Sustainability Should Be Part of Company Strategy
A Conversation with José Filippo, Natura & Company
Companies making products sourced from natural substances have had to address biodiversity and sustainability, but such business models may also offer wisdom other firms can follow. As chief financial officer for Natura & Company, José Filippo has been on the leading edge in developing sustainable sourcing initiatives that positively impact the bottom line. He shares thoughts on how other companies might do the same thing.
Hear more from Filippo at the Bloomberg Sustainable Business Summit on April 25 in São Paulo, where C-suite executives, influential investors, and innovative thought leaders will gather to discuss key issues and offer insight on sustainable business and finance.
What broad features of a sustainable business model built on products from natural and renewable sources can transfer to companies whose activities aren’t inherently eco-friendly, without negatively affecting the bottom line?
The Natura Carbon Neutral program, a major source of pride for the company, has been in place for over a decade. This program provides an example of how it is possible to incorporate a more sustainable business model into the company strategy. When we took the decision to become a carbon neutral company, we sought to reduce and mitigate our emissions. We achieved important targets, reducing our emissions by one third between 2007 and 2013.
But, in addition to reducing them, we sought to neutralize the remaining emissions by selecting projects that generate positive socioenvironmental impacts, helping offset emissions. Since 2017, we have been working with Banco Itaú to extend the reach of this initiative through a joint request for proposals for the selecting carbon-emission-offsetting projects.
This year we were joined by the B3 stock exchange and the retail operation Lojas Renner, demonstrating that changing mindsets to combat global warming is something that can be implemented by companies in the most diverse sectors. Moreover, this can generate an economic return for the communities in which we operate, as we perceived upon measuring the socioenvironmental impacts of our offsetting projects.
Measuring all the company’s stages of production, we can also help shape strategy, driving better targeted choices to make the business more sustainable. Based on this analysis, which includes the entire life cycle of our products, we are able to measure the local currency costs of the company’s activities, encompassing aspects such as water use and atmospheric emissions.
We pioneered the concept of studying the entire value chain, including product use by consumers. Natura constantly strives for innovation in its production process to make it more sustainable. Furthermore, effective monitoring of a company’s production chains is essential to ensure fair and transparent trade, regardless of the sector.
Lastly, worthy of note is that we were the first publicly traded company to become a B Corp, a global corporate alliance that seeks to integrate financial and socioenvironmental results, putting them on an equal standing. These companies are redefining the concept of business success in the most diverse sectors: today this is a community of more than 2,000 companies, operating in over 50 countries and 130 different sectors of activity.
What are some aspects of the community partnerships your company has worked out in areas where you acquire your product resources and how might such a model be applied to other business sectors?
In 2000, with the launch of our Ekos product line, we sought to transform socioenvironmental challenges into business opportunities, using Brazil’s biodiversity as one of our main tools for leveraging innovation. This demanded a new mindset in the way we related to the communities in the Amazon region who supplied the biodiversity ingredients for our products.
The entire Natura production chain was structured with the goal of generating a positive impact for society by means of fair trade, benefit sharing, and long-term relationship strategies which help formalize working relations with the supplier communities. For example, the Amazônia program initiated in 2011 is aimed at promoting sustainable businesses. The company has invested more than R$ 1 billion in the region since then, strengthening the local communities and generating income for them.
In 2018, we became the first Brazilian company to receive the Union for Ethical BioTrade seal, a new certification developed by the UEBT for the ethical sourcing of natural ingredients. The seal attests that all the vegetable ingredients used in the formulation of Ekos products have been submitted to a system that assesses principles and practices that ensure the maintenance of ecosystems, the fair sharing of benefits from the use of biodiversity and associated traditional knowledge, respect for working conditions, income generation, and local development, among other points.
What are the best ways to convince companies of the bottom-line value of transparent financial reporting as encouraged by TCFD?
We believe both shareholders and consumers are seeking a better understanding of companies’ business models, enabling them to comprehend not only the economic results, but also how these results are achieved. Since 2001, the Natura annual report has been published on an integrated basis, presenting both financial and socioenvironmental results.
This integrated approach has been incorporated by management to ensure shareholders have visibility of the company’s complete results, rather than just emphasizing financial outcome. It was precisely for this reason that we decided to become a B Corp.
The challenge is to ensure visibility that enables consumers to connect our products with the positions the company adopts in the causes it is engaged in. In parallel, we need to demonstrate to shareholders how the integration of this sustainable agenda is fundamental for the ongoing prosperity and future of the business.