Measuring ambitious sustainability goals at Signify

Non-financial reporting is becoming a high-priority issue to an increasing number of companies worldwide. This is also the case in the Netherlands. How do Dutch companies determine and measure KPIs, and collect data? Which systems do they use to facilitate this? In a series of conversations, we are asking well-known Dutch companies about their experiences with sustainability reporting. This time, Wesley Schulte talks to Maurice Loosschilder, Head of Sustainability Strategy & Reporting at Signify. How does this lighting company deal with sustainability KPIs and collecting relevant data?

Integrated thinking at ABN AMRO

Non-financial reporting is becoming a high-priority issue to an increasing number of companies worldwide. This is also the case in the Netherlands. How do Dutch companies determine and measure KPIs, and collect data? Which systems do they use to facilitate this? In a series of conversations, we are asking well-known Dutch companies about their experiences with sustainability reporting. This time Wesley Schulte talks to Tjeerd Krumpelman, Global Head of Advisory, Reporting & Engagement at ABN AMRO. How does this bank deal with Integrated Thinking and Integrated Reporting?

Measuring sustainability goals at Signify

We see an increasing number of companies linking their sustainability objectives and their strategy. As a global leader in lighting, have you established such a link at Signify?

We have looked at what the world needs and what we as a company are good at. We focus on those topics where we have the most impact as a lighting company, as that is where Signify can make a difference.

Our strategy originated from these topics. Additionally, these topics can be found in our purpose and are important in everything we do as a company. This means we have no separate sustainability strategy. We have instead derived our sustainability programs from the overall company strategy, such as Carbon Neutral and Zero Waste to Landfill. All our other non-financial indicators also contribute to our strategy and to the value we add as a company.

At Signify, you are aiming for ambitious sustainability goals. Did you look at what you can measure before deciding which goals to measure?

A little bit of both. For example, if we indicate that we are going to reduce hunger by five percent, we cannot make it measurable. Even so, we still like to take on bold commitments. On the other hand, we believe that if we state a goal, we must be sure that we can report on its progress.

Determining the KPIs is an important step in non-financial reporting. How did you define the KPIs at ABN AMRO?

We’ve tried to link material themes to the strategy. For example, our purpose is "banking for better for generations to come" and our strategy is "accelerating the sustainability shift". From there, we’ve defined metrics and then KPIs.

Doing this, we’ve encountered two major challenges. The first is choosing between bottom-up or top-down. We are a company with different business units. If we impose it top-down, not everyone can act on it, resulting in less support. If you request it bottom-up, it would get a lot of support, but it would be harder to consolidate. Suppose we want to help our customers become more sustainable. If we ask our retail bank how to do this, they would come up with solutions that are relevant to retail customers. If we ask our merchant bank, they would come up with a completely different solution. At aggregation level you’d get a phrase like "we help our customers". Such a phrase is not powerful and does not provide control parameters. As a solution to this first dilemma, we have chosen to do both. 

The second challenge is the discussion about short, medium or long term. This discussion is not easy to translate into a working solution. The period in which an organization such as ABN AMRO achieves impact can vary greatly per metric. For example, we cannot make our mortgage portfolio more sustainable within a week. That being said, we are engaged in providing sustainable investments every day. So, the timing of these metrics will differ, and short, medium or long term does not always apply on a metric level, it does however work well on a level of value creation for our stakeholders.

While determining the KPIs, did you look at how well the data for a certain metric can be obtained?

Absolutely, measuring is always a factor. It’s what I like about Integrated Thinking. If we have determined that a topic is important to us, we should find a metric that can demonstrate this. Following this, we should determine how to measure it and then develop something for this measurement. Take stakeholder confidence. We thought stakeholder confidence was important, but how do you measure it, and how do you do this in a meaningful way? To solve this, the whole banking sector and the NVB (Dutch Banking Association) have worked together to develop a trust monitor.

Another example is circular financing. Two years ago, we said we were going to do this, even though it was not clear at the time what circular financing entailed. From a reporting perspective, you could consider not doing it, as it had not been fully developed yet. However, market forces and innovation drive you to want to participate. Therefore, we’ve publicly defined this as a target before it was fully developed. This is also an example of how reporting can support the process because it has a disciplining effect.

We usually announce things that we can measure and that fit the core functions of the bank. However, there have also been goals that we would like to measure, but which we cannot measure properly. If this is the case, we choose to work with derived goals. How do you measure how sustainable ABN AMRO is, for example? For this we’re using the Dow Jones Sustainability Index, not so much as a KPI, but more as a derived indicator.

ABN AMRO has an internal reporting pack. What are the goals you’re using to manage Integrated Thinking, and how do you get the data for these goals?

We have a strategy execution team that measures the progress of the strategy. Sustainability is an integral part of this. ABN AMRO has three strategic pillars: "supporting our clients’ journey to sustainability", "building a future proof bank" and "improving the customer experience". Every month, one of the three pillars is discussed by the board, resulting in quarterly attention for each pillar. The strategy execution team prepares this discussion and provides the data. This information contains the metrics, the KPIs and the plans that we report externally as well.

Following this, the board receives a report in the form of slides. Technically, the reports could be automated, but we could lose part of the value of the process and the associated discussion. For the data we do rely on automated systems, for example the financial systems.

"For every goal, I think it is better to aim for 100% and eventually reach 95% than to not commit at all and only reach 70%."

Maurice Loosschilder - Signify

 

However, we do not need to know for sure that we will reach our goals. For example, we are aiming for 100% Zero Waste to Landfill. For every goal, I think it is better to aim for 100% and eventually reach 95% than to not commit at all and only reach 70%. So, we are not afraid to launch big goals, but at the same time reasonable assurance is very important to us. If we can't measure progress, we are not going to set it as a goal.

What is the response to these ambitious goals internally, do you have to deal with resistance or enthusiasm?

Fortunately, we have a CEO who believes 100% intrinsically in the need for the world to do more in terms of sustainability. For example, he is one of the founders of the Three Percent Club, in which companies and governments work together to increase energy efficiency. This entails not only the transition to clean energy, but also actual energy efficiency closer to home.

In addition to this conviction, sustainability is a strategic direction that increases the value of Signify. The Supervisory Board certainly agrees, and shareholders are becoming more and more convinced. The fact that we committed to become carbon neutral has been well received. Moreover, it aligns with the core of our company; you cannot sell your customers LED lighting while at the same time increasing pollution yourself. We help our clients to take the step towards becoming carbon neutral and challenge other companies to do the same. We want to increase our impact as much as possible.

How do you ensure that everyone in the organization contributes to achieving the sustainability goals?

We actively engage our employees in our sustainability journey, through different campaigns throughout the year. Every quarter we have a new employee engagement theme, like sustainable commuting, zero waste and carbon neutrality. We have a global network of local sustainability champions to support all our global initiatives.

In addition, the incentives of our executives worldwide are partly determined by achieving our sustainability goals. The performance of these sustainability commitments determines twenty percent of the level of incentives for our executives. We currently have 6 commitments: carbon footprint, Health and Safety performance, waste to landfill, sustainable supply chain performance, sustainable revenues and the number of LED products we deliver.

Moreover, our mentality around sustainability has grown organically in recent years. As Philips Lighting, we were already working on this and we have continued to do so after the spin-out from Philips. For example, we have been measuring our use in terms of water, waste, electricity and gas for years. These processes are all fairly smooth. If we look more broadly at the sustainability aspects of everything we sell, our sustainable revenue pillar, we need to know what and how much we sell. This makes it an organization-wide program.

How do you collect the sustainability data to substantiate and assess these targets?

Worldwide, every factory has an EHS (Environmental, Health, Safety) person that collects the sustainability data. In addition to our factories, every location with more than 50 FTEs falls under our reporting scope. We have data collectors in these locations as well. They collect everything in Credit 360, the sustainability reporting solution we are using.

Following this, my team manually validates the data to assess its accuracy. The next step is to compare the invoice with the numbers in the system. This manual exercise is necessary to obtain reasonable assurance, but also to have the full audit trail of that indicator. We want the method to be correct and the sources to be good, so that we are sure that our reported data is correct and that the report is approved by our accountant.

An emerging trend is the collection of external data as input for the reports. At Signify, do you also use external data, for example from your suppliers?

Absolutely. For our carbon footprint, for example, we receive data from our suppliers about our business trips. But we have also asked the leasing companies, car rental companies and transport companies for logistical data to complete our carbon footprint data. This is not an easy process, but this is for us the best way to have access to external data.

What is the next major step in sustainability you would like to take?

We want to translate our impact into value. We have already successfully monetized the impact of many of our goals. The challenge is to translate the fact that we supply lighting solutions into value. What does lighting bring to the world, and how do you express this in monetary value? That is still uncharted territory.

Want to know more?

Need more information on themes like sustainability or Integrated Reporting? Wesley will give you the ins and outs.
wesley.schulte@intire.nl

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