If tackling environmental problems is about finding new solutions to make damaging production and consumption a thing of the past, linking sustainability with product development is a must. Jeff Hogue, vice president of corporate sustainability at Danisco, spoke with Ben Cooper about how the Danish ingredients specialist is making innovation a key pillar of its sustainability strategy.
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There is a debate about the role technology has to play in tackling environmental problems. Technology may eventually provide the solutions to all the challenges we face but some believe trusting in science to come up with the answers compromises the quest for behaviour change right now.
For companies, however, the question is possibly academic as two overriding business imperatives, namely providing what customers want – or better still what they will want – and product innovation, inevitably steer a business towards the search for technological solutions.
For Danish ingredients specialist Danisco the integration of sustainability and innovation, whereby sustainability challenges can be transformed into business opportunities, has become a strategic touchstone.
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By GlobalDataThe company has just published its ninth sustainability report, so can be said to be a relatively early adopter of environmental reporting but Jeffrey Hogue, Danisco’s vice president of corporate sustainability, says the company’s sustainability focus is changing.
“I think that there’s two eras of sustainability at Danisco,” he says. “Between 2000 and maybe 2008, the direction was more internally focused, so it was on improving efficiency internally, reducing cost, reducing impacts, reducing the use of raw materials. I think right now the focus is how we can embed sustainability into our innovation processes, and drive innovation to deliver solutions to these particular challenges we face.”
Being proactive is vital, says Hogue. A company that simply aims to “fill out a checklist” of criteria provided by a customer has already missed the boat. “Where we see the real benefit is to quantify the impacts in major product areas and major new innovations, and proactively sit in front of customers and brainstorm around how our solutions can help them reduce their impacts in their consumer use.”
The emphasis on consumer use is critical, as Danisco’s approach includes a strong focus on life cycle assessment (LCA). As an ingredients company, Danisco is inevitably several steps removed from the end consumer, but it still views total life cycle analysis as crucial. “What we’re seeking to do is differentiate ourselves from competition,” says Hogue. “We’re seeking to demonstrate that we not only have the best product but we have the most sustainable product and that we’ve taken into consideration life cycle thinking when we develop a product.”
Hogue even talks of Danisco “owning” a certain part of a customer’s carbon footprint. Taking responsibility on sustainability issues is seen as a way of consolidating customer loyalty. “By proactively going to them and saying we have these solutions, these answers to your questions, we have aligned our strategies to meet your strategies, we build relationships.”
Clearly discussing issues like product innovation with customers is vital, but the company has made stakeholder engagement in general a key plank in its new vision of sustainability.
While the company believes it has demonstrated leadership in meeting stakeholder needs through inclusion in investor indices like the Dow Jones Sustainability Index (DJSI) and FTSE4Good, it has resolved to be more proactive in stakeholder engagement.
To this end it has set up a Stakeholder Advisory Board (SAB). The first meeting, attended by 13 stakeholders representing investors, NGOs, government, retailers, employees and customers, was held in Copenhagen in March with CEO Tom Knutzen also participating.
While Hogue stresses that the SAB is by no means the only stakeholder engagement opportunity the company has, he believes its inception has improved Danisco’s capacity for consultation. “We engage with thousands of stakeholders systematically throughout the reporting cycle,” Hogue says, and that engagement informs strategy. But the SAB allows a group of stakeholders “to give their opinion on whether what we’re focusing on are the right things and what they anticipate from their perspective to be the hotspots.”
Knutzen being present “actively in dialogue and engaging the stakeholders and answering questions” was clearly appreciated by NGO representatives in particular, Hogue adds. “I think that the interaction and the credibility of the process was a lot higher because he was present and aware of what their comments and concerns are.”
Given the high priority Danisco gives to sustainability, it is surprising that it does not have a corporate sustainability committee as such. However, Hogue believes the fact that sustainability strategy is discussed and determined directly by the Executive Committee, a group one tier below the board of directors made up of senior leaders across the business divisions as well as the chief financial officer and CEO, is a strength.
“The Executive Committee basically owns our sustainability strategy,” says Hogue. “It makes more sense for the Executive Committee to drive those strategies because they understand their businesses, they have the power to allocate resources, make decisions, and they can hold their divisional sites accountable. I think when you have a board committee above the executive committee it’s not as direct. There’s a direct responsibility on the Executive Committee member to make it happen.”
Hogue has eight people working with him on sustainability strategy centrally. There are also sustainability specialists at every divisional headquarters and one at all 51 of Danisco’s sites, making a full sustainability complement of around 90.
Having achieved ahead of schedule its 2010 targets in areas such as energy and water consumption, down by 21% and 30% per kg of product respectively from 2007, Danisco has set itself new, ambitious targets for 2020.
It aims to reduce energy consumption by 10% on a revenue-linked basis by 2020 from a 2009/2010 baseline, reduce water consumption by 20% and CO2 emissions by 20%, also per revenue, while increasing renewable energy usage by 20%.
However, Hogue believes the targets Danisco will soon be setting with regard to innovation are even more exciting. At present the company publishes a considerable amount of qualitative data on the sustainability impacts of its ingredients across a range of food categories from dairy to confectionery, cooked meat and canned seafood.
But Hogue says the intention is soon to publish quantitative sustainability data on such ingredients based on life cycle analyses, providing customers and other stakeholders with an empirical measure of those benefits, and making it possible to calculate the percentage of revenue Danisco derives from such products and track this over time against targets.
“We have the vanilla-flavoured targets that most companies have but what might be a bit different is how we’re going to drive sustainability into innovation and those targets that are going to come out of that internal identification process,” says Hogue. The hope is to have a system for this quantitative analysis, along with targets, in place before publication of the company’s next sustainability report.
The sheer complexity and multiplicity of the factors involved, the number of variables along the entire life cycle of a product from raw material to finished – and then purchased – good make what Danisco is planning a considerable challenge. But for a company that is seeking to link sustainability so closely to product innovation a comprehensive and objectively credible system for quantifying the sustainability benefits of its ingredients would be a significant asset.
