Creating Value by Doing the Right Thing: Q&A with Thomas Leysen

Thomas Leysen is the Chairman of Umicore, a global materials technology and recycling group. Before becoming Chairman, Thomas served as the Chief Executive Officer for eight years, transforming the organization from a metals producer to a global materials technology and recycling group with a focus on clean technologies, rechargeable battery materials, automatic catalysts, and precious metals recycling. He is also Chair of the Supervisory Board of Koninklijke DSM, Chairman of Mediahuis, and Chairman of the King Baudouin Foundation. Previously, Thomas served as the Chairman of KBC Group, President of the Federation of Enterprises in Belgium, and was the founding Chairman of The Shift, a coalition of businesses and NGOs in Belgium, promoting sustainable development..

Recently, Thomas spoke with Jacques Bouwens, Managing Director in the Board and CEO Advisors Practice, and Filiep Deforche, Managing Director in the Board and CEO Advisors Practice and Leader of the firm’s office in Belgium, at Russell Reynolds Associates. Thomas shared his view on the evolution of sustainability and effective stakeholder engagement, how he led Umicore through its sustainability transformation, and his view for the future.

The interview presented below has been edited and abridged for clarity.

AN EDITED TRANSCRIPT

Filiep Deforche: Thomas, I remember vividly our very first conversation – it must have been at least 20 years ago when you were appointed CEO of Umicore, when you shared a compelling vision of how to transform Umicore. You have been very vocal about the importance of sustainability and you have put your money and time where your mouth is. Thank you for being with us today.

Jacques Bouwens: You are obviously well-known for sustainability and are highly committed to it. On a personal level, what does sustainability mean to you?

Thomas Leysen: The definition that I often refer to is the definition given by an English author, Jonathon Porritt. He defines sustainability as ‘the capacity for continuance into the long-term future.’ This has to be the end goal for our planet but it also has to be the goal for any organization. Sustainability is very much about the long term – thinking about how to engage with current activities and at the same time projecting yourself into the future, and doing this whilst integrating the planetary as well as societal boundary conditions. It is important to start there in order to define what you have to do today.

Filiep Deforche: When it comes to sustainable development, what is your personal drive and when did that become a motivator for you?

Thomas Leysen: I have always been interested in environmental issues. In school, I was engaged in the environmental movement with some friends. We were almost activists in those days, and actually two of my classmates went on to later become President of Greenpeace in Belgium. I made a slightly different career turn, but this certainly remains a theme of interest for me. The focus was slightly different then. In the ‘70s, there was much attention on air and water pollution, but carbon emissions and fossil fuel usage were not yet on the horizon.

Filiep Deforche: Would you say your thinking about sustainability has developed over time?

Thomas Leysen: Of course, as new challenges have surfaced. Previously in the ‘70s, the concept of climate change was not even known – now it is the most pressing issue that we have. There is increased understanding now around challenges related to biodiversity and water usage. The themes have simultaneously broadened and deepened, and they now also encompass social and governance issues.

Filiep Deforche: What would you say has been your largest success so far, or the element you are most proud of today?

Thomas Leysen: I am proud of the collective endeavor around the transformation of Umicore. We transformed a company that was an old school metals producer with a heavy environmental legacy, and not very well-liked, into a company that is making a notable contribution to sustainable development through materials technology in rechargeable batteries, emission control catalysts and recycling. We are one of the enablers of the shift to clean mobility. We have resolutely taken responsibility for our historical legacy issues as well. This does not mean that we have no more challenges ahead of us, but overall we have made a very profound transformation in the company’s scope, business model, culture, and public perception. At the same time, we have also created a lot of value. Umicore’s market capitalization in 2000 was about €600 million; today, it is at €12 billion. This is a great demonstration that by doing the right things, you can indeed create value over time. This was a very exciting journey that I am proud of.

Another interesting journey that I look back on with pleasure is with respect to KBC Group, a leading Belgian banking and insurance group. I became Chairman of KBC Group just after the financial crisis. We had quite some short-term problems to deal with, but as we resolved these and put the company back on the right footing, it became clear that we had to think differently about our culture and business model going forward. This included reflecting on our purpose and our role in society. The Board was really important in changing the culture and anchoring the long-term perspective, and in defining on what sustainability meant for a financial institution such as KBC.

Jacques Bouwens: In the precious metals industry, there is a clear, tangible goal for sustainability; however, in the services or financial services industry, the journey may not be as straightforward. With the insight you possess today, what are some things you would have done differently back then?

Thomas Leysen: You undoubtedly learn as you go forward, and there are certain things that you would like to have done more quickly. Not all projects worked out, but it is always like that in life. As a leader you energize the people, try to instill a vision, make decisions – hopefully more good than bad decisions – but it is a long-term journey and you have to learn from insights that develop over the years. I am glad that Umicore was among the pioneers in its field, able to already articulate a vision around circular economy in 2000, 15 years before it became a household word. Looking back though, I would have dealt with some issues more radically and done some things earlier.

Jacques Bouwens: As sustainability evolves, how do you drive transformation in your organization? What methodologies have you used to create buy-in from key stakeholders to successfully transition and focus on sustainability?

Thomas Leysen: When we made the shift in Umicore and put sustainability front and center, many people in the company received it with enthusiasm. Pride in the company increased. Umicore, in the past, had some issues around historical pollution, and we had been more in a denial mode. The day we said we would proactively tackle the remediation was an expensive day for us, because it implied a commitment of more than €150 million to clean it up. But it was enormously liberating for many of our managers who had been trained to minimize discussion around these issues. Now, there was enormous pride that the company was taking responsibility, and not trying to shift them to society. There was great enthusiasm, and an accompanying sense that it is genuine – that we not only talk the talk but walk the walk.

We discovered that a plant in France had some emissions which were not complying with the norms, and managers had falsified publications to authorities to avoid such disclosure. We found this out through an audit and needed to decide on what actions to take. If we disclosed this, the authorities could decide that the plant should be immediately shut down, with very significant financial consequences. I decided with my colleagues on the Management Board that there was no alternative for us than to be fully transparent and take the consequences. We also decided to make this a lesson for the organization. We called the top senior management of the company and explained the situation to them and let them know that we were going to report it. I gave the plant team two to three days to prepare a case around a narrative for the authorities and potential remediation strategies. In the end, it worked out well. We reported it, the authorities were not pleased but they gave us some credit for addressing it ourselves, and we found solutions to solve the problems going forward. It was a very powerful moment in educating our people about our commitment to sustainability. Previously, it might have been dealt with a different way. These are teachable moments – it is important to show the organization that you really mean it.

Filiep Deforche: Did it occasionally lead to questions around personnel decisions – whether you could continue with certain managers whether leaders were aligned?

Thomas Leysen: Most people are very willing to follow, as soon as they truly feel that top leadership is committed. There are others that have been engrained in a different way of thinking. They find it hard to adapt to the new culture and to change their behaviors, and we have had to make some tough decisions about people. I found this is an area where a lot of teaching is needed, especially in the initial stages of transformation, to ensure buy-in from stakeholders and employees.

When I was CEO, I spent a lot of time on internal roadshows. It was before the time of digital townhalls, so I would visit 20 plants a year. Umicore, at that time, had approximately 80 plants around the world. Each time, we conducted a townhall meeting, to address employees’ concerns, explain again what the values and culture of the company were, and discuss both business and sustainability issues. It was a significant investment of time, but it was absolutely necessary. My colleagues on the Executive Committee did the same. This is how we truly changed the culture at Umicore.

Jacques Bouwens: In your board meetings, how is sustainability covered – is it a separate topic, or is it touched upon at all meetings?

Thomas Leysen: Sustainability certainly has to be integrated into the strategy of the company. The Board and management need to develop a shared understanding on sustainability-related threats and opportunities for the company. This really needs to be thought through before formulating a strategy. It should be part of all strategic discussions.

On another level, there are questions around the operational targets that you set, such as regarding CO2 reduction, the road to “net zero”, on water usage, but also on diversity and inclusion, stakeholder engagement, dealing with the supply chain, etc. These need to be reviewed periodically by the Board. For example, I have instituted in a number of companies a sustainability dashboard which gets discussed in depth every six months. This allows the Board to see which parameters are evolving the right way, to understand where we are on track or ahead of schedule or lagging behind. It ensures that there is a systematic discussion at the Board level at a regular interval, and that the management feels this is something that the Board really cares about. At DSM, a Dutch nutrition and materials company where I have just taken up the chairmanship, there is a Sustainability Committee which digs into opportunities and challenges around these issues, ahead of every Board meeting.

Jacques Bouwens: Are there debates around different perspectives on how to achieve this?

Thomas Leysen: There certainly are – and sometimes there are controversial debates in which people feel very strongly about certain issues. It might be on how far one wants to go or how quickly one could do it. There are also situations when some Board members are very passionate and well-informed, while others are less cognizant of the issues and take more of a backseat in these discussions. DSM is a long-established sustainability leader in its sector. It has a very deep knowledge and culture around it. You can feel that straight away when you see the quality of the Board discussion on these topics.

Filiep Deforche: Being a European industrialist and a member of the Bilderberg Group, do you see a change in the pace of adoption, change of commitment, or conviction around things changing now?

Thomas Leysen: Yes, very much so. This is partly driven by a broader realization from corporate leaders that these issues really matter – they are crucial for success and necessary for survival. Companies that will thrive in the 21st century are companies that integrate sustainability into their strategic thinking, as well as into their operations and culture. This realization has intensified in the last four or five years. In the last two years particularly, societal and stakeholder pressure has intensified the movement. We are moving away from vague notions around corporate social responsibility, and seeing much more concrete targets and action plans. Now, virtually every multinational has to set transparent targets on CO2 emission or the road to net zero. Some can do it by 2030, others by 2035 or 2050, but these are not gratuitous statements. If a multinational publishes these targets, then the whole organization of 10,000 or 100,000 people needs to move in that direction and needs to transform. This will bring real change over the next decade.

There is also pressure from the financial markets. I have seen this impact at KBC. There is a massive shift to socially responsible investments (SRI), so-called ESG funds and other sustainability-themed funds. I remember when I started at KBC, ESG-related products were still only about 6% or 7% of the total asset management products. Then we began to position it more proactively and today, sustainability funds are probably 50% of new sales of investment funds. In the past, you could say you did not really care about being part of the Dow Jones Sustainability Index or decide that you did not want to fill out all these questionnaires from sustainability and ESG investors. That becomes much more difficult when these become a large part of the investment universe. Regulatory pressure is also intensifying. The initiatives at the European level are being rolled out at a rapid pace. There is pressure coming from all stakeholders – society, customers, regulators, politicians, financial markets, and individual investors.

Jacques Bouwens: In selecting Board members and executives in your teams, how do you ensure they bring sustainability knowledge and mindset; how do you check for that?

Thomas Leysen: It is definitely a prominent part of the recruitment conversation, to see whether candidates have real knowledge about sustainability issues beyond generalities. It is important to really probe deeper to understand what they have already done in their career that is tangible and concrete, demonstrating an understanding of all the core issues. This is the same for Boar members. In certain instances, you recruit real experts in these fields, but not everyone can or needs to be an expert. Board members, however, need to have at the very least a basic literacy in ESG topics and bring the right values. Otherwise they will derail the Board’s intended good governance.

Filiep Deforche: What a powerful message. You are saying that it has become an integral part of what you look for in a candidate.

Thomas Leysen: Indeed, it has changed a lot in the last couple of years and I am very happy about this development. In the past, I was perhaps one of the few who preached about these issues and was a bit of a forerunner. Nowadays, it is gradually becoming mainstream. Of course, the proof of the pudding is still in the eating – we will see in the next couple of years how much companies progress and how much this actually results in change, but I do feel more optimistic about it.

Filiep Deforche: Is that a tricky challenge, or do you see more and more candidates that actually meet your bar? How many candidates did you not consider because they did not have what you expected from them?

Thomas Leysen: I unfortunately do not have the statistics but I remember a recruitment interview that took place not more than a month ago. We had various candidates sit with a small committee, and we probed a bit deeper about climate change. One candidate did not go beyond the commonplace observations and did not really demonstrate any real understanding, and so that was the end of that conversation. But in general, I would say that the trend is positive.

Jacques Bouwens: This has been a very optimistic conversation, a lot of progress has been made. If you look at the next five to ten years, what needs to happen and what is going to happen?

Thomas Leysen: I think the biggest challenge the world faces is climate change. We are at the tipping point and either we make it or we go towards major problems for our civilization. Are we going to make it in time? I am more optimistic now than I was two or three years ago, because I see both governments and corporations acting more decisively. That being said, there are still huge challenges. There is a lot of technology to be developed, there is a lot of capital to be redeployed, and there are a lot of behaviors to be changed. Not only does this need to happen in western Europe and in the western world, but other countries need to come onboard as well; China is probably on track, India and other parts of the world still have a long way to go. The challenges are still tremendous but I feel the momentum. It is not a question of shifting the responsibility just to governments or just to corporations or just to consumers; no, if we are going to make it on climate change, it means we need to have smart regulations, a tremendous amount of innovation coming from both academia and the corporate world. We need quite a bit of behavioral change from consumers and voters to reward governments who take courageous actions. It will take a change of behavior in the corporate world, really making trade-offs in a much more holistic way. A lot needs to happen, but I am more optimistic now than I was two years ago that the world will make it.

Jacques Bouwens: Very happy to hear that you are hopeful, which is a promising end to this inspiring and insightful conversation. Filiep and I would like to thank you, on behalf of the audience, for spending time with us on this very important topic of sustainable leadership.