Green is a family value at Swiss flavour and scent giant
“When I started at Firmenich five years ago we were clearly leading. Today everybody is more or less at the same level.”
When Bérangère Magarinos-Ruchat, Firmenich’s vice president for sustainability partnerships, made that statement she was not bemoaning the company’s inability to maintain its lead. Quite the contrary, she was happily touting the success of sustainability principles in the flavour and scent industry, and the way her company has led that transformation by example. It’s not that Magarinos-Ruchat does not see the advantage in being more sustainable than the competition. She does (more on that later). It’s that she, and the leadership at Firmenich, recognise that most of the challenges cannot be solved by any one company or NGO operating alone, and that there is more than enough opportunity to go around.
Firmenich is among the very few global businesses that treat sustainability as a guiding principle, along with clients, people, creativity and independence, informing all its decisions. Decision makers at Firmenich explicitly recognise that a “sense of individual and collective responsibility ensures the company’s long–term success.” This philosophy reaches back, at least, to 1991 when management started undertaking its first environmental projects. And it comes straight from the top. In 2006 the Firmenich family, who still control the company, asked for an accounting of its status on social and environmental impacts. A sustainability report has been issued in every year since. Then, in 2010, CEO Patrick Firmenich declared to his team that any new molecules developed by the company henceforth would be biodegradable. As a result, the company, which spends 10 percent of turnover on research and development, is heavily invested in developing renewables, biodegradables, and green chemistry, and is rapidly developing a niche expertise.
120 years and still growing
Geneva-based Firmenich International SA is the world’s largest privately held manufacturer of fragrances and flavours for the perfume, food, cosmetics, cleaning products and related industries, and second overall behind local rival Givaudan. It was founded in a workshop in Geneva’s Servette neighbourhood by chemist Philippe Chuit and businessman Martin Naef, and found success producing Vanilin from a technique Chuit developed. In a couple of years, the partners and their employees moved to a new facility near the junction of the Arve and Rhone rivers, and reincorporated as Chuit, Naef & Cie. In 1900, Chuit’s brother-in-law, Fred Firmenich, took over sales and two years later bought out his relative’s shares in the company. By this time the firm already had a number of unique products for the fragrance industry, but they were just getting started. In 1938 they introduced the first synthesized raspberry ketone, revolutionising the food industry and actually creating the basis for the food technology sector.
Throughout the middle of the 20th century Firmenich continued to innovate new solutions for perfumes and the burgeoning processed foods industry. It also grew through local acquisitions. In the 1980s, however, the company started acquiring international properties, establishing itself in North America, Africa, Eastern Europe and Japan, and later opening subsidiaries in China, Malaysia, Thailand and Vietnam.
Today annual sales from both the fragrance and flavour divisions top CHF 2 billion. The company holds more than 800 patents and claims a Nobel Prize winner as a former director of research and development.
Smart on chemistry,smart on sustainability
Firmenich, like many firms, began its journey toward sustainability with baby steps. That meant it spent the 1990s mapping risks, focusing on safety and waste at industrial sites, and developing nascent philanthropic projects in communities within its sphere of activities. Where Firmenich’s leadership really demonstrated its commitment, however, came when it went looking outside the organisation for strategic inspiration.
Bérangère Magarinos-Ruchat was not a Firmenich insider, or even from a corporate background for that matter. What she brought to the job instead was a decade of experience building partnerships to tackle social and development challenges. Her tenures at the United Nations and the Bill and Melinda Gates Foundation developing business-civil society alliances clearly shows in the way Firmenich’s strategy has developed since she joined in 2010.
Magarinos-Ruchat studied how to bring innovation into public enterprises at IDHEAP in Lausanne, Syracuse University, Cambridge and Stanford. With PhD in hand she joined the Swiss Poste during its split from Swisscom, learning in the process how you transform a major public enterprise.
“I thought, that’s interesting, maybe we can do the same thing at the UN.”
She then spent seven years discovering how the UN could deliver services with private sector partners, including the well-known project with Coca Cola to make vaccines as ubiquitous in Africa as bottles of Coke. With Gates she worked on getting food and beverage companies involved in nutrition efforts. One result was the GAIN Business Alliance. Another was that she met Firmenich on a project to feed Nigerian schoolchildren and joined the company a few years later.
“You have to understand that Firmenich is a special place in the sense that it is family-owned, which makes a difference in the way you deal with sustainability cymbalta generic. It’s really in the values and ethics of the company,” she said.
“For me, after nine years in the UN and Gates, I was not going to join just any company. The fact that sustainability is there as a fourth pillar, for me, was a way to engage in the private sector, to try to transform the company and transform myself as well.”
There are levels of maturity with regard to sustainability and, to remain competitive in the long run, a business must aspire to full sustainable maturity. At the lowest level a company is concerned about reputational damage for both predictable outcomes and many others that come as a complete surprise. At this level the company is merely reacting to outside forces and focused entirely on risk management. At the next level the company becomes proactive and begins to understand and gain control over its environmental and social impacts. It uses this awareness to differentiate its corporate image, often relying on philanthropic works. At the mature level strategic objectives for business and sustainability are integrated and inseparable, and risks are predictable. As opposed to being reactive or proactive, it is transformational because it opens up a whole landscape of new business opportunities that could not be imagined in a less mature business. Transformative businesses are focused on shared value.
Since it started monitoring its impacts and accomplishments in 2006, Firmenich has moved well toward sustainable maturity. It is now strategic about its efforts and monitors important indicators throughout the organisation and its value chain. It is also realising the benefits of maturity, such as new business opportunities. “The annual Sustainability Report actually became an entry point in discussions with clients,” said Magarinos- Ruchat. “More and more clients are asking us not just to do nice things but to find solutions with them.”
Being a known leader in sustainable solutions has, therefore, been pivotal in acquiring new business.
“When you draw up a sustainability strategy it is really about where you fit as a company,” said Magarinos-Ruchat. Pointing to a diagram of Firmenich’s value chain she said, “We are here—B2B— hidden in the value chain.” It is their clients who have to answer to the public.
Companies like Unilever and Procter & Gamble are under a lot of pressure from the public, as well as retailers who want better products on the shelves that have a positive environmental, social or wellness profile. Those companies turn to Firmenich to find solutions for sugar reduction, biodegradability and water conservation, to name a few.
“It requires looking at sustainability through the product and not just through the corporate strategies. That is the big transformation in sustainability today. It’s not just about saying I’ve built a kindergarten here and have X percent of diversity in the company. It’s about product innovation today.”
Consumer demand is the other big pressure facing clients, according to Magarinos-Ruchat. Young consumers especially pay attention to what people say on social media about products. They want to know a product is healthy for them and the environment, where it came from, and they want to have a positive impact through their buying. Firmenich is highly aware of the challenges around digital transparency and its exposure to reputational risk in the supply chain. “As the world’s second largest buyer of vanilla,” said Magarinos-Ruchat, “it is probably wise to make sure your vanilla is traceable and is not produced by children.”
Tracing materials and verifying sustainable practices in a global supply chain can be maddeningly difficult. Some companies assume it is impossible. Best practice requires having strong relationships with suppliers. Firmenich works with its vanilla suppliers in Madagascar and Uganda to make sure they have the right policies in place, certification, respect for human rights, and pay fair wages. In the process they have a positive social impact on the communities as a whole.
Sustainability is, by nature and definition, forward looking and attentive to trends. Magarinos-Ruchat said Firmenich tracks the main risks for the company and for society that it wants to address through its strategy.
“On an aggregate level we know demand is higher than capacity. We are looking at increasing the capacity of farmers by engaging with them to work on local solutions.”
This has resulted in Firmenich entering long term agreements with farmers rather than the traditional year-by-year agreements. It allows smallholders on thin—or no—margins to plan for the future and grow their capacity. Sometimes the company pays in advance so farmers can make necessary investments in their businesses.
Climate is another important trend for the company.
“We know we are going to have risk in areas where we work. We buy a lot of natural products. Also, when farmers are under pressure you have a lot of price volatility,” said Magarinos-Ruchat.
Firmenich has already worked on climate-related products, noted Magarinos- Ruchat. When Brazil experienced water shortages in recent years people simply did not have enough to rinse properly after shampooing with traditional products. Firmenich’s client asked for a dry shampoo that would give the consumer an experience equal to traditional products.
Populations are in transition all over the world with farmers leaving the impoverished countryside hoping for work in mega cities. This is a threat to local cultures as well as the supply of agricultural products. Firmenich recognizes a responsibility to foster opportunities for their stakeholders in rural places.
Obesity is a rising trend in Mexico, China, Egypt, and other parts of the world. Africa has the “double burden” of undernourished children and obese adults. Improving societal issues like these through product innovation is an important goal of a mature sustainability strategy.
“We make flavours with technologies that let you decrease the sugar level. That means we can deliver a product with the same taste but 50 percent less sugar,” said Magarinos-Ruchat, noting the company is also working on salt and fat reduction.
Magarinos-Ruchat also monitors biodiversity and ecosystem services issues, defining agreements with local communities to protect resources. And she is adamant about the importance of having transparency in the supply chain—knowing what suppliers are doing, asking for reporting, avoiding greenwashing. But, she said, the company’s first responsibility is to its own people. Firmenich employs 7 000 people around the world and thousands of suppliers. “You cannot do either or” she remarked. “Health of the business and sustainability go hand-in-hand.”
“My point is, you cannot look at sustainability in isolation,” she said. “You are part of a system and how you inf luence the system and the system influences you i s very important when you start thinking about your strategy.”
Article by Peter Carson