Responsible business in the Netherlands is distinguished by a focus on global supply chains, and by the creative ideas of smaller firms
Dutch consumers can be a difficult bunch. Research by the European Union’s statistical office Eurostat shows that one in four has made a formal complaint in the past year to a shop or service provider – a proportion only beaten in Europe by the Swedes. The tendency to complain, combined with the Dutch belief in doing the right thing, means Dutch companies are under constant pressure to improve their ethical performance.
Pressure is also applied by campaign groups and investors. The Amsterdam-based Centre for Research on Multinational Corporations (known as Somo – Stichting Onderzoek Multinationale Ondernemingen) has been producing critical reports on the ethical behaviour of companies since the 1970s.
The largest pension funds, meanwhile, emphasise ethics as a precondition when deciding where to put their money. Anna Pot, senior sustainability specialist at asset managers APG, which administers about 30% of Dutch collective pension schemes, says: “We feel the demands of our clients. There is a clear interest and a clear demand for a responsible investment approach.”
The international outlook of Dutch companies and the national generosity in development aid terms mean that global supply chains are a major concern. Pot says multinationals are continually scrutinised over their attitudes to labour standards and human rights, child workers, and environmental sustainability in poorer countries. Because of this, the sectors of the Dutch economy with global supply chains have a solid corporate responsibility reputation.
Examples include agri-business, retail and textiles. Michiel van Yperen of the Dutch National Contact Point of the Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, highlights clothing retailers C&A, Hema and WE Fashion as “proactive and doing a lot in the supply chains”. But he adds that companies such as these feel “very vulnerable to NGO attacks”.
Many Dutch clothing and textile companies are members of the Business Social Compliance Initiative, which, from a base in Brussels, administers a code of conduct aimed at improving working conditions in supply chains. WE Fashion also applies the SA8000 working conditions and social accountability standard. WE says that in due course it will require all of its suppliers to comply with the standard.
Globally traded commodities fall under the Dutch Sustainable Trade Initiative, set up in 2007 by the government, businesses and NGOs, and financed using development cooperation money. The initiative has eight programmes, covering aquaculture, cocoa, cotton, natural stone, soy, tea, timber and tourism. The objective is to help producers in developing countries to modernise, while persuading companies to adopt sector-wide sustainability standards.
The OECD’s Michiel van Yperen says the programme on cocoa is starting to have an impact, in particular because the world cocoa market is concentrated in Amsterdam. The programme’s goals are that by 2012 40,000 tonnes of cocoa should be certified as “sustainable” (representing about 1.3% of annual global production), and that 40,000 smallholders in poor countries will see a 20% rise in their incomes.
Though a Dutch initiative, the programme has a multinational profile, with Dutch supermarket group Ahold participating alongside Cargill, Heinz, Mars and Nestlé. Campaigners Oxfam and Solidaridad are also part of the programme.
The Sustainable Trade Initiative is an example of the Netherlands punching above its weight in corporate responsibility terms. Professor Andre Nijhof of Nyenrode Business University cites the Marine Stewardship Council as another venture in which Dutch business played a “major part”. The MSC, which promotes sustainable fisheries, was established in 1997 as a partnership between Unilever and WWF.
The Dutch concern with farmed and fished commodities is also fundamental to one of the country’s top performers, Rabobank (see case study). The bank’s head of sustainable development, Bouwe Taverne, says: “We are globally a key player in agri-business.” The sector, he admits, is “not without dilemmas”. These include the impact of industrial farming on the environment, tropical forest clearance for commodities such as palm oil, and the turning over to biofuels of land that could be used for food production.
One of Rabobank’s main ethical aims is to “contribute to sustainable food chains in the world”, Taverne says. The bank’s background is as a cooperative created by farmers, local administrations and churches, and its sustainability concerns are deep-rooted. For loans of €1m or more, Rabobank factors in the responses of applicants to sustainability questions when assessing the risk. But the objective is to “engage with customers and improve them” rather than turn them away. “We are not the sustainability police,” Taverne says.
The Netherlands’ concern with supply chains and commodities means that corporate responsibility as a discipline is well developed in sectors that trade internationally. But other sectors are less scrutinised and are consequently lagging.
For example, the Netherlands is home to a number of large international dredging and marine infrastructure companies, such as Van Oord and Royal Boskalis Westminster. These firms have perhaps been overlooked by sustainability campaigners. The sector as a whole is “still searching for the right approach” to corporate responsibility, says the OECD’s van Yperen.
Huib Klamer of the Confederation of Netherlands Industry and Employers says companies in the construction sector are now affected by government rules on sustainable purchasing, which came into effect at the beginning of 2010. “It will give them an impulse” to be more sustainable, he says.
The big Dutch multinationals tend to hog the responsible business headlines, but some ethically motivated Dutch consumers are also entrepreneurs, running their own businesses that are not necessarily known outside the Netherlands. Nyenrode Business University’s Andre Nijhof says this is where the most creative ethical business developments happen, where sustainability goes beyond the reactive approach of the corporate giants.
The Netherlands is notable for a healthy crop of “double goal” companies, Nijhof says – those that prioritise both profits and ethics. “For them, it is crucial to be proud of their work,” Nijhof argues. This is “not [only] a Dutch phenomenon but it is something to do with the culture in the Netherlands”.
The best-known of these companies is probably Triodos Bank, which was founded in 1980 and now has a balance sheet of about €3bn.
The bank says it is “100% ‘positively’ sustainable … We only finance people and organisations working to make the world a better place.” It has three broad areas of activity – nature and environment, culture and welfare, and social business – and says it always applies rigorous standards when making lending decisions. Triodos does not have a specific corporate responsibility department “because everything we do is sustainable”.
Another sustainable bank, ASN, is larger and older than Triodos, having been founded in 1960 by labour unions.
Other companies considered to be hardwired for sustainability include Gulpener, a brewer in the southern province of Limburg, which uses only local ingredients and refuses to pasteurise its beer to extend its shelf life. Fashion brand G-Star Raw is increasingly using organic materials such as nettle fibres in its clothing. And carpet manufacturer Desso has implemented cradle-to-cradle production (see case study).
But Nijhof worries that it may become harder for ethical entrepreneurs to get their ideas off the ground. He says incentive schemes in the Netherlands, for example for renewable energy, are less effective than in Denmark or Germany. The new Dutch government, meanwhile, which is committed to spending cuts, may have little to offer social enterprises.
Dutch entrepreneurs believe there is demand for more sustainable companies, but, Nijhof says, they see the government as “unreliable when it comes to sustainability policy”.
Case study: Philips
Consumer electronics giant Philips is best known on the high street for DVD players, shavers and other electrical goods. But while the company has a turnover of €8.5bn from these products, it earns almost as much from healthcare products and services such as scanners, sensors and monitors, and high-tech radiology and cardiology equipment.
Philips therefore seems set to benefit from the rising demand for healthcare associated with ageing populations. In February 2010 it headlined three main sustainability targets to be achieved by 2015. The first is to improve the lives of 500 million people – about 8% of the world’s population – by “bringing care” to them through its products, says company spokeswoman Marie-Helene Azar.
Other 2015 targets are to make the Philips product portfolio 50% more energy efficient, and to double the firm’s collection and use of recycled materials, both relative to 2009.
Philips claims a good record of hitting its targets. Azar says it has already overachieved against a target for 2012 of earning 30% of revenues from green products, such as energy-saving lighting and televisions that moderate their energy consumption depending on what is being shown on screen.
In September 2010, Philips was given supersector leader status by the Dow Jones Sustainability Index, prompting Rudy Provoost, who is both chief executive of Philips Lighting and chairman of the Philips sustainability board, to say that the company would continue to respond to “pressing global trends”.
Another pat on the back came in May 2010 when Greenpeace, in its Guide to Greener Electronics, said Philips had “made some considerable headway”, having previously been “bad guys”. Greenpeace said the company was working to change its previously lagging performance on issues such as the proliferation of electronic waste, and the use of dangerous chemicals in electrical products.
Azar says the improvement will be continued, with sustainability “clearly included as a key factor in Philips’ overall Vision 2015 growth strategy”.
Case study: Rabobank
Rabobank is among the biggest 25 banks in the world in terms of its reserves. It has cooperative roots, based on the common sense principles of farmers and church groups in the late 19th century. It did not suffer in the financial crisis because because it had avoided dangerous speculative investments.
Rabobank’s farming background means there is a focus on food. It is one of the world’s main agri-business banks and as such is concerned that food production should remain sustainable. “We are now using 1.3 planets each year,” says Rabobank’s head of sustainable development, Bouwe Taverne.
This results in an emphasis on three areas. To promote sustainable food chains, Rabobank avoids investments that upset ecosystems or cause harm to landscapes. It invests in clean technology and sustainable energy. It promotes cooperatives in countries such as Tanzania and Vietnam so that farmers can reap the benefits from the production of cocoa, coffee and other commodities.
The bank also has a collection of foundations and funds. The Rabobank Foundation works with marginalised social groups. Rabo Green Bank supports environmental projects. And Robeco is a responsible investment manager that, in 2006, acquired a majority share in Sustainable Asset Management, the provider of assessments that feed into the Dow Jones Sustainability Index.
Rabobank’s basic philosophy is straightforward: sustainability is the future. Green technology, for example, is “key to the development of many industries for the years to come,” Taverne says.
Case study: Desso
Desso is a carpet maker, headquartered in the town of Waalwijk in southern Netherlands, which believes in “manufacturing products that foster pride in the workforce”. It was the first carpet maker in Europe to implement a cradle-to-cradle approach for its products.
These principles, developed by the Hamburg-based Environmental Protection and Encouragement Agency state that the materials going into products should be like ingredients passing through the food system: once consumed, they should be transformed into nutrients that will be used for new products. Desso says it sees “carpet as a nutrient. Products will be manufactured from materials which can be truly recycled.” Desso’s carpets are “designed for disassembly”, so that nothing is wasted.
In practical terms, this means that Desso analyses the raw materials it uses, requiring suppliers to meet a range of regulations and standards, including those required to achieve cradle-to-cradle certification. The more hazardous chemicals in Desso’s carpets are progressively being replaced with low- or no-risk substances. Once carpets have exhausted their useful life, Desso will take them back, sending them to be burned as fuel in cement plants.
This is “biological or technical” recycling, according to Desso. The company does not just want to be considered a sustainability case study. Its aim is to “not be less bad, but truly good”.