As a follow up to my previous blog post on how companies may embrace Environmental, Social and Governance issues I’m going to use Volvo Cars where I am a board member as an example and use case.
Volvo has a significant, fulsome Sustainability Program with CEO top down support. Volvo solidified its commitment to Sustainability in 2017 by adding Sustainability to the People and Compensation Committee with Sustainability being directly addressed by the committee twice a year in addition to the Board’s oversight. Our General Counsel owns and leads our program.
Some of the highlights of Volvo’s programs are:
- Volvo announced their Electrification program in 2017 stating that it was going “all electric“ by 2019. Volvo will accomplish this by adding the option of electric motors to every model.
- They have further enhanced their electrification plans with an announcement that they aim for 50% of sales to be ‘fully electric’ by 2025. That’s a significantly more aggressive goal than adding “electric” options to all models.
- Volvo has committed to being climate neutral in manufacturing by 2025.
- All plastics in cars will be recycled, but tested for strength and safety, including carpets from recycled materials.
- Using Sustainalytics to measure specific targets on reduction of CO2.
- Volvo will use only responsible leather (as determined by traceability, respecting animal welfare) as well as offering leather free options.
- Commitment to LEED certified gold standard: new buildings will comply with LEED standards and old buildings will be refurbished seeking LEED compliance. LEED, which stands for Leadership in Energy and Environmental Design, is a global certification program focused primarily on new, commercial-building projects. Different levels of certification are based upon a points system.
- Measuring overall company renewable energy use (Sweden 100%.)
- Top 3 Auto company in the world in health and safety including contractors.
- Moving from a linear economy: “take, make, dispose” to regenerative circular economy based on recycle and reuse making the most out of finite resources. This includes the subscription business model which is circular where Volvo retains ownership of the assets in the car subscription.
- Responsible sourcing for cobalt batteries (i.e. conflict minerals from the Congo and no child labor)
- Volvo has been reporting on sustainability since 2003.
As part of their Annual Report, Volvo Cars presents a Sustainability Scorecard showing improvements and enhancements over the last five years so investors and consumers can clearly see their commitment to Environmental, Social, and Governance issues. Volvo’s Sustainability Scorecard has 4 distinct Dimensions: Economic, Environmental, People and Social.
Their key Economic indicator is the amount of units sold, which has improved since 2013 from 427,840 units to 571,577. This is key in understanding the remaining dimensions. Increasing output and sales would normally increase use of energy or water in manufacturing, so it’s important to have a set point of what is being measured.
Volvo has several Environmental Dimensions including Energy Use (which has decreased even with increased production and sales.) Energy use per manufactured vehicle has decreased as well from 1.3 megawatt-hour/vehicle in 2013 to 1.1 in 2017. In addition to energy use, emissions, waste, water and materials usage are all reported with significant reductions over the five year reporting period.
Volvo’s commitment to the People Dimension is clear as they have made significant strides in increasing the number of women in leading positions from 22.9% in 2013 to 28% in 2017. Reductions in numbers of injuries, accidents and sick leave are also dramatic over the five year period. Lost Time Case Rate, the standard measure by which companies measure the cost of sick leave has reduced from .62 in 2013 to .19 in 2017.
Finally Volvo has a Societal Dimension which indicates the percentage of product categories for which health and safety impacts are assessed for improvement. Volvo assesses 100% of its product categories. They do not selectively pick and choose which categories would be most beneficial for their reporting (greenwashing.)
Sustainability at Volvo Cars is governed by the Sustainability Board, which is a decision making body responsible for directing and monitoring Volvo’s sustainability program. The Sustainability Board consists of the President and CEO as well as a number of Executive Management Team members. The Board is chaired by the Senior Vice President and General Counsel, Group Legal and Corporate Governance.
Beyond annual reporting, Volvo keeps its commitment to sustainability in the forefront of daily operations with The Sustainability Working Group which consists of the operational leads and meets fortnightly to discuss emerging opportunities and challenges, as well as share best practice and ongoing initiatives. The Working Group is chaired by the Director of Sustainability and reports to the Sustainability Board.
Volvo has been reporting on the environmental, health and safety aspects of its products and production since it signed the UN Global Compact in 2000. In 2003, the company produced its first Sustainability Report in line with the international reporting guidelines from the Global Reporting Initiative (GRI). In 2018 the sustainability portion of the Annual Report will be externally verified by a third party.
As I suggested in my previous blog about embracing ESG, companies will find, as Volvo has found, that a sustainable approach not only brings environmental and social benefits, but also enhances the appeal of a company’s products, enhances profitability, engages employees and helps attract the best talent.