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“This year, our Green Product sales exceeded half of total sales, showing that our sustainable performance and offerings have resulted into a stronger demand driver for our brand,” explained Henk de Bruin, Global Head, Sustainability, Royal Philips. In an in-depth interview with de Bruin, we discussed Philips’ approach to corporate citizenship, how small changes can make a big difference, key social investments they’ve made over the years and the kind of impact they’re having, why doing good is good for business and much more.
Henk de Bruin is the global Head of Sustainability within Royal Philips. Reporting to the Executive Committee, Mr. De Bruin focuses on strategy and policy development and stakeholder management. Through a small but dedicated network, the execution of structural sustainability action programs in the company is driven via the standing organization.
Rahim Kanani: Tell me a little bit about your current role and how Philips is thinking about 21st century corporate citizenship, sustainability, and social investment.
Henk de Bruin: I am the global Head of Sustainability within Royal Philips and my job is to focus on sustainability strategy, policy and program development as well as stakeholder management. This is passionate goal which I share with my team as well as with our international, dedicated network of sustainability professionals who look after the execution of sustainability action programs in the +100 markets where Philips is represented.
When I am asked what I think about sustainability in the 21st century, I have to think about year 2050. And why this year…is because by 2050 it is predicted that there will be nine billion people on the planet – all wanting a high quality of life that must be achieved within the limitations of the Earth’s resources. And is the pivotal theme that connects Philips’ vision and sustainability.
Philips’ vision is to improve people’s lives and make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 2025. Fulfilling this goal means developing new approaches to healthcare that promote prevention rather than simply treating illness or focusing on energy-efficiency and innovations that are more intuitive, effective, affordable and accessible. We recognize these global challenges that today’s societies are facing and drive sustainable innovation by considering both the needs of people and the ecological capacity of the planet: we strive to improve people’s health, well-being and quality of life, while reducing the ecological impacts of our products, solutions and operations (i.e. a dual approach to sustainable innovation: social and ecological).
Philips Lighting, for example, contributes to sustainability through energy-efficient solutions and safety in urban areas. Consumer Lifestyle continues its work on material use and healthier lifestyle solutions. Our Healthcare investments reflect the increasing interest in innovative solutions that improve patient outcomes, expand access to care and reduce environmental footprints.
Across all our sectors, we apply circular economy thinking to close the materials loop and move towards new business models. This requires a new way of doing business that moves away from the traditional linear economy (take-make-break) towards a holistic, circular economy. We strive to do this by creating innovative products and business solutions that generate value through the regeneration of products, parts and materials that we collect, refurbish and reuse. Furthermore, we collaborate with suppliers, peer groups, recycling companies and civil society organizations to rethink business models. In this way, we are responding to the changing needs of our customers and to global challenges.
At the social investment side, we have a three-pillar approach addressing disaster relief, employee engagement and social innovation. We apply our innovation strength by developing solutions for access to healthcare, access to light and to build a healthy future, particularly for the underprivileged in close cooperation with some major international organizations.
This underpins our approach in innovation which must be based on a deep understanding of people’s needs and have a positive impact on their lives. In 2013 we improved 1.8 billion lives, measured in terms of the number of people touched by our Care, Wellbeing and Green products.
Kanani: Given the sheer scale of Philips—115,000 employees in over 100 countries—how do you think about incremental change, and how do you estimate the impact of these efforts?
de Bruin: Sustainability being a prominent part of the company’s vision and our concrete goal of improving the lives of 3 billion people a year by 2025, has helped to direct our sustainability and innovation efforts within the company. Although sustainability is now clearly articulated in the company’s vision, this focus is nothing new for Philips. Right from the beginning, our founders focused on the importance of social responsibility by building schools and houses as well as setting up sports clubs and trainings for the benefit of employees and the communities they live in. We have focused on environmental sustainability since the 1970s, continuously looking for ways to improve our operations, products and supply chains. And Philips set its first sustainability standards back in 1994. Although sustainability has its roots in the company and there has been consistent progress, we cannot deny that much more remains to be done. If Philips is to remain competitive in the future, it will require the company to continually adapt to the huge macro trends that it faces. What's needed is a systems-level shift across the entire business.
As chief sustainability officer at Philips, it is my job to flag up the importance of social and environmental issues – also internally. Change is never easy, whatever the pace but it helps when we have the full backing of our Executive members. Philips, as you'd expect of a company our size, employs a full fleet of bright engineers and competent managers but to achieve meaningful change we ask them to approach their day jobs differently. Let me take Circular Economy as an example, which is one of the dimensions driving our company’s future transformation in moving toward service-focused business. In its simplest form, it is about decoupling of material use and energy consumption from economic growth. However, implications from a business process perspective are profound: providing circular solutions and new business models require new competencies and new type of cooperation. We realize that the circular economy is not a strategy you can pursue alone. It requires relationships with recyclers, retailers, consumers, resource providers, regulators and so forth: basically, everyone involved in a company's value chain, from start to finish. So having the right connections is essential and this is one of the reasons why we decided to partner with the Ellen MacArthur Foundation. The foundation and McKinsey estimate the materials saving potential alone to be at over a trillion US dollars a year.
Kanani: What are some of the programs and partnerships you're currently working on and what kind of impact have they had thus far?
de Bruin: We have of course plenty of programs and partnerships running which span across our three sectors, Healthcare, Consumer Lifestyle and Lighting. Herewith a few highlights:
- In March we launched our Philips Africa Innovation hub in Kenya that will be the center for developing innovations “in Africa-for Africa” in the areas of healthcare, lighting and healthy living (e.g. community care services, smokeless cook stoves, consumer solar solutions). This hub underlines Philips’ commitment to invest in Africa and provide Africa-relevant innovations to address key challenges facing the continent.
- Philips to install 100 community light centers across Africa. A Philips Light Center is an area of 1000m2 (size of small soccer pitch) lit with solar-powered LED lighting to function as a communal area supporting activities like sports, healthcare, education, commercial activities by enabling communal life after dark.
- Philips will convert over 13,000 garage lighting fixtures to an innovative, custom-designed LED lighting solution for the Washington Metropolitan Area Transit Authority (WMATA) that will reduce energy usage by 68% per year and prevent 11,000 tons of CO2 emissions. The project is realized without upfront costs through the 10-year performance based maintenance contract that will create USD 600,000 savings in maintenance for WMATA. This project was recognized by SUSTAINIA100, an annual guide to 100 innovative sustainability solutions from around the world.
- Philips has partnered with Green Sense Farms (GSF), a Chicago-area commercial grower, to develop one of the largest indoor commercial farms using LED grow lights tailored to their specific crops. This innovative farming model allows them to harvest 20-25 times a year by using ‘light recipes’ optimized for their produce, using 85 percent less energy.
- Barcelona City Council and Philips have signed an agreement that will seek to make the city more energy efficient through connected LED street lighting, and make Barcelona a trailblazer in the field of Smart Cities for the economic, environmental and social benefit of citizens. Philips will also provide defibrillators to the city of Barcelona as part of this collaboration.
- Philips and AMREF (African Medical and Research Foundation) Flying Doctors, the largest health organization in Africa, work closely together in an innovative shared-value partnership model designed to bring about a structural improvement in the health care infrastructure and provision on the African continent. This long-term strategic partnership aims to support AMREF in achieving its social goals and will help Philips in its ambition to improve the lives of people in Africa, while at the same time realizing growth in this strongly emerging continent.
- Philips and Georgia Regents Medical Center in the US signed a 15-year alliance to facilitate innovative and affordable care. This long term alliance will support multiple GRMC sites, including its combined 632-bed medical center, cancer center, and children’s hospital, with an order value of approximately USD 300 million.
- ActiveLink is a state-of-the-art fitness and activity coaching service that helps Weight Watchers members set personalized goals, seamlessly track their progress, and ultimately help them reach their goal of becoming more active over time. Just as Weight Watchers members track points for food, ActiveLink makes it easy to track points for activity. It helps members better understand how activity impacts their weight, and their health and supports a long lasting behavioral change.
- The Philips Smart Air Purifier provides families with the confidence and reassurance that they are breathing clean air. To ensure there is no lapse in air quality when families enter the home, the Smart Air Purifier gives real-time overview and control of indoor air quality via a smartphone. These products can help to improve the lives of those suffering from allergies or respiratory problems - good indoor air quality can help prevent such issues from occurring or worsening.
Kanani: At the same time, what are some of the challenges you've had to face along the way, and how did you overcome those barriers?
de Bruin: The need for change and the often necessary speed of change has a natural counterpart called resistance. Next to that, there is the ‘old school’ thinking that sustainable solutions, especially those with the ecological benefits, are more costly. Adequate change management, consistent program development with key performance indicators measurement, in and external reporting with external assurance, top management support and involvement and bottom-up employee engagement, smart pilot selection, best practice communication, personal persistence and passion will continue to be my main ingredients to overcome those barriers.
In the case of Circular Economy, all of these will be the priority for us in the coming period. It is about driving a major transformation to other business models which requires a new mindset and culture changes at all levels: supply management, innovation, design, sales, marketing, communication etc. The Circular Economy approach therefore fits extremely well in our overall Accelerate! transformation (i.e. Philips’ performance and change program) and has the ability to fuel that even further and faster.
Kanani: What kind of impact do these efforts have on the bottom line?
de Bruin: This year, our Green Product sales exceeded half of total sales, showing that our sustainable performance and offerings have resulted into a stronger demand driver for our brand. But sustainable innovation for us is not only about Philips’ own margins. We find it just as important when we can enable significant energy savings for a city. For example: we partner with the city of Buenos Aires to covert more than 70% of its street lights to LED technology, which will enable energy savings of over 50% for the city and a significant reduction in CO2 emissions every year. In Healthcare for example, the impact of our efforts would be in improving access and affordability or quality of healthcare – which serves both the social and ecological dimensions of our sustainability strategy. This year, we started collaboration with the new Karolinska University Hospital in Sweden which will be operated with a low environmental impact, achieved by a range of Green Imaging systems such as MRI systems that have 20% lower energy consumption than the industry average.
Next to that we have learned that green design often leads to smarter and more cost effective ways of making a product. Modular design, design for disassembly and design for residual value are methodologies we apply to reduce costs and retain value over the lifetime of a product.
Kanani: Is doing good, good for business, and how do you see the trend of 21st century corporate citizenship taking shape in the future?
de Bruin: How will our children live in 20 to 25 years? Will the planet provide enough natural resources and a healthy climate? In 2050 there will be 9 billion people who will all need energy, food and water. If we do nothing, the global energy will increase by 50% in the next twenty years, and the same for food consumption. At the same time, millions of people will be faced with a shortage of drinking water, also as result of the climate change. This is where we see the transition from a linear to a circular economy as a necessary boundary condition. As companies move to this approach of value creation in the total value chain, the co-creation concept – both upstream with our suppliers and downstream with for instance recycling companies – will become crucial. And there is already enough proof that sustainable production and development does not necessarily cost more but can give a competitive edge. Realizing this, we believe, will give the needed thrust for circular economy in the coming 10 years.