What are the components of Wendel’s ESG (Environment, Social, Governance) strategy?
Christine Anglade Pirzadeh: The Group’s ESG strategy is the result of a wide-ranging collaborative effort. We have defined a roadmap for 2023, articulated around four priorities. The first priority covers equality between men and women and will extend in the long term to diversity in the larger sense. The second priority is clearly climate change, which affects us all. The third priority is, in some sense, inherited from Wendel’s industrial past: preserving the health and safety of the Group’s employees. We have extended this requirement to the health and safety of consumers. The Covid-19 pandemic has reminded us that health is an absolute priority. Finally, the fourth priority is eco-design, or ESG performance, i.e. thinking about the value ESG can add to products and services before they are created. This is what innovation is all about. Starting in May 2020, Bureau Veritas’s Restart audit, for example, was a pro-active response to the worldwide health crisis, helping companies, schools, government offices, etc. resume post-lockdown activities under optimal conditions.
David Darmon : In eco-design, for example, Constantia Flexibles has been working for several years to make its products 100%-recyclable, thanks to the development of EcoLam, a range of new single-layer, environment-friendly polymers*. This means you have to maintain a constant, focused dialog with customers to keep abreast of their needs, which in turn requires you to adapt production facilities and make significant investments. Wendel has always encouraged its companies to invest in research and development.
How do you support the companies you control in their ESG efforts?
D.D.: Our role as lead shareholder is to inspire and then to provide the spark on ESG topics, but not to step into their shoes. We make sure that our companies are not exclusively focused on value creation, even if creating value remains paramount. We want them to integrate ESG topics, which in turn also create value. When we are sure that ESG awareness has been integrated into the corporate culture, our role is to dialog with company executives to create the most relevant performance indicators for tracking progress. I should add that we take a pragmatic approach to ESG; it must be useful to the company and its employees.
C.A.P.: For example, when we acquired Constantia Flexibles, the accident rate was too high. So we made the variable portion of the CEO’s compensation partly dependent on a reduction in this rate. Real improvement followed: in 2020, the accident rate declined by 78% compared with 2015, the year in which Wendel became a shareholder. Regular progress in ESG is also possible. Stahl is a perfect example. A pioneer in environmental issues, Stahl is constantly improving. Its CO2 emissions declined by 25% between 2015 and 2019, compared to the initial target of -10%! These results earned Stahl a silver medal from EcoVadis, the independent ESG evaluation platform. EcoVadis also awarded a gold medal to Constantia Flexibles in its business sector for that company’s efforts over the last three years. Education has been our preferred method for getting the management of all our companies to sign on to ESG issues. ESG concepts are now firmly anchored in the strategy of each and every company. Wendel does not just provide direction, but also offers companies the resources with which to do it, with access to a reporting platform and to ESG experts.
D.D.: We have created ESG performance indicators for each company, articulated around the four priorities, and the company’s board of directors tracks progress on a regular basis. We help ensure that ESG practices cascade down to all levels in the company. For the executives of these companies, it is very motivating to see indicators implemented and then to observe the transformation.
C.A.P.: In 2020, we made a commitment to create an ESG roadmap for each company. The objective of these roadmaps is to integrate ESG issues into the strategy and specific challenges each company faces. You absolutely must do this if you want ESG to make a real contribution to overall corporate performance. It’s a good example of what Wendel can contribute as a responsible investor.
Wendel feels it must be exemplary. Can you give some examples?
C.A.P.: Wendel has committed to evaluating its carbon footprint every year. Not so much because we think our activities have a big impact on climate change – we are a small company – but on principle. We think we should take the medicine we ask others to take. Concerning equality between men and women, the proportion of women on our Supervisory Board is now 45%. This exceeds the objective of 40% recommended by the Afep-Medef code since 2016 and required by law since 2017. Concerning executive functions, we know we can do better. For this reason, we were among the first to sign the charter developed by France Invest** (French Association of Investors for Growth), which aims to achieve gender parity among French private equity firms and in the companies they support. Our target is for 30% of Wendel’s representatives on the boards of directors of our companies to be women by 2023. Internally, our efforts have already translated into tangible results. As of April 30, 2021, 28.6% of the members of our Investment Committee were women. As such, we have already exceeded France Invest’s 2030 target of 25%.
Specifically, has your ESG strategy changed your investment process? Has there been an impact on the way you evaluate investment opportunities?
D.D.: For one thing, we have compiled a list of sectors that we have excluded from our investment universe. That’s the first filter. Secondly, for all other sectors, we carry out in-depth ESG due diligence. If the score is too negative, we won’t invest. It is not our intention to support activities that in our view will disappear over time, because they go against today’s underlying trends. Crisis Prevention Institute, our most recent acquisition in the United States, is a positive ESG impact company. With its training programs for managing violent situations, CPI is helping to change the lives of thousands of families and institutions.
How does Wendel plan to strengthen its ESG strategy?
C.A.P.: On the climate priority, we have made a commitment to audit our companies’ climate risk. This assessment will enable each company to adjust its ESG roadmap, based on results, so as to improve its impact. More generally, we aim to be among the companies with the highest non-financial ratings. Accordingly, we are very proud to have been selected to join the Dow Jones Sustainability Europe and World indices (DJSI), which recognize the Group’s performance in terms of ESG. The Wendel Group obtained a rating of 71/100 on all of its ESG activities, compared with an average for its sector of 30/100. Today, Wendel is the only French company in the diversified financials sector that is present in the DJSI Europe and World indices. We are very pleased with the performance of Bureau Veritas too, which is also in the 2020 DJSI Europe and World indices, and which boasts a no. 1 ranking in the professional services sector***.
In December 2020, the first time we were included, Wendel achieved a CDP (carbon disclosure project) climate rating of B. This rating confirms our active approach to climate change, which we take into account in our business activity.
It’s a long-term effort, because the non-financial ratings ecosystem is sometimes far removed from our business sectors. These distinctions reinforce our determination to go further, with the guiding principle of creating value for all of our stakeholders.
The Dow Jones Sustainability Indices (DJSI)
Launched in 1999, the DJSI includes the best-performing companies in terms of sustainable development, based on an analysis of nearly 3,500 listed companies worldwide. Every year, these companies are evaluated via a corporate sustainability assessment (CSA) questionnaire. Based on industry-specific criteria, the highest-performing 10% in terms of sustainability are then integrated into the Dow Jones Sustainability Index. Of the 162 companies evaluated this year in the diversified financials sector, which includes Wendel, only 17 have been included in the DJSI World index.
Did you know?
Every year, CDP presents a ranking of more than 8,000 companies evaluated worldwide. This UK-based NGO specializes in collecting published data on the measures companies implement to combat climate change.