In this episode of The Heidrick & Struggles Leadership Podcast, Heidrick & Struggles’ Martin Holm speaks to Lise Kingo, an independent board director at Danone, Sanofi, and Covestro. Kingo, who served as chief of staff, executive vice president, and a member of the executive management team at Novo Nordisk and then held a five-year tenure as CEO and executive director of the United Nations Global Compact, implementing its Sustainable Development Goals, shares her insights on the private sector’s role in addressing environmental, social, and governance (ESG) challenges and explains the competitive advantages, economic and social, that companies can gain by purposefully implementing sustainability initiatives. She also shares ways to keep sustainability consistently at the top of the board’s agenda, discusses driving impactful sustainability strategies in the life sciences sector in particular, and offers advice to CEOs and leaders who are looking for a clear path for themselves and their companies on sustainability on how they can start.

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to The Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of senior-level executive search and leadership consulting services. Diversity and inclusion, leading through tumultuous times, and building thriving teams and organizations are among the core issues we talk with leaders about every day, including in our podcasts. Thank you for joining the conversation. 

Martin Holm: Hi, I’m Martin Holm, a partner in Heidrick & Struggles’ Copenhagen office and regional managing partner for Europe and Africa in the Healthcare & Life Sciences Practice. In today’s podcast, I’m excited to speak to Lise Kingo, independent board director at Danone, Sanofi, and Covestro. In 1988, Lise joined Norway Industries, now Novo Nordisk, where she served as chief of staff, executive vice president, and a member of the executive management team and was instrumental in defining Novo Nordisk’s sustainable business strategy. Lise then moved to New York for a five-year tenure as CEO and executive director of the United Nations Global Compact, implementing its Sustainable Development Goals. She now functions as an independent board member on prominent international boards. Lise, welcome and thank you for taking the time to speak with us today.

Lise Kingo: Thank you, Martin. It’s a pleasure to be with you today.

Martin Holm: Based on your range of experiences, could you share your view on what contributions the private sector can make to the ESG agenda to make the greatest impact on society and the planet?

Lise Kingo: That’s a big question. I think as a starting point, the whole idea about companies contributing to the environment, to society, is basically what we mean when we say “sustainable business” or “ESG.” A very good way to define this societal responsibility is to look at the 17 Sustainable Development Goals, unanimously agreed upon at the United Nations in 2015, because these goals outline some of the major global challenges that companies today need to be part of solving and improving. The 17 goals have served as a lighthouse and an inspiration for many companies across the world, and the majority of larger companies today have picked three or four of the Sustainable Development Goals and integrated them into their business strategy to make sure that sustainable business is built into the heart of their business operations. 

This also marks a very important shift in society from shareholder capitalism, where the role of business basically was to generate a financial surplus, to the model that is emerging today, which is stakeholder capitalism, where companies of course need to make a profit but they also need to contribute to the planet and to society across the world.

Unfortunately, when we look at the 17 Sustainable Development Goals as a scorecard for the world, this scorecard is in the red. The world is far behind on the UN’s goals for climate change, diversity, sustainable consumption, so it’s really urgent that business take responsibility. The 17 goals cannot be met without the contribution of the global business society, so it’s really important for the future of the planet and all of us that business is actively engaged.

Martin Holm: CEOs aspiring to pave the way forward on sustainability will of course be mindful of having a qualified dialogue with the ownership of the company, the board, and other stakeholders about how the company will perform better by [implementing sustainability initiatives]. It’s probably safe to say that the business agenda and the sustainability agenda go hand in hand. What do you see as the competitive advantages, economically and socially, that companies can be looking at when purposefully implementing sustainability initiatives?

Lise Kingo: Today, the sustainable business agenda has become quite advanced. It is an agenda that started back in 1992, so it has developed over a number of years. Today, being a sustainable business has become a legal requirement for all major companies. So it’s not voluntary to address ESG; it is a compliance matter for many companies. 

But let’s start with the investors. Investors today require companies to account for their ESG performance, not least because it is a very efficient way of providing investors with a risk profile for the company. But it’s also a great way to figure out if the company is prepared to become a company of the future, considering that we are living in a world with many challenges and many changes, in terms of climate change, geopolitical challenges, and of course social areas like diversity, inclusion, and so on. So it’s a very good way for investors to test if the company is fit for the future.

Secondly, as I mentioned, ESG reporting in many parts of the world today, particularly in Europe, is a matter of compliance. You have to report, as part of your annual reporting, on your ESG performance and also your climate impact. So you would be out of compliance if you didn’t report. And of course, the challenge is that you need to set up a strategy, you need some goals, and you need activities in order to have something to report on.

I think it’s also fair to say that ESG today is considered a fiduciary duty for boards. When I work as a professional board director on various boards, I am responsible toward the shareholders that the company has a good and solid approach to ESG. So it’s actually not a matter of choosing if you want to discuss ESG on the board or not; it’s part of the board’s fiduciary duty.

Finally, having a strong ESG profile is a prerequisite for attracting talented young people today. Many young people don’t want to work for a company they can’t identify with or feel proud of. We know from a Goldman Sachs study that 90% of young people today want to work for, buy from, or invest in responsible companies.

So I think it’s fair to say that ESG has become a competitive theme across all industries. That’s also why you see many board members educating themselves about ESG and many companies creating an ESG committee as part of their governance setup.

Martin Holm: Lise, you mentioned the board’s role here, so I’m keen to get your insights on sustainability and ESG in the boardroom. From your quite extensive international board exposure, what would you point to as some of the ways to keep sustainability consistently on the top of the board’s agenda?

Lise Kingo: I think best practice these days is to start by anchoring sustainability from the top, at the strategic level of the business. So first ensure that sustainability is an integrated part of the business strategy, and include the goals to achieve that strategy. The goals could be on access to health, on climate, on diversity, on bringing down the amount of plastic used in production, so making the goals very concrete. The next important thing is to ensure that sustainability is part of the purpose of the company and also part of the values and behaviors that drive that purpose across the organization globally. And then, sustainability has to be part of the company’s governance, as it’s part of the purpose. It should be a fixed item on the board’s agenda throughout the year. It should be anchored in a specific ESG committee or as part of another committee. And then it should be integrated in the balance scorecard of the company, so it can be cascaded throughout all functions of the business.

Once you have sustainability fully integrated at the strategic level and in the overall scorecard for the company, then you can begin to cascade down the priorities and the goals across the organization: research and development, production, supply chain, purchasing, HR and leadership development, and finance—because sustainable financing is becoming more important, it’s very crucial to anchor sustainability thinking there as well. And once that is done, you will have a much better framework to do the last part of the process, which is to report and communicate on, hopefully, all the great things the company is doing but also on some of the dilemmas the company is facing.

And what I see as best practice these days is that the sustainability goals of the company are part of the incentive targets for the CEO, for executive management, and they are also cascaded down through the entire organization. I’m also seeing that sustainability being values based is a key parameter when new leaders are being selected for important positions in the company. Of course, as a leader, you have to be able to create business results, but you also need to demonstrate that you are an authentic leader who understands the whole sustainability agenda, the importance of stakeholders, the importance of being global and holistic in your thinking. So that’s definitely becoming a parameter as well.

Martin Holm: Lise, in the life sciences sector, ESG, and sustainability in general, has become a major theme—for instance, responsibility to supply affordable drugs, to invest in developing new treatments, environmentally friendly manufacturing, transportation, medicines, and so on. What do you see as the key drivers for impactful sustainability strategies?

Lise Kingo: It’s interesting looking at the life sciences sector because the sector, and of course in particular the huge global companies, have worked with a sustainability agenda for many years, so I think they understand the agenda well. Most companies are very advanced in working with access to health, pricing in developing countries, providing donations to people who have no financial opportunities, and also creating foundations that can help them facilitate providing better access to their products. And clearly for the life sciences sector, the whole access to health issue is probably the most relevant of all because it is so related to the products and at the core of the business. 

In addition, I think the climate agenda becomes more important as we see how difficult it is for the world to maintain a future scenario aligned with the 1.5° increase in temperature.¹ So many life sciences companies are looking into Scope 3 targets. They are finding it very challenging, but I think many are putting in great effort to try to have Scopes 1, 2, and 3 in place. Scope 3 is a huge priority at the moment. 

And an emerging priority, which is very closely related to climate change, is biodiversity. I think for many life sciences companies today, that connection is a little bit abstract. But focusing on the link between health in society, climate change, and biodiversity is probably going to make a lot of sense in setting biodiversity priorities going forward. 

And the last theme that has received renewed focus is plastics. It’s not a new topic for the life sciences industry, but it has become more urgent today. Many life sciences companies will say, “We only have a limited set of materials that we can use for packaging and for devices, and they have to be approved by the authorities.” But that shouldn’t be used as an excuse [for not addressing the plastics challenge]. And this issue will also hit pharma companies sooner or later. Companies are grappling with the plastics issue both when it comes to packaging and devices. How can you collect and reuse, how can you begin to use plastic materials that don’t come from petrochemicals but from plant origins? It’s a long road, but the expectation these days is that you are working very hard on helping to address the plastics challenge.

Martin Holm: There are a lot of important themes, and it’s a complex agenda for sure. Here is the final question. With your experience from the industry and as an advisor in the boardroom, for all the CEOs and leaders out there looking for a clear path for themselves and their companies on sustainability, what’s your advice on where to start? 

Lise Kingo: I’d like to keep it very simple. Start at the strategic level, and define your priorities based on the Sustainable Development Goals. The goals define all the global challenges, and there’s a lot to choose from. Anchor these priorities in the heart of the business strategy, in the purpose, in the governance, and then cascade your priorities across the organization, making sure that incentives and promotions depend on both ESG and financial success. That is the very short recipe.

Martin Holm: Thank you, Lise, for sharing all your valuable insights and experience and advice and for taking the time to speak with us today.

Lise Kingo: It was my pleasure. Thank you, Martin.

Thanks for listening to The Heidrick & Struggles Leadership Podcast. To make sure you don’t miss more future-shaping ideas and conversations, please subscribe to our channel on the podcast app. And if you’re listening via LinkedIn, Twitter, or YouTube, why not share this with your connections? Until next time. 

About the interviewer

Martin Holm (mholm@heidrick.com) is a partner in Heidrick & Struggles’ Copenhagen office and regional managing partner of the Healthcare & Life Sciences Practice for Europe and Africa. He also co-leads the Medical Technology sector and is a member of the Industrial, Private Equity, and Corporate Officers practices.

Reference

¹ The Paris Agreement, an international treaty on climate change, was adopted by 196 parties at the UN Climate Change Conference (COP21) in Paris, France, on December 12, 2015, with the goal to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.” The UN’s Intergovernmental Panel on Climate Change indicates that crossing the 1.5°C threshold risks unleashing far more severe climate change impacts, including more frequent and severe droughts, heatwaves, and rainfall. For more, see “What is the Paris Agreement?” United Nations Climate Change, unfccc.int.