#26 Sustainability as an opportunity for mid-sized companies: how SSI Schäfer masters the ESG challenge

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

SSI Schäfer set ambitious goals in 2021 and locked in its vision last year: as a technology leader, the company wants to enable the sustainable supply of goods to an urbanized society.

That only works if you act sustainably yourself.

Isolated measures stopped being enough a long time ago. To really change things for the better, you need a well-thought-out sustainability strategy that is deeply rooted in the corporate strategy.

But how does that work? How do you get leaders and employees on board? Which parts of the company are affected, and is sustainability actually understood the same way everywhere in the world?

We recorded a new podcast episode on all of these questions with Heiko Stötzel, Global Head Group Social Responsibility at SSI Schäfer, and Anna-Lena Mayer and Fabian Kirchmann from IR.on. In our new episode of Hope Is Not a Strategy, you'll get a practical guide to building your own sustainability strategy, rolling it out company-wide, creating real impact, and why regulators may soon require you to do exactly that.

SHOW NOTES:

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 Schäfer Grouphttps://www.ssi-schaefer.com/de-de

Sustainability report of the SSI Schäfer 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/

Hope Is Not a Strategy podcast episode with Steffen Berschhttps://www.underwood.de/podcastfolgen/14-strategieinterview-strategieprozess-ist-lernprozess-fuer-alle

Preorder the book Hope Is Not a Strategy herehttps://www.underwood.de/shop/buch-hoffnung-ist-keine-strategieDetailed episode description:Table of contents

- Global Head Group Social Responsibility and HSE Heiko Stötzel: about him

- Sustainability at SSI Schäfer

- Why companies should finally tackle sustainability

- Creating awareness for sustainable action

- First steps in the sustainability process

- First steps in the process at SSI Schäfer

- Getting employees involved- Regional differences in how sustainability is interpreted- Different definitions of sustainability within Germany

- What comes next at SSI Schäfer

- Classic pitfalls- Sustainability only works together

- How long it takes to involve every site- The current situation among mid-sized companies in Germany

- Anna-Lena Mayer's decisive success factor

- Heiko Stötzel's decisive success factor

- Fabian Kirchmann's decisive success factor

- Show notesIn today's strategy interview, Christian Underwood talks with three experts at once. His guest is Heiko Stötzel, Global Head Group Social Responsibility and HSE at the SSI Schäfer Group. The SSI Schäfer Group is the world's leading provider of products and systems for in-house material flow, known as intralogistics. With around seventy operating companies and seven production sites worldwide, the group, headquartered in Neunkirchen, North Rhine-Westphalia, employs roughly 10,000 people. A classic hidden champion.

Also joining are the experts for investor relations, sustainability and ESG from the Cologne-based agency IR.on: Anna-Lena Mayer, Head of Sustainability and ESG, who has been with IR.on for seven years, and founder Fabian Kirchmann, CEO for 22 years.It's an absolute first to have this many guests in one episode, but the topic is genuinely big and can't be handled alone. It's sustainability, also known as ESG. In what follows, we explain in more detail what that means. Since a topic this big can't be solved single-handedly inside a company, we also want to look at different perspectives: the company perspective and the consulting perspective. You'll find more from SSI Schäfer in the podcast episode with Steffen Bersch, CEO of the SSI Schäfer Group, from January of this year. It's linked in the show notes as well.

Global Head Group Social Responsibility and HSE Heiko Stötzel: about him

Before the episode gets into the substance, Heiko Stötzel introduces himself. He holds a degree from the University of Siegen in hydraulic engineering, so he's a true specialist. He is also a project manager, safety engineer and CSA manager. He has been working on sustainability and HSE for around 13 years. Before SSI Schäfer, he was HSE manager at ALPINE Bau GmbH, MAN and KHS GmbH. At KHS in particular, he shared global responsibility for sustainability, and for about a year and a half he has been driving the topic globally at SSI Schäfer.

Sustainability at SSI Schäfer

The pressure to act more sustainably comes from two directions: internal and external, with the external side driven mainly by customers. In intralogistics, in e-commerce for example, every kilowatt hour a product can save matters. So the company works hard to stay well ahead with its own products and to keep developing them in terms of sustainability. But the internal side is just as important. In other words, intrinsically motivated pressure is growing too. Employees are far more aware today that sustainability is no longer just a trend but a journey that essentially never ends. Every day you can see, including in the context of current global conflicts, that savings are needed: in energy and in gas. So employees expect an action plan from their company as well. For about a year and a half, SSI Schäfer has been working through this systematically and putting it more and more at the center of how the business operates.

Why companies should finally tackle sustainability

Some time ago, the agency IR.on deliberately put ESG on its agenda as an investor relations consultancy. Clients come to IR.on in different ways. The agency has many clients that are financed through the capital markets. As a rule, these are necessarily somewhat further along on sustainability, because they have either fallen under CSR reporting requirements since 2017 or they face general pressure from investors who often want companies to report more extensively on their sustainability activities. When companies decide not to put sustainability explicitly in focus, the consequences can be painful, as an example from one of IR.on's clients shows. Its share price collapsed from one day to the next last year. At first, nobody really knew where the drop came from. So what had happened? A major international rating agency had published a negative ESG rating. As a result, some Anglo-Saxon investors chose, or in some cases were actually required, to exit the stock. The board was very surprised and moved the topic onto the agenda very quickly afterwards. That shows clearly how much influence sustainability also has in the capital markets. Among mid-sized companies that are not listed, on the other hand, companies like SSI Schäfer with a strong focus on sustainability are still the exception.

Building awareness for sustainable actionIn companies with less of a sustainability focus, the first thing you need is awareness that something has to change. Legal obligation alone isn't enough. The awareness has to be intrinsically motivated above all, and it has to land in people's heads. The company should recognize that integrating sustainability into its corporate strategy makes the organization more resilient and more competitive overall. This affects supply chain dependencies, for example, but also employer attractiveness or access to new financing options such as green bonds. So the benefits are wide-ranging, and they need to land with people so that sustainability gets its driver.

First steps in the sustainability processTo make your own company more sustainable and implement ESG well, the first step is to identify someone to own it. Often new positions even have to be created, because sustainability is too broad and too important for one person to handle on top of their day-to-day work. It definitely can't be declared a side job, and a lot of work has to go into it. This is the point where the actual effort involved is frequently underestimated. It's also important to approach the topic strategically. Many companies stress that they already pay attention to sustainability. There are often good projects being implemented, but the strategic background and structured direction are usually missing. That's why IR.on starts with its clients by developing a sustainability strategy, which usually begins with an environmental analysis. This first puts the peer group and the status quo front and center. The next step is a management workshop comparing internal and external expectations: what the starting position looks like, where the goal is and how you define your own ambition. Do you want to be a pioneer and invest a lot of work, or is it enough to meet the requirements and avoid standing out negatively? Once that foundation is in place, the actual strategy development can begin. At this point, stakeholders can also be involved, through interviews or online surveys, for example. Then comes a materiality analysis, and once the material topics are set, the fields of action, goals and measures are defined.

First steps in the process at SSI Schäfer

Mr. Stötzel has been with SSI Schäfer for about a year and a half. The new corporate strategy, and with it the group's new mission statement, was announced at almost the same time.

> For anyone interested in a closer look at this process, we recommend the podcast episode with Steffen Bersch. < At SSI Schäfer, sustainability was already anchored in the mission statement, the vision and the strategic priorities, putting it right at the heart of the new group strategy. Mr. Stötzel found this starting position extremely helpful, which is why it's a good place to begin.

To define how to proceed with sustainability, a management workshop was held at C-level to start. Next came the stakeholder analysis, supported by IR.on, in which interested parties were surveyed through interviews and questionnaires. The feedback was used to build the materiality matrix, in other words a materiality analysis, which up to that point was two-dimensional. To make it three-dimensional, it goes to the C-level, where specific topic areas and fields of action are developed while business relevance is assessed. These fields of action are then categorized and assigned to the respective core functions in the company such as HSE, compliance, procurement, research and development and so on. After that, a roadmap is developed defining what each area can contribute to sustainability, who is responsible and what the timing looks like.

Getting employees involvedPressure on companies to act more sustainably continues to grow from employees as well. So after the analyses and the roadmap are set, the challenge is to find a good balance alongside the top-down decisions made so far, in order to bring employees on board and involve them properly. Mr. Stötzel ran the process so far top-down and behind the scenes. Of course there were occasional local projects that got noticed, but the focus was more on generating input for employees so there would be a story to tell. Once the substantive work is done, it's important that each area takes its approach into what are called the communities and involves employees.

For this purpose, a pilot project took place at one of SSI Schäfer's plants in Simpang, Malaysia. Together with the employees there, they developed the local microcosm strategy for sustainability and considered all relevant local functions. Goals were set and the significant sustainability topics in Malaysia and Simpang were worked out. It also had to be clarified first what sustainability means in the Malaysian context, since the situation there differs significantly from Germany or Europe. After working through the sequence of steps, there is now an action plan there too, backed by corresponding measures and dates. If the project succeeds, which is very much expected, they will roll it out at other sites and communicate the pilot in company meetings among other channels, so that employees on the ground see that something is changing in the company.

Regional differences in how sustainability is interpreted

One example of the different interpretation of sustainability in Malaysia stuck with Mr. Stötzel in particular: palm oil. The country invests heavily in this area, since it's one of its most important exports. Entire stretches of the country are planted exclusively with palms for palm oil production. Mr. Stötzel asked his regional colleagues whether the monoculture posed a problem for them in any way. They responded with relative incomprehension. So monoculture plays a relatively small, insignificant role in Malaysia, for example. The regional understanding is simply different. That makes it all the more important to look into it first and get into discussions with people about what sustainability means to them individually. On saving energy, for example, views in Malaysia and Europe are similar. The social pillar of sustainability also plays a major role there. So common ground was found quickly, making a very good dialogue possible.

Fabian Kirchmann and Christian Underwood made similar observations about regional differences in the definition of sustainability in China, particularly around CO2 avoidance and green electricity. So you always have to decide individually in the regional context and find acceptance within the cultural environment.

Different definitions of sustainability within GermanyEven within Germany, it can be hard to find a consistent definition from company to company. Clear differences show up within an industry and depending on company size. What matters most then is where the company's sites are. For companies focused mainly on Europe or the German market, finding common ground and bringing all employees along is less of a challenge, because the understanding is similar. For a company like SSI Schäfer with 70 locations, it's considerably harder. There you really have to go into detail to bring everyone along.

What comes next at SSI Schäfer

Back to the pilot project in Malaysia: once a project like this launches successfully, you can't simply roll the pilot out to every site one after another. You always have to consider the organization and decide case by case how ready it actually is. So first the pilot is completed, the measures are tracked and the results documented. Then the community model is rolled out site by site. Alongside that, plenty of other things are happening, of course: looking at the plants' own emissions, for example, or other local measures that run independently of the community model. It's also about intervening in the company's processes and establishing sustainability there. Because you can only talk about excellence once sustainability is already built into the processes. At that point, sustainability is a fixed part of how the business operates and no longer "extra work." For SSI Schäfer, that's the path ahead. One major challenge still to come is building a global data base. The current sustainability report covers the 18 largest SSI Schäfer units. The next step has to be rolling this out globally, and that's exactly what this data base is needed for.

SSI Schäfer's sustainability report will be linked in the show notes once it's published. It gives you a sense of what a result like this looks like in the end, because for many companies the reporting alone is reason enough to get this process started.

Classic pitfallsWhen a mid-sized or even small company enters a process like this, there are always a few classic pitfalls.

Between strategy development and execution, the whole process takes an enormous amount of time. Companies often underestimate that at the start. That's why IR.on manages expectations with clients right away and makes clear that this time commitment and these people resources are genuinely necessary.

Take stakeholder involvement as an example. Many leaders believe they already know their stakeholders inside out. Sales talks to customers and prospects regularly, and employees are covered through performance reviews. So the assumption is that everything customers, banks and other stakeholders want is already known, without ever having had a structured conversation about sustainability. Of course, every industry has its perennial topics, the carbon footprint being one. But time and again, a structured, in-depth stakeholder survey brings plenty of new insights and angles to light. That valuable information can back up the strategy and create real value inside the company. Management tends to focus heavily on sustainability. Understandable, since the topic is everywhere right now. But people often have the impression that ESG consists of a single letter and refers only to the E (environment). In conversations with stakeholders, you frequently notice that the social requirements matter just as much, inside the company and across the supply chain. In mid-sized companies, the data situation simply isn't mature enough yet, and depending on the standard you're following, you have to go pretty deep. Data collection is another pitfall for many companies. When setting up data capture, you should ask a lot of questions and think things through. The data base you create and the system behind it have to hold up for years to come. It has to be fed and expanded, and ideally automated. In the best case, you move away from Excel spreadsheets and implement everything on the IT side. But that also means the IT systems have to be reworked and tackled so that sustainability KPIs can be captured at all. Here, too, the time factor is often underestimated. Resources are a key aspect you have to plan for, not just time, but people as well.Sustainability only works together

Sustainability in a company is never the responsibility of one person alone. Heiko Stötzel has made it one of his main tasks to get across to employees that ESG concerns everyone. There may be a dedicated unit that pulls together and filters the currents within the company, but sustainability itself shouldn't be projected onto him as a person. Everyone together has to take responsibility for acting sustainably. The processes in particular have to be designed sustainably, and only then can you achieve excellence in this area. Automated processes, embedded in a corporate culture, ensure that sustainability is factored into every decision from the outset.How long until every site is on board

To get all of SSI Schäfer's countries and sites on board, Heiko Stötzel currently expects a time frame of roughly three to five years. That's also how long it takes for the cultural development to reach the point where sustainability can be established everywhere. After all, the goal isn't just to tell a story, the words should be followed by sustainable action.

Where German mid-sized companies stand today

Among German mid-sized companies, the leaders often haven't really grasped the scale of the sustainability topic yet. As Fabian Kirchmann reports from conversations with business owners, many believe they're already doing enough in that direction. Often, though, they mean isolated measures. Those are good, genuinely commendable and important, but they simply aren't enough. At the latest when the new CSR reporting requirement arrives and the sustainability report becomes part of the management report, companies will have to rethink. Auditors will then ask why this or that sustainability measure was taken, or why sustainability hasn't been sufficiently factored into product development, and you have to be able to justify it. That means you need a systematic approach to sustainability in the company. Stakeholders have to be involved, strategy development has to be pushed forward, and concrete targets and KPIs have to be set so that the progress you make is measurable and traceable. That's absolutely decisive and it has to sink in. But there's still a long way to go.

Anna-Lena Mayer's decisive success factorAbove all, it's hugely important to assess the people and time resources realistically. For strategy development, until the targets are clearly set, you simply have to plan for a horizon of six to eight months before you can move into execution. The first sustainability report then takes another four to six months. Data has to be gathered and collected, texts written and employee interviews conducted. If you haven't approached this in a structured way yet, the best day to start is today, so you're genuinely prepared when the reporting requirement actually arrives.

Heiko Stötzel's decisive success factor

Sustainability is an incredibly interdisciplinary function. For one, the topic shouldn't be projected onto a single person, and for another, the organization should be ready to start. The person responsible, or the function itself, needs access to other functions. You need data, but also the willingness to contribute. The organization has to be prepared, which can be achieved through a lot of communication and workshops, for example. If there is a compliance officer, that person needs to know they'll be contacted. Procurement is another important interface. There's a lot of potential in the supply chain here. You also have to build a data foundation that makes the company's sustainability measurable. But sustainability itself has to be sustainable, too. If you move too fast and overwhelm the organization, you take a step backward on the social pillar of sustainability and overload your stakeholders. So preparation is a key point, and it's better to start today than tomorrow. You simply have to get going.

The decisive success factor, according to Fabian Kirchmann

In addition to the other advice, it's also critical that management is genuinely on board. The C-level should truly live the company's strategy, values, mission and sustainability agenda, so they can communicate authentically and credibly, not just externally but also within the organization. That's why company leadership has to be part of the process from the very beginning. You start with the management workshop, build the roadmap, and that's what makes the difference.