NKT CEO: Both our product handprint and footprint matter

To gain a corporate perspective on championing sustainability, Nordea On Your Mind author Johan Trocmé interviewed Claes Westerlind, CEO of Danish power cables provider NKT. He sees a strong link between having a business aimed at making society better and having a sustainable production footprint. Buy-in for this philosophy runs broad and deep in the company, paving the way for sustainability investments which are strategically necessary but may take time to pay off. Customers also increasingly weigh ESG into purchasing decisions, versus a more pure price focus 20 years ago.

Johan Trocmé (JT): In what ways can NKT's products and solutions contribute to the energy transition away from fossil fuels, and towards a more sustainable society and economy?

Claes Westerlind (CW): If you start by looking at what we do, we are a power cable provider – from where the electricity is being generated, to where it is consumed. There are two main drivers that push the demand for our products forward. One is the green transition that we are seeing in society at the moment. This requires cables to transmit offshore wind power to the power grids, for example, or when you want to electrify sources that would otherwise emit CO2 when they are in production, such as offshore platforms that are used to extract oil and gas. The second trend driving demand is the general electrification that we are seeing in society today. More and more of the energy we are using in society today depends on electricity rather than fossil fuels. Wherever you want to do this, the grid needs to be reinforced, and the end-user will need a way to connect to the grid. A typical example is the charging of electric vehicle batteries. These trends are currently important demand drivers for the power cable industry.

JT: You also have high ambitions for a sustainable footprint for your business. Where did NKT’s strong emphasis on sustainability come from? What prompted the company to embrace sustainability and make it part of its identity and values?

CW: The strong emphasis for this simply comes from being a Nordic company and being close to nature. Another thing is the blueprint we build our business upon. To make the world a better place, we always need to think and reflect on how we can minimise our footprint when delivering the solutions we make. We can improve on manufacturing, delivering and installing our solutions. And last but not least, I want to give credit to our employees. Sustainability is really being driven at the grassroots level in the organisation. Long before sustainability and ESG became the hot topics that they are today, actions were being taken by people in our organisation to reduce our footprint when we are carrying out our processes. This driver has been present in the company for 15-20 years, and of course has sharply accelerated in recent years, in parallel with the rest of society.

JT: How do you think NKT compares to your industry peers in terms of attitude to sustainability and footprint?

CW: I would be careful about claiming that we are better than our peers, but we did embark on the journey due to the fact that our business philosophy is to deliver systems that do good for society. So the next step to deliver these services while having a lower footprint was not very big. We were the first company among all of the major power cable manufacturers that committed to SBTi in 2020, so in some instances we have been first movers. If we go further back to the 1960s, we were the first company to institutionalise a recycling centre for power cables, and in 2020 we made the decision to run all our factories on green electricity, which serves as a testament that we have been aggressive and maybe even first among our peers.

JT: Thinking about what has made you embark on this journey and choose to be an early mover within your industry – has that been driven by pressure from employees, customers or society in the form of regulators or other stakeholders? Or did you decide internally in the company that this is what we are going to do?

CW: We believe that this is who we are. We are trying to embed ESG and sustainability into our DNA, and that has been the case for a long time. Of course we are inspired by our employees, society, and competitors. But I’d say that the general realisation in society that carbon emissions and the footprint of companies really matters, including from a consumer perspective. You can see a strong pull today compared to 10-15 years ago. We see that customers are also incentivising us to always stay ahead on sustainability topics. This is something that has changed, and it is great to see that it is not only the product that matters, it is also the footprint

JT: Do you ever run into opposition or scepticism when trying to convince people in the organisation that this is the way we should go?

CW: I would not say that I meet a lot of opposition, and there are a lot of proposals coming from the organisation on how we can improve further. But I would say that there is this paradox around sustainability. On one side, you are doing well for the environment, and you have something to feel good about. But on the other side, there can be an increased cost for the business from doing that. We continue down the path because we believe it is right, and everyone in the organisation is aligned. We want and need to work hard on further improving our sustainability profile.

JT: Do you look at sustainability in terms of the business case for it? Are you able to charge higher prices or see stronger growth from a more sustainable offering or footprint? Are you able to avoid penalties, fines, other charges or issues from having a strong sustainability profile? How do you see this evolving?

CW: We have the SBTi targets and we have initiatives for circularity and biodiversity. These are targets and initiatives that are not about financially quantified business cases, but rather that we believe are the right things to do, and our belief is that in the end it will pay off financially. Even if this may not be the case on a short-term basis, we continue to do it. When we incorporated all these initiatives, it was not always a financially sound decision. We were increasing costs and our customers were not paying more, but it was still the right thing to do, but over time it should render financial value for our shareholders and customers.

 When it comes to the customers and what the market is prepared to pay from a financial perspective, a few years ago customers would not pay a premium for a product that is more sustainable. But today we see that our customers are sometimes prepared to pay more for a greener product, for example a power cable manufactured with copper having a lower carbon footprint than normally sourced copper. We also see that sustainability is becoming a bigger part of the evaluation process when customers are procuring large infrastructure projects. Customers 20 years ago would base their decision solely on price, but 10-15% of the decision today is based on sustainability factors. We would like to see sustainability factors be even more prominent to ensure the cable infrastructure is built with the lowest carbon footprint possible.

JT: Could you say a few words about your ReNew BOOST Strategy?

CW: The strategy was crafted back in 2020, and then updated in 2022. It is based on three pillars – growth, innovation, and driving sustainability. The sustainability part of the strategy has many aspects including climate action and science-based targets. For Scope 1 and 2 greenhouse gas emissions, we have come a long way. We also have initiatives for Scope 3 greenhouse gas emissions, but there is still work to be done on this front. In working with the Scope 3 targets, I think this is where the big battle lies for society in general, and for most companies. 

We strive to work very closely with suppliers when it comes to helping them lowering their footprint, but also when it comes to innovation, so that we can get more sustainable materials flowing into our portfolio. Circularity is also critical, and we are doing a lot within the field of recycling materials.

And lastly, something that is being talked less about, but is equally important, is the social aspect. Many of our factories are in smaller areas outside the big cities, and often our presence in these smaller areas are a big part of the community, so it is important to do things there. The social aspect is also about diversity and inclusion and safety. We need to ask how we can provide a safer environment and how do we make sure that people come home in the same or better shape as when they came to work the same morning. So not only do we have firm financial targets, but we also have firm sustainability targets. All the topics just mentioned are equally important, and as a company, if you are serious about the sustainability journey, you have to make sure you are measuring and following up to ensure you have a positive trajectory.