Flemming Lynge Nielsen is interim Head of Group Sustainability & ESG at Danfoss. He has worked at Danfoss for 37 years in various positions in Drives and corporate functions with a primary focus on environment, safety and sustainability. He was the lead on the ESG project with Boston Consulting Group and is now leading the execution of the 2030 ESG Ambition together with colleagues from all Danfoss segments and shared functions.
Host Vic Marinich is joined by guest Flemming Lynge Nielson, interim head of Group Sustainability & ESG at Danfoss to discuss the importance of ESGs and how companies can get started with developing and introducing them to both internal and external stakeholders.
- ESG stands for environment, social and governance and is the new way of thinking about sustainability. It’s not a new concept but it’s a different way of organizing all what we have been doing for years on sustainability and climate impact.
- When a company decides to integrate ESGs into their mission, they need to start by doing a 360-degree evaluation on the company’s position.
- The ESG umbrella includes environmental issues such as climate control, energy consumption, waste pollution and resource consumption as well as ethics, human rights issues, supply chain management and reporting transparency.
- Depending on where you are as a company, there are different ways of getting started. First, take a look at what your current processes are. If you are in the manufacturing business, then start with production and look at your resource consumptions, emissions and waste-handling to get some tangible data that you can build on. Investigate your human rights management, including your financials.
- Customers, especially large global companies, are pushing for more transparency and accountability on sustainability issues. Pressure to adopt ESGs is also coming from investors at financial institutions because ESGs are a way to measure the company’s handling of these topics so it can also be put into a framework.
- Companies need to have support from management and should include key internal stakeholders in the process. Once you have made a lot of the assessments, you can start spreading the message to the rest of the employees so they understand the value of what you are doing.
- When it comes to educating your stakeholders outside the company, keep things tangible and straightforward. There are a lot of buzzwords around ESGs so focus on tangible targets and narrow it down to a few things that you and your customers and suppliers can work through together.
- Danfoss has been focusing on sustainability and ethics for many years but to be even more attractive to customers, looked at what the company is doing to be more energy-efficient in the manufacturing process. The company decided on three step-change initiatives: decarbonization, circularity and diversity and inclusion.
- To start the process, the company hired outside consultants to provide a holistic view of the organization. They did stakeholder interviews and talked to NGOs and financial institutions. The goal was to assess the perception of the company. Then they ranked the various issues under the ESG umbrella based on importance to the company and to outside stakeholders.
- ESG goals for decarbonization are based on the science-based targets that originated in the Paris Climate Agreement. To limit global warming by 1.5 degrees Celsius by 2030, we need to align with the UN framework for climate assessment and greenhouse gas protocol and lower our emissions according to guidelines for our industry.
- In order to be successful, all employees need to be on board. If people get demotivated or derailed, it is difficult to get back on track. Design your organization processes to ensure that you listen to people at all levels and they feel heard.
- Draft up a solid plan. In a global company, messaging needs to be tailored to local needs, languages and cultures.
- When creating ESGs, understand your company’s DNA and take on projects that are achievable.
- Make sure you engage all leaders, both formal and informal, and utilize the expertise in your organization.
- Assessment tools such as EcoVadis, which provide ratings, benchmarks and scorecards for sustainability, will give a measure of a company’s current state and potential. There are also many free tools available via a Google search.
To learn more about how ESGs can create value for your organization, visit https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value
To learn more about Danfoss’ ESG goals and step-change initiatives, visit https://www.danfoss.com/en/about-danfoss/company/sustainability/esg/
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For more information and additional episodes of the EnVisioneering Exchange podcast, visit https://www.danfoss.com/en-us/about-danfoss/insights-for-tomorrow/envisioneering-exchange/