One Manufacturer’s Journey from Bulk Chemicals to a Purpose-Led Company
The article below is from our BRIEFINGS newsletter of 19 November 2019
Dutch company DSM was once one of the world’s largest bulk chemical companies. But over the last three decades, it has transformed itself into a cutting-edge, purpose and performance-led science company whose strategy is aligned with the United Nations Sustainable Development Goals (SDGs). At a recent Goldman Sachs Asset Management (GSAM) Forum event, Katie Koch, co-head of GSAM’s Fundamental Equity business, spoke with Feike Sijbesma, DSM’s CEO of 13 years, about the company’s journey and the impact that corporations can have on climate change and malnutrition, among other global issues.
Katie Koch: DSM once stood for Dutch State Mines but today, the company is no longer Dutch, state-run or in the mining space. Can you talk about the company’s journey to becoming a company driven by purpose, and focused on health, nutrition and sustainable living?
Feike Sijbesma: DSM started in 1902 as a coal mining company in the Netherlands at a time when approximately 40% of the country was dependent on coal. But by the 1970s, the production of coal gave way to chemicals, and DSM underwent its first transformation into a chemicals producer. Then, about 20 years ago, we decided to divest our bulk chemicals business and embarked on our second big transformation to reinvent ourselves into a life sciences company. From a macroeconomic viewpoint, it made sense to focus our investments on solving the world’s biggest needs – whether it is to reduce hunger or slow the pace of climate change. I firmly believe that it is possible to make money while contributing to a better society. In fact, I’m convinced it’s the only responsible way to make money in the future.
Katie Koch: Can you talk about DSM’s approach to innovation, and how those innovations are aligned with the company’s mission?
Feike Sijbesma: Given DSM’s business strategy is aligned with the UN SDGs, and many of the issues addressed by the goals don’t yet have viable large-scale solutions, innovation is at the heart of everything we do. For example, we’ve spent a lot of time looking at ways to reduce greenhouse gas emissions, and learned that methane emissions from cows and other livestock account for nearly 15% of global GHG emissions. As a result, we developed an ingredient we call Clean Cow which can be mixed into livestock feed and results in a 30% reduction in methane emissions from cow burps. But these types of innovations take time to have large-scale impact. You need to identify the problem, design the concept, create a product, and attract customers. In some cases, the process calls for working with governments and regulators, and convincing them that there’s a need. It takes time, but it can be done.
Katie Koch: You’ve said before that DSM is open to collaborating with other companies on innovations. How do you cultivate that culture within your organization?
Feike Sijibesma: In many companies, there’s a mindset that if you didn’t come up with an idea, it means you’ve failed. But in all of the fields that we’re in, there’s a minefield of patents and technologies – we don’t own everything. That means we can continue to fight on our own to find a solution or we can combine forces with other companies to reach the answer more quickly, for the collective good. So in an effort to change the mindset of our employees, about eight years ago our Chief Innovation Officer started a new internal narrative around our innovations, which we call “Proudly Found Elsewhere.” This initiative has cultivated a culture of open innovation, which has led to 80+ academic partnerships, 30+ Public-Private Partnerships, and various venturing projects, IP arrangements and joint ventures – all aimed at fulfilling our purpose of creating brighter lives for all.
Katie Koch: So to pick up on the idea of changing mindsets, how have you been able to successfully push the company in a different direction and what were some of the challenges?
Feike Sijibesma: I always try to have a vision on what’s happening in the world and a vision of where our company should go – and then we go and pursue it. I develop this vision by traveling, interacting with our people and clients, picking up new ideas and adjusting my views based on those conversations. The narrative of the company has to be consistent with what is happening under the hood and in the real world. This is essential to being viewed as credible. Once you have the vision, you need to be able to communicate it effectively with your people. You have to be open and transparent on what you’re doing.
Katie Koch: So I want to stick on this concept that you can do good in the world while also doing well by your shareholders. Recently in the US, the Business Roundtable made a statement advocating for executives to take a more expansive view of their company’s role in society, beyond serving shareholders. Are we at a point where corporations can be leaders in addressing global issues such as climate change if governments are falling behind?
Feike Sijibesma: Yes, I think so. Today, there are many multinational companies who have a huge impact on society and are able to have influence across borders. Governments’ jurisdictions, on the other hand, stop at those borders. As companies’ impact on customers grows, so should their responsibility for impact. The private sector should take a leadership role in addressing climate change, but collaboration between governments and companies is still needed because neither can solve the world’s problem on their own.
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