Environment, social and governance (ESG) may not be an abbreviation typically heard through the industry. How does it fit into conversations and reporting on sustainability in particular?
Michael Costello: This is the new way to describe sustainability; it’s even reflected in our job titles – ‘ESG’ director or manager rather than ‘sustainability’. And what ESG is, really, is putting measures and numbers on what was previously called sustainability, or corporate social responsibility (CSR). Though to an outsider it might sound like the same thing, just a new name, it is actually more specific because it is about what measures you are putting in place. And what specific numbers and evidence you have in your company for the CSR and sustainability activities that you’ve been talking about.
It’s not just focused on environment, which was really the case for CSR. It is also being adopted by the financial markets, and in major gatherings like Davos, as a scorecard that forms a picture of a company for an investor to get a really quick picture of how that company is doing on all of these social environment and governance topics.
This snapshot of data may be important as it is how investors in the future will value companies; and how they perform against ESG metrics and KPIs will influence what it is worth. Is there any crossover from the former style of reporting?
Ingrid Weijer: Yes, we kept a few KPIs from previous reports – mainly environmental issues like waste, water, energy or CO2. We also kept our reporting on safety, which is a priority for our company. Governance is perhaps the newest part. For instance, we disclose our board of directors, which gives more insight into how the company is run, as well as industry governance.
Is one key part of the governance section inclusion in the Leather Working Group?
IW: It’s more a measure of the environmental performance of the lead companies, and it’s a standard that lead manufacturers are looking to globally. So it’s a way to level the playing field of environmental standards in leather manufacturing around the world. And we are on the executive committee of the Leather Working Group, which maintains protocol, and contracts independent auditors to carry out those audits on leather manufacturers around the world.
MC: It isn’t the only working group; it has only been around for the past decade, but it is the largest. The idea is to upgrade the environmental performance of the whole industry, and level the playing field so that a buyer of leather can choose a manufacturer from anywhere in the world and it will be based on the same global protocol for environmental stewardship.
Is there a mark or certificate to confirm a company has addressed these protocols?
MC: Yes, there’s a certification; it’s split into gold, silver and bronze depending on the level of certification. I have to say even the bronze is a very high level of environmental performance. We are even seeing retailers putting the Leather Working Group label on final articles as a demonstration of quality.
Is there a ranking in importance of the different ESG streams?
IW: The real priorities are based on a risk assessment. It’s for the law, the European law – extra financial performance declaration – which is mandatory. And we had to do a risk assessment on CSR issues, including ESG. There is no ranking though – we don’t see that the environment is more important than social topics or governance.
One key highlight of the report is the ZDHC Gateway compliance certification for Stahl’s global leather portfolio, which consists of over 1,200 products. What does this entail?
MC: Each region has a fairly strict set of rules and regulations about chemicals. REACH is the dominant regulation in Europe. For any chemical that’s produced or imported into Europe, it has to be inventoried on this platform. There is constant assessment about whether it can be used or not. This is constantly reviewed and there are new substances being put on the blacklist. If it ends up on the list, the chemical industry in Europe has to find a way to eliminate use of that chemical.
The same exists in the US, except theirs is called TOSCA [Toxic Substance Control Act], and all around the word there are similar regulations. There are also a number of voluntary initiatives to which the chemical companies can decide if they wish to comply or not. And these are typically focused on the use of specific chemical substances in the chemicals while the textile or leather is being manufactured, as well as if those substances can be found in the final textile or leather.
One very good example is what’s called zero effluent discharge system (ZED) of hazardous chemicals. It’s a foundation that was set up 10 years ago by a group of brands and has grown into a much bigger group, but it also consists of manufacturers and chemical companies. It was launched in response to a report that Greenpeace had created about chemicals being found in the environment, from the textile industry. A list of substances that the industry wanted to be eliminated from the supply chain by 2020 was set up.
The chemical industry has really got on board. Indeed, most of us have been able to eliminate those substances from our products this year. There is more to come – more restrictions and substances on the banned list. This has gathered really significant momentum in the past three to four years. And it’s a major driver now in our industry towards a continuously improving sector in the sense that the transparency of the chemicals used, as well as the elimination of certain substances, isn’t going to end.
Ingrid Weijer
Has Stahl had chemicals feature on the banned list?
MC: We have examples where a chemical has been put on the list, and if this happens, we simply need to eliminate that product. You might have to find another alternative that does the same thing, but contains a completely different kind of chemistry if that’s possible. It can take a long time to replace a chemical that has been banned with something that performs the same role but is allowed, though it can sometimes be relatively quick; say, six months. The key is in the final performance of the chemical if it is replaced. This is at the heart of the work we do, ensuring that all our chemicals support our customers; that if it is harmful, we remove it and find a substitute.
IW: We are part of many such groups, such as a chemical advisory group, which means that we are aware, and aware early, of any products that are on the so-called candidate list for removal. If they are not restricted yet, but will be in the future, we are made aware, so it is not a surprise that a product is removed, and we are given the time to ensure replacement or a substitute is prepared. We might not have a crystal ball for the future, but these programmes and initiatives ensure that we have a clear picture of legal restrictions that are upcoming. It is a major benefit of entering these programmes for us – that opportunity to be able to estimate or predict more credibly.
It would seem that we have barely scratched the surface of what ESG means for the wider industry, so we will have to do this again soon.
The conversation will continue in the next edition of Leather International.
ESG report: Stahl publishes 2019 report on environment, social and governance
Stahl has significantly reduced greenhouse gas emissions and workplace accidents while increasing its commitment to chemical compliance. More such facts and figures are available in the ‘Stahl 2019 Environment, Social & Governance (ESG) report’. 2019 also saw Stahl launch its Responsible Chemistry initiative. By using low-impact manufacturing chemicals biotechnology to replace non-renewable resources, and by contributing to circularity, Stahl aims to reduce the environmental footprint of its supply chains.
Environment – CO2 emissions reduced by 25%
Stahl has reduced its CO2 emissions by 25% since 2015. Switching to renewable energy at European sites and investing in long-term energy efficiency equipment have been key contributors in this achievement. The reduction is in line with the Paris Climate Agreement – an agreement within the United Nations Framework Convention on Climate Change (UNFCCC), relative to greenhouse gas emissions, mitigation, adaptation and finance.
Social – Road to Zero campaign
As a supplier of chemical products, Stahl considers the health and safety of its employees to be its primary responsibility. In 2019, the company introduced the Road to Zero (R20) safety awareness campaign and recorded a drop in the frequency of total recorded injuries.
Governance – ZDHC Gateway Certification for leather chemicals portfolio
A significant ESG highlight in 2019 was the certification of Stahl’s global leather portfolio in the Zero Discharge of Hazardous Chemicals Gateway. The certification of over 1,200 products, from both the company’s wet-end and leather finishing portfolios, underlines Stahl’s commitment to transparency in the complex world of chemical substance compliance.
Source: Stahl
REACH overview
REACH (EC 1907/2006) aims to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances. This is done by the four processes of REACH; namely, the registration, evaluation, authorisation and restriction of chemicals. REACH also aims to enhance innovation and competitiveness of the EU chemicals industry.
The regulation also calls for the progressive substitution of the most dangerous chemicals (referred to as “substances of very high concern”) when suitable alternatives have been identified.
One of the main reasons for developing and adopting the REACH regulation was that a large number of substances have been manufactured and placed on the market in Europe for many years, sometimes in very high amounts, and yet there is insufficient information on the hazards that they pose to human health and the environment. There is a need to fill these information gaps to ensure that industry is able to assess hazards and risks of the substances, and to identify and implement the risk management measures to protect humans and the environment.
Source: European Commission
