppliers to share the recognition, thank them for their support on this journey, and offer them the opportunity to engage with our team and get best practice on this issue.”
The company has since made it mandatory for its 3,500 suppliers to report to CDP, a move which has since seen competitors ask the same of the supply chain. “Competition is good. Responsible Competition is better,” Ghostine claimed.
Ghostine was “positively surprised” by the number of responses that wished to facilitate best-practice sharing with the firm. However, where Firmenich differs from others in the vanguard of sustainable business practice is its ability to couple societal needs with that of the planet.
The company’s “inclusive capitalism” business model is described growing while creating positive value for all its key stakeholders, such as “understanding the needs of low-income consumers in emerging markets” and providing relevant solutions.
While addressing the needs of low-income markets has numerous touch points with the SDGs, it also runs the risk of creating trade-offs, notably with the need to reduce resource consumption, improve the circularity of products and lower greenhouse gas emissions.
For Firmenich, which invests 10% of its turnover in R&D, solutions are coming to market where, provided the company’s scientific expertise can be of assistance, people, planet and the company’s profits can benefit.
Firmenich, for example, is committed to tackling sanitation crises in developing nations “with a sense of urgency”. The company has completed a five-year $13m partnership with the Bill & Melinda Gates Foundation to improve sanitation. According to Ghostine, the company’s impressive sustainability track record has created conversations with suppliers and customers in nations such as South Africa – suffering from severe water scarcity – to improve sanitation for citizens without increasing water use in the country.
The company is also actively engaged in the “smart protein” market, and is exploring how plant-based proteins can overcome the need to feed a future population of 10 billion people a healthy diet within planetary boundaries – as outlined in the EAT Lancet report.
Both Ghostine and the company’s vice president global head of sustainability Berangere Magarinos-Ruchat share the belief that the “connection” between environment and social issues is become more profound and interwoven and that companies will find themselves collaborating with new partners from new sectors to drive solutions, a move that aligns to the “triple bottom line” ethos.
Through this business model, Firmenich has revamped its sustainability strategy to contribute to the Paris Agreement.
In 2016, the company announced a vision of becoming carbon-neutral, supported by a $15m investment framework in renewable energy and onsite generation. The company is striving to source 100% of electricity from renewables by 2020.
Ghostine revealed that for some manufacturing locations, it is still more expensive to source renewables, but that the public commitments meant that they were willing to pay more to use hydropower in Geneva, for example. The increase in capital was also being offset by energy efficiency improvements elsewhere.
More recently, Firmenich has had a goal to reduce Scope 1 & 2 emissions by 39% approved by the Science Based Targets Initiative (SBTi).
The Swiss perfume brand has built on its 2020 goal to reduce absolute emissions by 20% by having its emissions reduction goal for direct and electricity emissions verified by the SBTi. The 39% reduction goal, which has a 2030 target deadline, has been verified alongside a 20% reduction goal for Scope 3 emissions.
Water use will also be decreased by 25% in areas considered water-stressed, while waste efficiency rates will also be improved by 15%. The company is targeting zero waste sent to landfill across manufacturing sites and will eliminate the use of ozone-depleting refrigerant gases at these sites.
But as more radical debates emerge claiming that capitalism and climate change mitigation cannot co-exist, Ghostine remains defiant that businesses can thrive during the low-carbon transition.
“I strongly believe that every single business leader wants to do the right thing,” Ghostine added. “I don’t have two hats, I’m not the CEO during the day, but a different person when I go home, I’m a human, I have emotions and I live in a society that I want the best for.
“You can make trade-offs because you want the inclusive capitalism business model to thrive and at the same time it’s your way to have a positive impact. Our manufacturing output has increased by 15% while CO2 emissions have declined by 20%. We’ve decoupled and proved we can grow our business in a more responsible way while having the ambition to be carbon neutral as a company as our main goal. We’re always looking at solutions that are good for the planet, even if they are more expensive for us.”