08 Oct 2019
How the Neste board leads on sustainability
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There are clear examples of boards like Neste stepping up and taking responsibility for environmental and climate matters, but others need educating.
It is also the number one ranked energy company in the world. This is thanks to its industry-leading exposure to clean revenues, top quintile resource productivity for energy, carbon, water, NOx and particulate matter combined with excellent innovation capacity, and gender diversity on its board.
Talking to Observe magazine, the Chair of this company, with its revenues of EUR 13.2 billion in 2017, declared: “Sustainability is at the core of Neste’s business model and an integral part of Neste’s strategy that the board approves.”
Matti Kähkönen continued, “As the company’s business is focused on providing renewable and circular solutions to combat climate change, the indicators related to the company’s overall climate impact, for example, its carbon handprint, are regularly reported and reviewed also at the board level.
“The board has annual discussions on business-related operational sustainability matters."
“The sustainability function is organised directly under Neste’s CEO which also ensures the visibility of sustainability issues to the board.”
Kähkönen expresses an important sentiment that other boards would do well to follow: “Translating sustainability targets into operational targets is a very company-specific issue. Our experience is that a proper materiality analysis is necessary. Neste’s overall business performance is closely linked to the company’s sustainability targets.”
In Africa, Lauren van Halderen, Joint MD of Odgers Berndtson’s Sub-Saharan Africa business, believes that boards and leadership teams in her region must similarly “maintain an ongoing focus on balancing competing stakeholder interests to ensure sustainable growth of the organisations they steward”.
Valli Moosa, a South African politician, Chairperson of the WWF South Africa Board and Independent Non-Executive Chairman at Anglo American Platinum, told Observe that: “Business existence is characterised by rapidly-evolving customer needs, shifting regulatory and investor requirements and escalating environmental concerns.
“In one organisation where I chair the Sustainability Committee, we are responding to a variety of trends including artificial intelligence, transparent supply chains, demographic shifts, ethical fashion, resource scarcity, anti-plastic sentiment and climate change. While these trends represent risks, they are also opportunities to which we need to respond with determination and commitment.”
Van Halderen adds that businesses in her region “need to find new, innovative ways to achieve sustainable value creation, growth, greater social equity, promoting a sustainable, thriving planet to provide solutions for future generations. Stakeholders should support the development of commercially and environmentally sustainable solutions for the company, as well as enhancing sustainable long-term shareholder returns.”
Educating boards on sustainability
Still, as Strandberg rightly points out, educating board directors to know how to change things in favour of greater sustainability must come from actively wanting to do it.
“Boards have professional development objectives for their directors and every year the governance committee is responsible for making sure that there is a programme of education to equip boards with the knowledge that they need. But it’s not happening as rapidly as I would like."
“Well-governed boards have an annual evaluation of the board’s performance. You should have questions in there on how knowledgeable the board is on sustainability matters.”
“If directors rank themselves low, it’s then for the governance committee to decide what kind of education is needed. Not just the board overall but also its committees.”
Boards unsure of how to accelerate their sustainability programme would do well to take note of Neste’s approach. As Kähkönen states: “The company is developing its portfolio of renewable and circular solutions to reduce global dependence on fossil oil and to contribute to improving recycling of plastic waste in society. Neste is committed to progressing towards reaching its corporate-wide climate targets, while supply chain management remains high on the agenda.”
Adds Kähkönen: “Neste is committed to transparency in our operations and performance. We communicate promptly, consistently and accurately, and provide a sufficient level of information to ensure that all stakeholders can form a true and fair view of Neste and its current and future operations simultaneously and equally.”
Every day that goes past without a coherent and implementable sustainability strategy is a day lost to the inexorable rise of climate and environmental change. It’s time for boards to act now!”