Strategic investments and concrete measures have made Chr. Hansen the most sustainable company in the world. Today, 82 per cent of its revenue directly supports the Sustainable Development Goals set by the United Nations.
Søren Westh Lonning has good reason to be proud. A few months ago, when his bioscience company was ranked the world’s most sustainable company at the World Economic Forum in Davos, the CFO was pleased to see the energy dedicated to sustainable work over the past couple of years materialise in such an accolade.
“We are humble about receiving this prize, and we only just started the sustainability journey. It will remain a core priority for the finance and IR department as well as the rest of the business in the coming years,” he says.
When Lonning first took the CFO-chair in 2015, he saw a huge potential in sustainability as a growth lever, and it quickly rose to the top of his team’s agenda.
“From an investment perspective we could see, that sustainability created access to lots of great capital opportunities, both among our shareholders, but also from external sources such as sustainability financing,” he says.
Chr. Hansen started investigating how the company could make the most sustainable impact based on what the company sells, and then link this to the 17 Sustainable Development Goals (SDGs) set by the United Nations. All 3,000 of the company’s products were analysed, until they decided on three specific goals to pursue: zero hunger, good health and well-being, and responsible consumption and production.
“Our product portfolio matches perfectly to these concrete goals,” the CFO says.
Chr. Hansen’s core product – good bacteria – allows yogurt to stay fresh longer which in turn enables consumers to reduce food waste. The bacteria also play an increasingly important role in human health research, the CFO explains:
“Studies document that specific bacteria minimise the risk of a flu during winter, and it helps solve different stomach issues. We are only just starting to see how big an impact bacteria has on our health condition, and we can make a great impact in this area in the future.”
Measuring impact is key
Today, 82 per cent of the company’s revenue directly supports the three UN Global goals. And it is a core priority for the CFO to be able to measure this impact, meaning that reporting on sustainability progress has become an integrated part of external auditing.
“It creates a high degree of credibility for investors and customers. We are pioneers when it comes to measuring our sustainable impact, and it is a key element in our strategic planning and company culture. This is also where I have an important role to play as CFO.”
There are many ways to measure positive impact, he adds. The SDGs are only one aspect of it. Another is to regularly measure the company’s C02-emissions as well as water and electricity use. It is also highly relevant to measure employee satisfaction, diversity and inclusion in the company, the CFO says.
“It is about choosing the most important parameters for the company and then making sure that the reporting is of high quality. I think we have taken a big step on this.”
New focus areas
For Søren Westh Lonning, such classic CFO tasks as reporting, compliance and investor relations are still primary focus areas. But he continuously spends more of his optional time on the sustainability agenda.
“It is truly inspiring to work for a company that transformed from a producer of bacteria into a company that helps solve some of the big challenges, the world faces.
And I am convinced that a modern CFO needs to take on new tasks like these. It is not enough to control the finances. As CFO, I need to set the direction on areas such as sustainability and digitalisation.”
IT and new technologies also take up more of Søren Westh Lonning’s time. He has brought the IT and finance departments closer together to find out, which digital platforms and new technologies to invest in. Robotic Process Automation (RPA) is one technology that is very interesting to the team; automation and streamlining processes are key priorities according to Lonning:
“We are about the same number of people today in Finance as we were when I first started in the company ten years ago - even though the company has grown three times in size. Streamlining processes has made this possible, and I believe RPA will help us further on this journey.”
Machine learning and bioinformatics are other areas that the IT team investigates together with the R&D organisation. Every investment in new technologies needs to add value for the customers, Søren Westh Lonning says.
“The value add relates to our innovation and ability to introduce new products to the market. This is where machine learning and bioinformatics have a role to play; we cannot afford to fall behind in the fast-moving developments on these areas. We are an innovation driven company, and we have to take the lead.”
A turbulent landscape
Even though Chr. Hansen can afford to prioritise investments in sustainability and digitalisation, Søren Westh Lonning pays full attention to the geopolitical and economic developments that comprise the increasing threats.
“We see the macro landscape changing when it comes to trade agreements, economy and politics. These threats are bigger today than a year ago,” he says.
Therefore, enterprise risk - such as related to cyber security and compliance - are at the top of the agenda. The IT and finance teams are very focused on having the right people with the right skills to be able to detect, or quickly recover from, a cyberattack. Lonning created a task force to oversee this area and get all the facts on the table to make the right decisions and be cost effective at the same time.
“However, it is not enough to look at the current risks that we are facing today. When it comes to risk management and investments, we need to look ten years ahead. This takes up much of my time these days,” he adds.
Historically, Chr. Hansen has not only survived financial crises but has also been able to sustain growth. During the financial crisis in 2008/2009, the company grew by eight per cent.
“This does not mean that we are immune to crises, but it gives us the serenity needed to make the right investments that create growth. Today, the goal is to grow by eight to ten per cent organically per year,” Søren Westh Lonning says.
Some of this growth will likely stem from digitalisation but also from sustainable investments, and M&As may enable new growth paths, he says.
“Even if they do not result in the fast payback that would normally justify such investments, we may choose to make them anyway because of the impact they create. Most likely, we will look at other SDGs at some point, as we are taking the next steps on our sustainable journey.”