Mark Errington, Chairman of ERM’s Asia Pacific Region, and Sophia Ong, Director of Marketing and Communications for ERM’s Asia Pacific Region, spoke with J. Heinrich Jessen, Chairman of Jebsen & Jessen, about how the multinational firm’s dedication to environmental sustainability has fueled its efforts to achieve carbon neutrality across its diverse business units.
Sophia Ong: Who is Jebsen & Jessen?
Heinrich Jessen: Jebsen & Jessen is part of a family enterprise that started in Hong Kong as a trading company 127 years ago.
In the 1960s, we were still mainly a trading company, representing other companies as agents and bringing their products into Southeast Asia. Agency trading is difficult: if you do a poor job, you lose your contract, but if you do a really good job, you may also lose your contract because your principal might think they can do what you do themselves.
We realized that the way for us to survive from a business point of view was to be a value-add company. For us, that meant being not just a company that sells products, but one that’s active across different parts of the value chain. Over several decades we slowly became more involved in engineering and manufacturing. As we did, we had to begin considering our environmental footprint, which we did not have to do much before because our operations had been mostly confined to offices and warehouses.
Today, Jebsen & Jessen Group (J&J) is headquartered in Singapore and operates throughout Southeast Asia and beyond. We’re a diversified industrial group with businesses in ingredients, cables and connectivity, packaging, process technology, and more. Within our larger family enterprise J&J also has sister companies around the world in distribution, mining, and other sectors.
SO: What was the pivotal moment for you, the inspiration for wanting the firm to become a leader on environment?
HJ: In the mid-1990s, when we began producing and manufacturing, our environmental footprint grew. This growth occurred at the same time that the environmental considerations of business were becoming a bigger topic of conversation. And so, I began speaking with my father, who was the group’s chairman at the time, about how we should do something in that regard.
I went back and applied industrial environmental management practices to determine our environmental footprint and think through how we could mitigate it. One of our biggest risks were from chemicals distribution. We worked with ERM to figure out how to better handle and store our chemicals, how to prevent and safely manage chemical fires, and so on. A comprehensive management strategy was put in place and has continued as a key part of our business since.
There are also some sectors we simply left, because at the time it was difficult or impossible for us to manage their environmental impact or risk.
By 2000 or 2001, we were in pretty good shape in terms of general EHS performance. Our next step was to go for ISO 14001 to ensure consistency across our entire group of 50 different companies in Southeast Asia, each with its own business activities and challenges. Once we achieved that, the next question was: Where do we go from here?
That was the first time the conversation about carbon came up. In 2006, we showed everybody in the company Al Gore’s documentary about climate change, An Inconvenient Truth, and hosted various speakers to raise awareness.
Frankly, carbon was not something that was felt as very urgent at the time. Not by our colleagues, and not by our customers. But we decided to measure our carbon footprint and see how much we were generating. At the time, a new company here in Singapore was selling a carbon measurement tool, and so we became a guinea pig for carbon measurement, along with two other Singapore-based companies.
Once we knew our carbon footprint, the next question was what to do about it. At that point we decided to commit to bringing our Scope 1 emissions to zero.
There was no pressure on us to do it, we just took this decision ourselves. Our thinking was that if the whole world did exactly that, if every single company in the world just focused on its own Scope 1 and neutralized them, the world would be carbon neutral. Any manufacturing that we do, our offices, our trucks going back and forth, any travel by our own people, et cetera, all of that gets measured. For J&J, it comes to about 50,000 tons of CO2 annually, depending on the year.
In 2008, we were the first in the region to hire an executive-level Carbon Neutrality Officer, whose job was to go each of our companies, study their carbon footprint and explore ways to reduce the carbon footprint of each one in-house. We adopted a rule that any initiative to bring down carbon emissions where the ROI (Return on Investment) for implementation is less than ten years, we will do it, and if it's more than ten years, we will offset instead. It was tough going, I would say, but there were a few low-hanging fruits which we immediately implemented. In 2012, we offset our previous year's emissions, and we've been doing that every year since.
For a couple years, we seemed to be the only company doing it in the region. At some point, I began to ask, why is nobody else doing this? And my sad realization was – I'm being a little bit cynical – that too few others really cared. No government was giving us a tax break. No customers were deciding to buy from us because we were carbon neutral. And I don’t think many of the employees who were deciding to work for J&J were doing so because we were carbon neutral.
But we just continued with it anyway. And in the past couple of years, we have finally started to see a considerably more supportive environment.
SO: What are some examples of that?
HJ: Well, for one thing, there is now a carbon tax in Singapore.
Also, our employees are more aware and appreciative of our climate goals. Even today, I wouldn't say employees are working for us because we are carbon neutral, but there are certainly many who are proud of the fact that we are and think it's cool.
And we now have customers who also take our carbon neutral status into account in their procurement decisions.
For example, recently, we won a very big project here in Singapore where the customer specifically asked us to put our carbon neutrality credentials into the tender because they themselves wanted to be the most sustainable player in their industry.
I don't think we won the project specifically because of our climate commitments, but it sparked a conversation, and the customer wanted it to be highlighted. So, I'm taking that as a good indication that we're going in the right direction.
Mark Errington: What has it meant to the company leadership to adopt a net zero goal?
HJ: I mean, carbon prices are coming up now, right? And that drives us to be more aggressive on emissions reductions, because the ROI now very often does come below 10 years. For example, seven or eight years ago we had a factory here in Singapore where we had to decide whether to put solar panels on the roof or not. And at the time, in Singapore that ten-year ROI calculated out for us that it was worth the cost. But that same analysis in Malaysia and elsewhere showed that it wasn’t worthwhile, so we didn't do similar installations on factories there at the time. However, today we're putting solar panels on all the roofs that we possibly can, whether they are in Singapore or Malaysia or anywhere else in the region, because now that ROI calculation makes sense. Energy costs have become more expensive, and solar installations have become cheaper.
A few years ago, the biggest carbon footprint we had was in a packaging plant in Vietnam that used coal to fuel the heat processes. It was terrible: our single biggest carbon footprint anywhere in the group, 25 percent of our total carbon footprint. We were not happy with that, of course. But in Vietnam, if we had switched to natural gas (which has a much lower carbon footprint), we would have had four times the energy cost because of the government’s specific coal subsidy program. Ultimately, instead of natural gas we changed the boiler to be able to take biomass.
But once we did so, we found that we couldn't find enough biomass, so we invested in a nearby plantation to secure sufficient supply of biomass to the boiler. That boiler can still burn coal if needed, but we generally use a hundred percent biomass. Overall, this has improved the carbon footprint of that plant enormously.
But there are also still a lot of constraints out there.
For example, in Indonesia, there's a law that a facility can only produce its own electricity for up to 15 percent of its usage. Which means that regardless of any emissions reduction initiatives we may have planned, we can now accomplish much less. I guess the request I would have from the industry side is that a government doesn’t need to subsidize alternative energy, but at least remove the negative subsidies and disincentives.
ME: I am so interested in these stories that illustrate how you’ve navigated the intersection of commercial value and sustainability value. Can you share another example?
HJ: One example is a small Australian garnet mine that we invested in, and then bought entirely, as part of the family enterprise.
Garnet is a very hard mineral that can be used as an abrasive for sandblasting and water jet cutting. For sandblasting, garnet is actually recyclable, and much safer for workers and the environment than other options such as sand and various slags, many of which are heavily regulated and even banned in certain jurisdictions. We've meanwhile become the largest garnet miner processor, distributor, and recycler in the world. Today it’s a global business blending garnet from mines around the world, and we are extremely environmentally aware. After we finish mining in a location, we fund the restoration of the mine to its original state. We process the garnet with zero chemicals, just centrifugal force, water, magnetics, and gravity.
Eventually, we also got our garnet enterprise to carbon neutrality. And today, our garnet operations are very environmentally friendly and have become one of our major lines of business.
ME: You've been ahead of the curve on this for a long time, probably because of your background as a biologist and an environmental scientist. And sometimes you've been perhaps too early to market, bringing these things ahead of your customers, ahead of the market. But, you've persisted, and you've chosen things which will create commercial value with clients and within businesses.
HJ: I think your interpretation is right. I mean, our DNA is actually to try a lot of entrepreneurial things, and then sometimes fail, and that's okay. Because that's part of how we grow and how we develop. You are right to note that we've persisted in wanting to be ahead of the curve, trying different ways to become environmental leaders. Yes.
ME: What is next for your company on this journey? Do you see any challenges on the horizon?
HJ: Climate action is going mainstream, and momentum is growing. However, society is still not moving as fast as we would like to decarbonize.
The problem is that we are just not there yet as a society. In the corporate world, any climate-related initiative you pursue, you are often the only one paying the bill for action, while others are not. There are of course more stakeholders calling on companies to act on climate and exerting their influence through consumer demand. Still, we need to move faster.
As such, the current environment constrains to some degree penalizes those companies who want to take aggressive climate action. It also places the onus on these companies as pioneers, rather than pushing laggards to improve their own practices. If you are not acting on climate, it should cost your company, rather than cost the companies who are acting.
ME: What advice do you have for other others in your position who are starting their own climate action journeys?
HJ: The advantage we had is that a lot of it is driven by my own convictions. If you are a leader at a private company and are passionate about climate change, go ahead and take action, as it is easier to make those decisions. If you are at a publicly listed company, however, it is not that simple.
Because company leaders are incentivized to maximize profit.
If the profits go down because you're offsetting, it can affect your bonus. My advice would be that if you really believe in this, understand that you will face resistance and you'll just have to persevere because the fruits of this effort can take quite some time to develop and to be harvested.
ME: I've been doing this stuff for 30 years, and no one used to be interested, but when I go to business meetings or cocktail parties, now it's the center of the conversation. Everyone's got some kind of commitment around ESG and sustainability. This isn't going away, and it's not going to get any easier. So, I say, get your head in the game because this is how a business is going to be differentiated in the future.
SO: Do you see organizational transformation or structural changes that require elevation? Like do you have a Chief Sustainability Officer in today's context?
HJ: We are quite a decentralized group, so each of our business units is run pretty much independently. There are few services that come from this head office. My first job was EHS officer for the whole group. But now EHS responsibilities lie within each business unit and are housed with each company because they have needs linked to their specific activities. The only EHS functions that are centralized are our carbon neutrality programme as well as a new initiative to publish our first sustainability report, which will gather data from all the businesses.
SO: Another question is around incentives, on compensation for senior executives benchmarked against sustainability KPIs. Do you see that as a possibility? Or is it already embedded within the senior group of leaders?
HJ: Our leadership and company managers are incentivized via several factors.
The first is financial performance: profitability, sales, and so forth. But they also have a series of KPIs and key tasks, which, depending on what the role is, can factor into total remuneration even more than the financial performance. And in those KPIs and key tasks, we embed environmental elements. For example, every company in J&J has to have ISO 14001, so for a newly acquired company, a key task for their management could be achieving ISO 14001 certification.
Starting next year, there’s also one other way for sustainability to impact remuneration. Up to this point, we’ve always paid to offset the full group's carbon footprint from the holding company. But for next year, we've said that each subsidiary will pay for its own carbon footprint. So, if a subsidiary can reduce its carbon footprint cost-effectively, it will pay less for its offsets and thus make a bigger profit, which would feed into the incentives also.
ME: And by doing that, you, you're also creating a bigger pool of expertise to solve the problem, because you're pushing it into all units, rather than just fixing it at the corporate level. The whole sustainability agenda has been woven through the DNA of the business for quite a long time, particularly since you joined the business – it’s been pushed down into each of the business units. It sounds like time is right now for you to have them take that responsibility as well.
HJ: Yes, I would even say it should have been done earlier.
~ Originally published here by ERM's SustainAbility Institute.