A green light for innovation an interview

with Philips
Why do successful businesses need successful
societies? Nigel Salter and Georgina Combes check
in with Philips Robert Metzke on the Dutch
companys new vision.

You can only be successful in business if you are
successful as a society, says Philips Robert
Metzke. As Head of the multinationals
sustainable innovation programme EcoVision,
Roberts a central figure in making
sustainability happen across the business.
While Philips may not always get the public recognition for
sustainability it deserves, it was one of the first companies to set
a specific goal around green product revenues (30% of total
turnover by 2012) back in 2007, a target thats now risen to 50%
by 2015. So the company clearly believes that profit and purpose
can be aligned, but, as Robert explains, their big breakthrough in
sustainability thinking came by understanding sustainable
development is not just about green, but about the balance
between social and environmental performance. This rationale
meant that, we came to a sustainability model where we said:
Philips wants to improve peoples health and wellbeing. If you put
this idea at the centre then you need resilient societies around it
thats the social wellbeing and then you need supporting
ecosystems. So these things are interdependent and you cannot
work on one without working on the other as well.

Robert Metzke, Head of Philips sustainable innovation programme
This integrated thinking underpins Philips sustainable innovation
programme, but to deliver the business benefits, the company
realised it also needed to be reflected in their communication too.
Robert explains: We developed a methodology to understand
which part of the Philips brand value is driven by sustainability to
assess if there is a correlation between perception and
performance. We found ourselves positioned as a silent hero
doing a lot on sustainability but not getting much public
recognition for it. So we recognise theres work to be done,
especially now that sustainability is core to the companys
purpose of improving lives through meaningful innovation.
But whats the link between sustainability, Philips ambitious goal
of improving the lives of 3 billion people a year by 2025 and the
product portfolio? Clearly, innovation is vital and sustainability is
a key driver. We dont just innovate for the sake of it, says
Robert. We innovate to remain relevant to our customers and
address peoples needs in a changing world. Its an interesting
nuance, especially at a time when everyone seems to be talking
about innovation, because it puts sustainability at the centre of
the companys business development, rather than it having a
more narrow focus on product R&D. Its just one example of how
Philips aims to do the right thing commercially and for society, a
commitment that stems from the founding principles of the
Philips family enterprise, which began in 1891.
To Robert, innovation at Philips has evolved in three distinct
waves. In the 90s we led with our Ecodesign programme based
on the belief that with technology we can fix everything. Focused
at product level, developers spent their time searching for ways
to, for example, reduce packaging or increase energy efficiency.
While this was a good place to start, Philips realised that to move
forward they would need to influence consumer behaviour. And
so began the second wave thinking beyond the product,
towards end-to-end solutions and customer choices. Robert takes
the example of lighting: Rather than just trying to sell as many
light bulbs as you can, how can you provide adequate and
sustainable lighting solutions, selling light as a service? Philips
studied their lighting proposition, from the social benefits of light
and the implications for health and wellbeing, to how they reuse
and recycle materials, the opportunities for leasing as opposed to
selling materials, using renewables and incentivising business
partners to increase their efficiency. But why stop there?
The latest wave of innovation is exploring how Philips can
influence systems thinking throughout the supply chain. As
Robert explains, 50 to 100 years ago it was legitimate for
business to make more profits by externalising costs. Fortunately
NGO pressure and legislation have put an end to this, and
innovation is about including the benefits of more sustainable
solutions in your business model, finding the additional revenue
streams and investing in them.
Luz Verde, a successful green light project in Mexico, illustrates
the point. Philips teamed up with energy company Eneco and
ING Bank to deliver the first registered project generating carbon
credits from consumer energy-savings. We gave 20 million
energy saving light bulbs to residents in Mexico City to save
emissions, reduce costs for low income households and improve
access to light. The emissions savings were then monetised as
carbon credits by Eneco using INGs financing structure and used
to pay for better light bulbs. While great for the Mexican people
and the environment, it was also business for us financed
through carbon credits.
Philips innovates to remain relevant and address
peoples needs in a changing world.
Philips is no stranger to emerging markets: With the outsourcing
wave in the late 80s and early 90s, supplier sustainability became
increasingly important to us. We outsourced parts of production
to China, which meant we needed to talk with our suppliers about
what sustainability means, covering both the social and the
environmental aspects. It became part of our general business
principles and supplier regulations. But it was still very much
focused on risk and reputation management. Now, the focus in
emerging markets is opportunities for sustainable growth,
including in bottom of the pyramid markets. Philips has a big
opportunity to respond with affordable, sustainable solutions,
such as their off-grid lighting solutions or a smoke-free wood
stove which is aimed at alleviating respiratory problems and
improving health, especially womens.
Philips Mission and Vision
At Philips, we strive to make the world healthier and more sustainable through innovation.
Our goal is to improve the lives of 3 billion people a year by 2025. We will be the best place to work
for people who share our passion. Together we will deliver superior value for our customers and
shareholders.
Sounds great, but what does Philips new business vision to
make the world healthier and more sustainable through
innovation mean to stakeholders? Its helped to put what we do
into context and to inspire people he explains, but theres still
lots to do to tell the story externally. We need to develop the right
marketing claims, train sales and marketing staff, have intelligent
conversations with customers, and get feedback on how Philips
can help customers and consumers to meet their needs more
sustainably.
Philips have already started to strengthen their sustainability
messaging for investor and internal audiences throughout their
integrated report. It helped with the perception of the business
because including sustainability information made the report
better, Robert explains. Investors want to know how
sustainability contributes to shareholder value. Philips is ahead
of the curve with its fair value concept which identifies value
from sustainability. During the 2009/2010 drop in the economy,
the green part of Philips product portfolio was more resilient. In
fact, Robert says, it continued to grow where non-green products
declined. There are other real benefits too: Better solutions and
smarter designs with built-in social and environmental benefits do
not have to mean extra cost and contribute to brand preference,
loyalty and market position.
So what is it that drives the front runners in sustainability? Its
about staying relevant in a changing world by recognising long-
term trends, making connections between your business and the
outside world, and responding commercially to societal needs,
says Robert.