#26 Sustainability as an opportunity for SMEs - How SSI Schaefer is mastering the ESG challenge

Strategy interview with Heiko Stötzel (SSI Schäfer) Anna-Lena Mayer (IR.on) and Fabian Kirchmann (IR.on)

If you have a vision, you have to follow it up with action.

SSI Schaefer has set itself ambitious goals for 2021 and defined its vision last year: As a technology leader, they want to enable the sustainable supply of goods and merchandise to an urbanized society.

Of course, this is only possible if you work on acting sustainably yourself.

Individual measures are no longer enough. To really make a positive change, you need a well-thought-out sustainability strategy that is deeply rooted in the corporate strategy.

But how does it work? How do you get managers and employees on board? Which parts of the company are affected and is sustainability actually understood in the same way all over the world?

We have recorded a new podcast episode on all these questions with Heiko Stötzel, Global Head Group Social Responsibility at SSI Schaefer and Anna-Lena Mayer, as well as Fabian Kirchmann from IR.on. In our new episode, Hope is not a strategy, you will find a guide on how to create your own sustainability strategy and roll it out company-wide to achieve real impact and why the legislator may soon force you to do so.

SHOWNOTES:

Christian Underwoodhttps://www.linkedin.com/in/christianunderwood/

Heiko Stötzelhttps://www.linkedin.com/in/heiko-st%C3%B6tzel-676aa685/

Fabian Kirchmannhttps://www.linkedin.com/in/fabian-kirchmann-iron01/

Anna-Lena Mayerhttps://www.linkedin.com/in/anna-lena-mayer-1b4baba5/

SSI Schaefer Grouphttps://www.ssi-schaefer.com/de-de

Sustainability Report SSI Schaefer Group:https://www.ssi-schaefer.com/de-de/unternehmen/nachhaltige-loesungen/nachhaltigkeitsbericht-2021

IR.on AGhttps://ir-on.com/

Underwood GmbHhttps://www.underwood.de/

Hope is not a strategyhttps://www.hoffnungistkeinestrategie.de/

HIKS podcast episode with Steffen Berschhttps://www.underwood.de/podcastfolgen/14-strategieinterview-strategieprozess-ist-lernprozess-fuer-alle

Pre-order the book Hope is not a strategy herehttps://www.underwood.de/shop/buch-hoffnung-ist-keine-strategieDetaillierteEpisode description:Table of contents

- Global Head Group Social Responsibility and HSE Heiko Stötzel - Personal information

- Sustainability at SSI Schaefer

- Why companies should finally tackle the issue of sustainability

- Creating awareness for sustainable action

- First steps in the sustainability process

- First steps in the process at SSI Schaefer

- The involvement of employees- Regional differences in the interpretation of sustainability- Different definitions of sustainability within Germany

- The further procedure at SSI Schäfer

- Classic stumbling blocks - sustainability only works together

- The period until all locations are integrated - The current situation in the German SME sector

- The decisive factor for success by Anna-Lena Mayer

- The decisive factor for success by Heiko Stötzel

- The decisive success factor for success by Fabian Kirchmann

- ShownotesIn today's strategy interview, Christian Underwood talks to three experts. The guest is Heiko Stötzel, Global Head Group Social Responsibility and HSE at the SSI Schaefer Group. The SSI Schaefer Group is the world's leading supplier of products and systems for internal material flow, also known as intralogistics. Headquartered in Neunkirchen, North Rhine-Westphalia, the Group employs around 10,000 people in around seventy operating companies at seven production sites worldwide. A classic hidden champion.

The experts for investor relations sustainability and ESG from the Cologne-based agency IR.on will also be guests. These are Anna-Lena Mayer, Head of Sustainability and ESG, who has been working at IR.on for seven years, and founder Fabian Kirchmann, CEO for 22 years - an absolute premiere with so many guests in one episode, but it is also about a really big topic that cannot be tackled alone. This is the topic of sustainability, also known as ESG. In the following we will explain in more detail what it is all about. Since such a big topic cannot be solved single-handedly within a company, we also want to shed light on different perspectives - the company perspective and the consulting perspective. You can also find out more about SSI Schaefer in the podcast episode with Steffen Bersch, CEO of the SSI Schaefer Group, from January of this year. This is also linked again in the show notes.

Global Head Group Social Responsibility and HSE Heiko Stötzel - Personal information

Before the episode starts, Heiko Stötzel is introduced. Mr. Stötzel holds a degree in hydraulic engineering from the University of Siegen - an absolute expert! He is also a project manager, safety engineer and CSA manager. He has been working in the field of sustainability and HSE for around 13 years now. Before SSI Schäfer, he was HSE Manager at ALPINE Bau GmbH, MAN and KHS GmbH. At KHS in particular, he was jointly responsible for the topic of sustainability globally and for around one and a half years now he has also been driving the topic forward globally at SSI Schaefer.

Sustainability at SSI Schaefer

The pressure to act more sustainably comes from two dimensions - internal and external, with the external dimension relating in particular to customers. In intralogistics, for example in the e-commerce sector, every kilowatt hour that can be saved on products is an important kilowatt hour. Naturally, the company tries to be very far ahead with its own products and develop them further in terms of sustainability. However, the internal area is just as important. This means that intrinsically motivated employees are also under increasing pressure. Employees are now much more aware that sustainability is no longer just a trend, but a never-ending journey. It can be observed on a daily basis, including in the area of current global conflicts, that savings need to be made - in energy and gas. In this respect, employees also expect the company to have an action plan. For around a year and a half, SSI Schaefer has been systematically working through this and increasingly focusing on it in its business activities.

Why companies should finally tackle the issue of sustainability

As an investor relations consultancy, IR.on consciously put the topic of ESG on its agenda some time ago. There are different ways in which clients approach IR.on. The agency has many clients who are financed via the capital market. As a rule, these are inevitably a little further ahead on the topic of sustainability, as they have either been subject to CSR reporting requirements since 2017 or are under general pressure from investors, who often want companies to report more on their sustainability activities. If companies then decide not to explicitly focus on sustainability, this can have very painful consequences, as an example from one of IR.on's customers illustrates. Last year, its share price plummeted from one day to the next. At first, nobody really knew where this development came from. So what had happened? A major international rating agency had published a negative ESG rating. As a result, a number of Anglo-Saxon investors withdrew from the share, or some of them actually had to. The Management Board was very surprised by this and then very quickly put the issue on the agenda. This clearly shows the influence that sustainability has on the capital market. In contrast, non-listed SMEs such as SSI Schaefer with a strong focus on sustainability are still the exception.

Creating awareness for sustainable actionIn companies with a less sustainable orientation, the first thing needed is awareness that something needs to change. The legal obligation alone is not enough here; awareness must above all be intrinsically motivated and get into people's heads. The company should become aware that integrating sustainability into the corporate strategy will make the organization as a whole more resilient and competitive. This applies, for example, to dependencies in the supply chain, but also to attractiveness as an employer or access to new financing options such as green bonds. In other words, there are a wide range of benefits that need to get into people's heads so that this triggers the driver for sustainability.

First steps in the sustainability processIn order to make your own company more sustainable and implement the topic of ESG well, the first step should be to identify a responsible person. Often, new positions even have to be created here, as the topic of sustainability is too comprehensive and important for one person to master in addition to their everyday tasks. It definitely cannot be declared a part-time job and a lot of work has to be invested. At this point, however, the actual effort involved is often underestimated. It is also important to approach the topic strategically. Many companies emphasize that they are already paying attention to sustainability. Although there are often good projects that are implemented, there is often a lack of strategic background and structured orientation. IR.on therefore works with its customers to develop a sustainability strategy, which usually begins with an analysis of the business environment. This initially focuses on the peer group and the status quo. The next step involves a management workshop in which the internal and external requirements are compared, the starting position, where the goal is and how the company's own requirements are defined. Do you want to be a pioneer and invest a lot of work or is it enough to meet the requirements and not stand out in a negative way? Once this foundation has been laid, the right strategy development can begin. Stakeholders can also be involved at this stage, for example through interviews or online surveys. This is followed by a materiality analysis and, once the key issues have been identified, the fields of action, objectives and measures are defined.

First steps in the process at SSI Schaefer

Mr. Stötzel has been with SSI Schaefer for about one and a half years. Almost at the same time, the new corporate strategy was announced, including the Group's new mission statement.

> For all those who are interested in this process in more detail, we would like to refer you to the podcast with Steffen Bersch. < At SSI Schaefer, sustainability has already been anchored in the mission statement, vision and strategic priorities and is therefore at the heart of the new Group strategy. For Mr. Stötzel, this starting point proved to be extremely helpful, which is why this is also recommended as a starting point.

In order to define how to proceed with the topic of sustainability, a management workshop was held at C-level at the beginning. This was followed, with the help of IR.on, by a stakeholder analysis in which interested parties were surveyed in interviews and questionnaires. The feedback was used to form the materiality matrix, i.e. a materiality analysis, which up to this point had been two-dimensional. In order to make this three-dimensional, it is passed on to the C-Level and, by examining the business relevance, specific topics and areas of action are developed. These fields of action are then categorized and incorporated into the respective core functions in the company, such as HSE, compliance, purchasing, research and development and the like. A roadmap is then drawn up that defines what each area can contribute to the topic of sustainability, who is responsible and what the timings are.

Employee involvementThe pressure on companies to act more sustainably is also increasing on the part of employees. Therefore, after the analyses and the definition of the roadmap, in addition to the top-down decisions made up to that point, it is important to find a good mix in order to get the employees on board and involve them properly. Mr. Stötzel has carried out the process so far in a top-down approach, in secret. Of course, there were occasional local projects that were noticed, but the focus was more on generating input for the employees and being able to tell a story. Once the substantive work has been completed, it is then important that the departments go into the communities with the respective approach and involve the employees.

To this end, a pilot project was carried out at one of SSI Schaefer's plants in Simpang/Malaysia. There, together with the employees, their local microcosm strategy in the area of sustainability was developed and all local, relevant functions were considered. Goals were set and key sustainability issues in Malaysia and Simpang were identified. In addition, it was first necessary to clarify what sustainability means in this context in Malaysia, as the situation here differs significantly from that in Germany or Europe. After working through the sequence of steps, there is now also an action plan with corresponding measures and deadlines. If the project is successful, which is strongly assumed, they will then continue it at other locations and communicate the pilot at meetings, among other things, so that employees at the grassroots level are aware that something is changing in the company.

Regional differences in the interpretation of sustainability

One example of the different interpretations of sustainability in Malaysia that particularly stuck in Mr. Stötzel's mind was palm oil. The country invests heavily in this sector, as it is one of the most important export goods. Entire stretches of the country are planted exclusively with palm trees for palm oil production. Mr. Stötzel then asked his regional colleagues whether the monoculture was a problem for them in any way. They responded with relative incomprehension. So the issue of monoculture plays a relatively small, insignificant role in Malaysia, for example. The regional understanding is simply different. This makes it all the more important to first investigate and discuss with people what sustainability means to them individually. When it comes to saving energy, for example, the views from Malaysia and Europe are similar. The social pillar of sustainability also plays a key role there. Common denominators were therefore quickly identified, allowing us to enter into a very good dialog with each other.

Fabian Kirchmann and Christian Underwood had similar experiences with regional differences in the definition of sustainability in China, which were mainly expressed in the areas of CO2 avoidance and green electricity. So you always have to make individual decisions in a regional context and find acceptance in the cultural environment.

Different definitions of sustainability within GermanyEven within Germany, it is sometimes difficult to find a uniform definition from company to company. There are also clear differences within the sector and in the size of companies. The decisive factor is where the company is located. For companies with a strong focus on Europe or the German market, the challenge of finding a common denominator and getting all employees on board is less of a challenge, as the understanding is similar. For a company like SSI Schäfer with 70 locations, on the other hand, this is much more difficult. There, you really have to go into detail to get everyone on board.

The further procedure at SSI Schäfer

Back to the pilot project in Malaysia: After the successful launch of such a project, the pilot cannot simply be rolled out to all locations one after the other. Consideration must always be given to the organization and an individual decision made as to how ready it is for this. The pilot is therefore completed first, the measures are tracked and the results documented. Then the community model is gradually rolled out per location. Of course, many other things are also happening at the same time, such as dealing with our own emissions within the plants or other local measures that run independently of the community model. It is also about intervening in the processes within the company and establishing sustainability there. After all, we can only speak of excellence if sustainability is already part of the processes. In this case, sustainability is already an integral part of corporate activity and no longer a "special task". For SSI Schaefer, this is the way forward. One major challenge that still lies ahead is the development of a global database. The current sustainability report initially refers to SSI Schaefer's 18 largest units. The next step, of course, will be to roll this out globally, which will require this database.

SSI Schaefer's sustainability report will be linked in the show notes after publication. Here you can get an impression of what such a result looks like in the end, because for many companies the reporting alone is already a reason why this process has to be initiated.

Classic stumbling blocksWhen a medium-sized or even small company embarks on such a process, there are always classic stumbling blocks.

The entire process involves an enormous amount of time due to strategy development and implementation. This is often underestimated by companies at the beginning. At IR.on, a certain amount of expectation management is therefore carried out with customers right at the beginning and it is communicated that this time and personnel resources are necessary.

One example is the involvement of stakeholders. Many managers are of the opinion that they already know their stakeholders very well. The sales department regularly talks to customers and potential customers, and employees are also consulted in staff meetings. This anticipates that everything that customers, banks and other stakeholders want is known, but without ever having discussed the topic of sustainability in a structured way. Of course, there are also perennial issues in every industry, such as the carbon footprint. However, time and time again, many new insights and aspects come to light through a structured and intensive stakeholder survey. This valuable information can be used to underpin the strategy and generate added value within the company. The management level usually focuses particularly on the topic of sustainability. This is understandable, as the topic is currently on everyone's lips. However, people often have the impression that ESG consists of just one letter and is only referred to at the E (environment) level. In discussions with stakeholders, however, it often becomes clear that social requirements are also particularly important - both within the company and in the supply chain. In medium-sized companies, the data situation is simply not yet sufficiently mature; depending on the standard being pursued, you have to go into quite a bit of depth here. Data collection is another stumbling block for many companies. Many questions should be asked and thought about when setting up data collection. This database that is created there and the system for it must be able to last for years to come. It must be fed and expanded and ideally also automated. In the best case scenario, you get rid of the Excel spreadsheets and implement the whole thing on the IT side. However, this also means that the IT systems have to be revised and tackled so that the collection of sustainability KPIs is possible. The time factor is often underestimated here too. Resources are therefore a key aspect that needs to be considered - not only in terms of time, but also in terms of employees.sustainability only works together

There is never just one person responsible for sustainability in the company. Mr. Stötzel has made it his own main task to convey to employees that ESG is everyone's business. There may be a staff unit that brings together and filters the trends within the company, but sustainability itself should not be projected onto him as a person. Everyone together must face up to the responsibility of acting sustainably. Processes in particular must be designed to be sustainable and only then can excellence be achieved in this area. Automated processes, established in a corporate culture, ensure that sustainability is taken into account in all decisions from the outset.

Heiko Stötzel currently expects it to take around 3 - 5 years to get all SSI Schaefer countries and locations on board. This is also the period until the cultural development is so far advanced that sustainability can be established everywhere. After all, not only should a story be told, but the words should also be followed by sustainable actions.

The current situation in the German SME sector

In German SMEs, the scope of the issue of sustainability has often not yet been fully recognized by company managers. As Fabian Kirchmann reports from conversations with entrepreneurs, many are of the opinion that they are already doing enough in this direction. However, this often only refers to individual measures. These are certainly good, really commendable and important, but they are not enough. At the latest when the new CSR reporting obligation comes into force and the sustainability report becomes part of the management report, companies will have to rethink their approach. Auditors will then ask why this or that sustainability measure has been implemented in the company or why the topic of sustainability has not yet been sufficiently taken into account in product development, and it must be possible to justify this. In other words, a systematic approach is needed to tackle sustainability within the company. Stakeholders need to be involved, a strategy needs to be developed and specific targets and KPIs need to be set so that the progress made can be measured and tracked. This is absolutely crucial and has to get into people's heads. But there is still a long way to go before that happens.

The decisive success factor for the success of Anna-Lena MayerIt is extremely important to realistically estimate the personnel and time resources. A time horizon of 6 - 8 months must be planned for strategy development until the goals are clearly defined before implementation can begin. The first sustainability report then also requires another 4 - 6 months. Data must be collected and collated, texts written and employee interviews conducted. If you have not yet tackled this in a structured way, it is best to start today in order to be really well prepared when the reporting obligation actually arises.

The decisive factor for success by Heiko Stötzel

Sustainability is an incredibly interdisciplinary function. On the one hand, the topic should not be projected onto one person and, on the other, the organization should be ready for the start. The person or function responsible must have access to other functions. Data is needed, but also the will to contribute. The organization must be prepared, which can be achieved through a lot of communication and workshops, for example. If there is a compliance officer, they need to know that they will be contacted. Purchasing is another important interface. There is a lot of potential here in the supply chain. A data situation must also be created that makes the company measurable in the long term. But sustainability itself must also be sustainable. If you proceed too quickly and overburden the organization, you will take a step backwards in the area of sustainability in the social pillar and overburden the stakeholders. In this respect, preparation is an important point to start with today rather than tomorrow. You simply have to tackle it.

The decisive factor for success by Fabian Kirchmann

In addition to the other advice, it is also very important that management is really on board. The C-level should really exemplify their own strategy, values, mission statement and also the topic of sustainability in the company so that they can communicate authentically and credibly, not only to the outside world but also within the organization. This is why company management must be integrated into the process from the outset. You start with the management workshop, build the roadmap and that is crucial.