Reinvention, Resilience AND Regeneration in Business

Ilham Kadri: Today, I'm delighted to be speaking with Peter Bakker. He's the President and CEO of the World Business Council for Sustainable Development, which is a global CEO-led community of the world's leading sustainable businesses. Peter's work has been recognized widely. He has even received the Royal Order from the King of the Netherlands for his incredible commitment to helping businesses become more sustainable. Peter has many interests, including a great passion for music and nature. His staff tell me that he starts each meeting with music to fire everyone up. I just love this. I have had the great pleasure of working with Peter since Solvay is a member of the WBCSD and because I have just taken up the role as a chair of the organization, which is such a great honor. Thank you so much, Peter, for joining me today. 

Peter Bakker: Thank you for having me, Ilham. It's so great to see you.

Ilham Kadri: Great to see you too. Was it true Peter that you like to start meetings with music, if you had to choose a song to kick off our discussion today, what would it be?

Peter Bakker: Well, my taste in music is shifting all over the place at the moment. I like ambient music much, but I would probably play The Nearer the Fountain, More Pure the Stream Flows today, which is a new album by a gentleman called Damon Albarn, which was recorded in Iceland. And he tries to capture in the music, the climate-changing landscape of Iceland. So that's quite beautiful. 

Ilham Kadri: Wow. I will definitely, you know, listen to it.

Peter Bakker: I'll send you a link.

Passion for sustainable business 

Ilham Kadri: Yeah, please. So there is a link definitely to nature rights and sustainability, Peter, your other passions, right? So I want to start Peter by asking, is there a specific moment in your life that really sparked your interest and passion in making businesses more sustainable? Is this something you always thought about? How did it start? 

Peter Bakker: No, it came very late for me. I had already become a CEO of TNT, the company where it was working. And I was very young, I was 40. I had my job interview for the CEO role on 9/11. Two weeks later, I was the selected candidate to become the CEO. And in that week Enron exploded. So here I was a young guy making a career, becoming a CEO, and then the war on terror started, Sarbanes-Oxley was invented. So it was a pretty tough time where you know, business and business leaders were not necessarily the most positive contributors to the world's conversations. And I thought, well, that can't be true, because I'm a CEO, I'm now a bad guy, so let's see what we can do. Well, one thing led to another. We became the first corporate partner of the United Nations back in the day. And I was talking on one of the Clinton Global Initiative meetings about a year or two years into that journey about what we were doing. And then somebody came up to me and said, Oh, it's fantastic what you do for the world food program. But you must understand climate change. This was 2004. 

Ilham Kadri: Wow. 

Peter Bakker: I had never heard about climate change, which was probably my ignorance. But I had never heard of it. I educated myself and that's where it all started.

Ilham Kadri: An amazing story. 

WBCSD’s call to action: Time to Transform

Ilham Kadri: So Peter earlier this year, I've been in the room, and you know, watching you, supporting you and the beautiful work done by the WBCSD team. WBCSD released a fantastic call to action with its Vision 2050 Time to Transform. For our audience who may not know, this report shows how businesses can start transforming now to mitigate the urgent challenges of the climate emergency, the loss of nature, and inequality. It's a very holistic, very bold, very forward-looking vision. And one of the best things about the report is that it lays out in detail nine transformation pathways with 10 action areas that businesses can implement before 2030. Can you elaborate Peter on some of these actions? 

Peter Bakker: Yeah. I think what we try to do is  - the title is a bit misleading, you know? Vision 2050 sounds like far away, but what we try to create is an action agenda for all businesses. So the basic view is that sustainability is now going mainstream. This is no longer about philanthropy or about corporate social responsibility. This is about how do we integrate sustainability into our business strategy, into our business models, into the product. So, what we've done is we've looked at what are the nine most important products and services that business provides to society and what can companies do now to make those products and services more sustainable? So you'll find a pathway for energy, for food, for products and materials, for mobility, for built environment, and a few more. And in each of those pathways, we have said, what is the long-term vision? Well, clearly a net zero carbon energy system that is an affordable and accessible tool. What are the key transitions we need to then work through to decarbonize energy, to decarbonize heavy transport, and then for each of those product categories what are the ten action areas that businesses should consider implementing into their strategies now? So if you look into that work and you know, any listener that would like to go there, it's TimeToTransform.biz. That's where you can download all these pathways. You'll find very concrete ten action areas per product category that companies can use as a checklist and then implement in their own strategies. That's really the purpose of that work.

The three Rs for business: reinvention, resilience and regeneration

Ilham Kadri: Yeah. And having been under the tent and at the launch, it's really comprehensive work. By the way you talk about the three Rs- the re-invention, resilience, and regeneration. Can you explain Peter what you mean by these three Rs and the mindset shift to you continuously talk about which is required very much in business? How do you think we instill this mindset shift effectively so that everyone is excited about the opportunities and the growth potential? 

Peter Bakker: I think the interesting debate when you talk about, let's go make the world more sustainable, is that some people tend to think that technology will solve everything for us. And therefore the engineers will find the solution, so that is partially true. We absolutely need innovation, we need engineers, we need the new solutions, but our opinion is it cannot be left just to technological innovation. There will be a need to change the way we think about how we make business decisions, what we find important. So in that context, Vision 2050 has talked about the three Rs - reinvention of capitalism, resilience in supply chains, and regeneration. So the reinvention obviously talks about you know, how do we get a more inclusive, more sustainable capitalism. Resilience, I think that's best illustrated what we see now in the world. COVID-19 has brought a massive shock to our economic, our human system. But still today, many supply chains are not yet back up and running, massive delays have occurred. So what is in a sad way has demonstrated is that the resilience of our supply chains cannot handle big shocks and we know whether it's climate or whether it's another event, there will be more shocks coming our way. So we need to shore up the ability of supply chains to get up and running much faster. Regeneration, the third R talks about the capacity of the earth system to recover after we take what we need for all the activities that humans have on this planet. And there, I think the strongest examples of that are now in the regenerative agriculture space where we see a lower dependence on fertilizers, on pesticides, more natural solutions being implemented, more understanding of soil quality, instead of all kinds of additives that we may add to the process. But the main concept is technology and innovation will be a massive part of the solution, but it will require all business leaders to also have a different mindset when they make their decisions.

A more inclusive, more sustainable capitalism 

Ilham Kadri: Yeah, beautiful. So yeah, technology innovation, ingenuity, yes a good foundation but you need mindsets shifts, right, and probably leaders to lead, right? So now, let's focus Peter on the reinvention. And we talk a lot about reinvention of capitalism, with all what's going on around us in the world, including the geopolitics. And I know it’s close to your heart, to mine too. Because we both believe that capitalism can be part of sustainable development. If you could write a book on reinventing capitalism, what would be the main chapters? In other words, what does reinventing capitalism mean to you? 

Peter Bakker: Yeah. I'm not sure I would write a book. I would rather stand in front of the classroom of business leaders to help them understand what is needed. But in my mind, this reinventing capitalism has a bit of a risk as a label because this is not an ideological rant for or against capitalism. This is really an argument that we want to make that just focusing on financial performance or on financial capitalism is no longer good enough. We know that we have natural capital, we have social capital, and just like in current capitalism, we optimize returns from financial capital, we must do the same on environmental and social capital. So what does that mean in practice? Business must really get better at measuring and managing the impacts it has. Not only on its balance sheet and cashflow, but also on nature and on the people in the communities, in which it operates. It must integrate that into its risk management, into its CapEx processes, and eventually into its disclosures to capital markets. Capital markets, meaning investors and finance hears them. Need to take that information and put it into their valuation models. My view is very simple. I'm not saying simple to achieve, but simple in its words. The more sustainable a company is, the lower its cost of capital should become. Because if you're more sustainable, you have lower environmental and social risks, risk is a big driver of the cost of capital, and that means you should be able to finance your growth cheaper or get a higher PE rate, so for companies that are listed. And if we can change capitalism in that direction, then all of a sudden you will see that capitalism will work for sustainability instead of against. And therefore I've always said that passion in a job is always a big statement to make. But the reason I'm here, in this role in WBCSD is I believe we can make that change and we're actually getting quite close to it, and if we make that change, then we can stop talking about sustainability, because then sustainable capitalism will be the biggest accelerator that the world has.

Ilham Kadri: Absolutely. And you know, lots of companies are coming out, I mean, I know you returned Peter from COP26, and like me, despite some headlines, you see the glass half full. First of all, what makes you optimistic? And what do you think companies should be doing more to translate real conviction to the public and avoid being perceived as greenwashing and just giving intent for 2050, where most of us will be retired. What would be your advice as to industries like ours? 

Climate change and the last COP

Peter Bakker: I left Glasgow COP26 optimistic this time. I said it felt like the first time it was a how to COP instead of a why or what COP. We're more business interested than ever before. Most of them didn't just fly in for a speech and fly out again, but we're really on the ground taking part in dialogues and presentations and the like. Then secondly, the financial players have come to the COP in much greater numbers than ever before. Obviously, Mark Carney and his 130 trillion announcement. And that's massively important. If business together with capital markets agree that this is the way forward, then you have a big engine in the world that will drive towards solutions. I think what companies must do, and I think you raise a very important point. There's a lot of distrust in business, you know, that was best demonstrated in Glasgow, there were in total 30,000 people in the COP, but there were a hundred thousand people on the set that they protest against the COP and business was often shouted at as villain and greenwashing promises, no action. I think the only real answer to business has to do three things in my mind- set ambitious targets like I know you have done in Solvay, create an operating plan behind that target to know where your company can actually begin to reduce, to drill it into the company so that all management can be part of it, and then the third step is to be as transparent as you can about what is the progress we're making towards that operating plan. And eventually, that target. Because making speeches that we're not greenwashing, we're actually really trying to do something can help, but only so far. I think in the coming two, three years, really demonstrating progress, clearly focusing on the plans that companies have, that's the way to build trust over time.

Power of partnerships 

Ilham Kadri: Yeah, I fully agree. And talking about businesses, I mean, obviously they have a lot to do inside their walls and in their ecosystem, in the value chain, but we cannot do it alone, right? So what do you think governments, regulators, investors, and companies must do to play their role in this transition, Peter? 

Peter Bakker: Yeah, I think you're right. An individual company can do a lot, but it can't do enough to work through all the climate challenges. I think the word collaboration is going to be a critical word in the next five years. And that is on all kinds of fronts, collaboration within supply chains. Now, if you look at a company like yours, you're in the midst of so many value chains, you can probably or you have or you will create solutions that will make other people's products way more sustainable, but that requires real co-design across value chains. That's one step. The second step is we really must get much closer to our investors on these topics. What I see changed in the engagement with investors is that investors begin to understand better than a few years ago, that where the company is today, where it needs to be 10 years from now, but how do we get from where we are today to where we need to be. The transition risks in that transformation, that scenario, where we need to do more work together to make sure that everybody understands the changes. Governments, I think is important. Two things- business is really well-organized to stop new regulation coming in, there's still too much lobby against change. There's not enough positive voice for change, and that’s strange, but business is often very good at protecting the status quo and is too fragmented in saying we actually want to change, this is the change we want, and this is the type of regulation or policies that would support that change. So, I think we can do more there. And then obviously, the last and probably the trickiest one is we need to include the consumers because people around the world, citizens have much better understanding of two big challenges. You know, you've seen it in Belgium and Germany, and the Netherlands, massive floods, forest fires, wherever you look. So people understand there are big issues at hand. But when they are consumer in the supermarket, they don't always make the choices that are relevant or are aligned with those concerns. And that is something where I think business can play a bigger role than what we're playing today.

Role of chemistry

Ilham Kadri: Absolutely. And you know, Solvay is part of the industry, but the chemical industry specifically. I used to call it Peter, the mother of all industries at the risk of feminizing it. What's your opinion on the role of the chemical industry, which is, you know, being finger pointed right here and there, and has been seen as part of the problem. What's your opinion on the role of the chemical industry in this transition? 

Peter Bakker: Yeah. I find the chemical industry, I find it the most interesting industry that is out there, one for a “come on guys and girls do more.” But the other thing is it needs to much better tell the story. I know that in the labs of all the chemical companies in the world, there will probably be 90% of the solutions that the world needs to avoid plastic pollution or reduce energy use or reduce weight in the vehicles or other transport means that we have. So we need to tell that story of what are the solutions and how can we get them to market? What policies do we need? What demand chains would get us there? The reason why I think it's often finger pointed is because this is not talking about individual companies because there's always good examples out there like I think you're trying to create in Solvay. But generally, the industry has been too slow in moving on what can we do ourselves to reduce the energy, the emissions that we create in some of our big plants. And I think it's important that we bring the industry together, to talk about what our scope 3 emissions in this sector. And I think that's going to be in my mind the main ticket going forward for the chemical sector. Because the minute the chemical sector has a clear way of measuring and managing scope 3, then you can show what are the avoided emissions in other parts of the supply chains way beyond your own plants, but by other people using your solutions. And then people will see the enormous power of the sector.

Ilham Kadri: Yeah, and this is a huge opportunity. I agree Peter, there are a few big brands and less bigger actually, where we are trying to put our efforts together, right? Because sometimes we're going to reinvent the wheel on the way to involve suppliers and engage with us customers because we need that trustability. 

Protecting nature and biodiversity

Ilham Kadri: Well listen times fly. I know you are a great lover of nature and spend a lot of time in the forest, close to your house. I do the same here next to my house. So let's turn to biodiversity for a little while. We had the first phase of the COP, 15 summit on biodiversity, Peter. What do you think will be accomplished in phase two? And what do you think businesses can do concretely to better protect biodiversity?

Peter Bakker:  I'm really hopeful that COP CBD will be able to produce some real tangible targets. We have in 2021, launched the Global Goals for Nature - WWF, WBCSD, other organizations were in the lead of that - which basically said, we need to be nature positive by 2030, we need to restore nature by no later than 2050. Those are great statements, but we need to be more precise for it to be actionable for business. So I think the impact that business can have is going to follow the same trajectory as climate change. And any listener in business that wants to understand what is going to happen in biodiversity, just take the rule book from climate. So the first thing is, I would expect the science-based targets for nature to emerge. Just like we have the one and a half degrees for climate. There will be some targets for nature. The second thing that will then happen is what can we actually do in terms of disclosures? So we have the TCFD, The Task Force For Climate Related Disclosures. Climate change in 2022, the TNFD will be launched, The Task Force For Nature Related Financial Disclosures. And then the third step of that will be new bodies, like the International Sustainability Standard Sport. We'll move beyond climate ESG indicators into nature ESG indicators. And that's actually very good news for business. Because then you know, what the target is the business needs to live up to. You know how to integrate it into your corporate scenarios, governance, and you know how to disclose the impact you have. And that's, I always say, you know once you're at that state, business can breathe again, because then it knows what to do, there's a target, there's a process, and there are KPIs against which we can measure ourselves.

Love of writing, photography and more

Ilham Kadri: And I know you work in a very political environment, so we don't often get to know a lot about you personally, right? And business meetings are always a bit rushed. I'm really interested to know more about who you are outside of the WBCSD, tell us more about you, Peter.

Peter Bakker: Well, I'm a father of three. My kids live in the Netherlands, I live in Switzerland. So it's been tough times in COVID, not being able to go to visit them too. Like you said in the beginning, the difficulty I have in my life is if you run a purpose-based organization, like WBCSD, which is not the big a hundred thousand multinational that I was used to, then there's always more work than there are hours in the day. There isn't always that much time to do other things. But when I relax, I listen to music, I write letters a lot.

Ilham Kadri: In the old way? With the pen or electronic letter?

Peter Bakker: No, with the hand obviously. And in my dreams, I'm the best photographer in the world. I just never make enough time to really show that to the world, but I like photography, 

Ilham Kadri: Really? So you may have read the book - La Dame de Berlin, The Berlin Woman.

Peter Bakker: Yeah. 

Ilham Kadri: It's a story of a photographer, right? 

Peter Bakker: Yeah. Yeah. 

Ilham Kadri: It's beautiful. Well, thank you. Thank you very much, Peter. Thank you for this fascinating discussion. You are an amazing leader and an inspiration for me and many around you as we strive to make business both sustainable and profitable, by the way, science-driven and human so we can reinvent, obviously, humanity’s progress. So keep up the great work and I'm sure our listeners and the audience have felt your passion, your wisdom, and sustainability, and even more, and the power of the AND.