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ESG x Governance (4): White Goods to INED - Bengt EngströmThis is the fourth of a series of interviews intended to help our IDN members grapple with the ESG topic. In this episode, we delve into the experiences of a seasoned industry executive-turned-INED, and explore the insights he has gained in the course of his career. Bengt Enström was senior executive at Whirlpool (Global VP Microwave Ovens, Europe VP Manufacturing &Technology, EVP Whirlpool Corporation) and President Whirlpool Europe. After moving home to Sweden, he was CEO of Duni AB and Nordic CEO of Fujitsu. In recent years, he has worked as an advisor, board member and investor in both large and small companies. His assignments include: Chairman of the board of Nordic Flanges AB, Qleanair AB, Qlosr AB, and IFG Duroc. Board member of Polygiene AB, Scanfil Oy, Real Holding AB, Scandinavian Chemotech AB and KTH Executive School AB. In your view: What is the relevance of ESG for overall company governance and success? The up front value is to drive change, which is vital. The entire society needs to shift direction, with businesses playing a crucial role in driving this change. However, this transformation must occur within the framework of business operations, which is crucial. I'm somewhat apprehensive about past experiences where new regulations were introduced without adequate oversight thereeafter. Many individual companies failed to comply without facing consequences. This penalized those who adhered to the rules from the outset, as it imposed certain costs that could initially only be offset by raising prices. This situation could put compliant businesses at a competitive disadvantage. I'm therefore sceptical that adherence to regulations will necessarily result in a marketing advantage. While in some areas, sustainability efforts currently offers an edge, especially among investors and larger companies, which are beginning to cascade requirements down to suppliers, this advantage may diminish as regulations become more stringent. Ultimately, this raises questions about the viability of compliance strategies. So, it's a complex issue with no simple answer. What do you see as the added value of ESG beyond compliance and risk management? And: What is your perception of the cultural differences between companies successful in implementing sustainability initiatives and those facing challenges? If I may draw a parallel: When ISO came into play initially, it was merely about filling out forms and getting them stamped. It was a box-ticking exercise. But over time, it evolved into a management tool. Similarly, when the concept of quality management emerged, it was seen as an added cost. However, it eventually transformed into a means of enhancing and rationalizing business operations. And indeed, taking again quality management as an example: It did take some time before it became apparent that there were other underlying issues that needed to be addressed to operationalize it. For instance, everyone desired Zero Defects, but achieving this required intervening at multiple levels, providing assistance, training, and continually reinforcing expectations. Contrasting approaches between the white goods and automotive industries were evident. While the latter imposed demands on suppliers, we in the white goods industry proactively supported our suppliers. I recall one supplier who prioritized car production over us, only to realize later our significant role in their development. This underscores the importance of a demanding yet supportive customer base. In industries with narrower margins, the responsibility extends further back due to less room for error. The disparity in productivity between low and high-margin businesses is considerable. Despite advancements, the cost of washing machines has decreased over time (the opposite is true for cars), and reveal hence differences in marketing approach. But not in engineering prowess. What does it need? I am Swedish, so I take Swedish examples. For instance, Atlas Copco exemplifies successful decentralization, with P&L responsibility cascading down the organization. This fosters a culture of financial literacy and leadership, enabling seamless transitions to other companies. Conversely, a centralized structure delays exposure to P&L accountability until senior levels, resulting in leadership challenges when individuals transition. Companies that neglect holistic financial understanding often struggle to thrive. Jack Welch's approach at GE, pushing responsibility downwards, yielded remarkable leadership proliferation. Conversely, increased centralization tends to stifle success. Hence, the key lies in empowering individuals with accountability and comprehension When responsibility is distributed and ESG principles ingrained in daily operations, success naturally follows. Until ESG principles become ingrained in everyday business practices, they'll remain burdensome rather than beneficial. It's about more than just ticking boxes;1 day ago by
Pamela RAVASIO -
Record. available! ESG x Governance: Materiality of LeadershipOur April 10th webinar, co-hosted by INSEAD IDN and INDEVOR, explored how ESG factors intertwine with corporate governance. Led by Dr. Pamela Ravasio, it featured INSEAD professor emeritus Ludo VAN DER HEYDEN, Singapore ESG expert Jessica Cheam, US expert Kiku Loomis, and board consultant Frederik Otto. They emphasized the urgent need for boards to embrace sustainability issues summed up in Otto's CHANGE framework for boards (Climate, Human Rights, AI, Nature, Geopolitics and Equality) Discussions pointed out the challenges of imbuing (vs. siloing) these priorities and shifting boards's focus from 20th C shareholder value creation to 21st C stakeholder value creation. The latter necessarily includes communities affected by a given business and calls for public-private collaboration to address externalities captured in CHANGE. Please find attached 4 relevant articles that have been hand picked by the speakers:...2 days ago by
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