Dr. Thomas Schmidheiny, Chairman, Spectrum Value Management Limited, Zurich, and Former chairman, Holcim, the world’s leading cement, concrete, and aggregates enterprise, is a leading figure in the global entrepreneurial circles. The Thomas Schmidheiny Chair on Family Business & Wealth Management at ISB was instituted under the auspices of Dr. Schmidheiny. The purpose of the Chair was to enable Indian families to learn about the subject, exchange best practices, and profit from cutting-edge research. In 2015, the chair was converted to a full fledged Centre with generous funding from Dr. Schmidheiny. Dr. Schmidheiny, in a conversation with ISBlnsight, spoke about the role of the Triple Bottom Line, family values, governance, and wealth management inperpetuating family businesses.
This interview of Dr. Thomas Schmidheiny had earlier appeared in ISBInsight 2008 issue and is being reproduced here as his exemplary outlook towards family businesses and their social responsibility is still very relevant.
ISBInsight: You have been passionate about the ‘Triple Bottom Line’ philosophy for Holcim. Can you elaborate on the connection between this corporate philosophy and the Schmidheiny family’s values in this context? Thomas Schmidheiny:
Before I explain the ‘what’ and ‘why’ of the ‘Triple Bottom Line’ philosophy at Holcim, let’s look at the origin of this thinking. Holcim was started by my grandfather. He, and subsequently my father and I, have always lived at the interface of business, and society. We have strongly believed that while the exact role could vary; we have a trusteeship role to perform in society. For instance, my father was deeply engaged in Swiss politics to foster economic and political liberalism. I have always believed in contributing to society by creating corporate wealth. Of course, a company is not a charitable institution; profits and shareholder value come first. Only a profitable company can positively contribute to philanthropic activities. For entrepreneurial and philanthropic reasons, businesses should proactively tackle social and environmental issues within their influence sphere. My family, as a social entity across generations, has retained a proactive contribution to socio-economic development. It is a core family value and a guiding principle for us. This is exactly why Holcim introduced the ‘Triple Bottom Line’ concept at a very early stage. At Holcim, individual and company performance is measured not only in financial terms but also by considering the social and environmental bottom line.
The ‘Triple Bottom Line’ means that a company does not only account for its financial success but also ecological and social outcomes. At Holcim, we have incorporated the ‘Triple Bottom Line’ in our strategy as “mindsets.” There are milestones and roadmaps to ensure that social and ecological issues are incorporated into employee activities and results. They are integrated into work schedules and incentive systems at all levels.
To pursue a ‘Triple Bottom Line’ is vital to the cement industry, unlike other businesses.
First, a cement plant built today involves an extremely long-term capital investment, and it becomes profitable only after several years. Second, cement production absorbs large amounts of energy and raw materials. 15% of cement revenues go to energy costs. Reducing energy use is therefore important for a society that is desperately looking for alternative sources of energy. It is of course in Holcim’s own best commercial interests as well. Third, social responsibility at Holcim arises naturally from the practical conditions of its cement production. In contrast to most other global firms, Holcim is composed of many relatively small plants scattered all around the world. They are mostly in remote areas, where raw materials are found. The relationship between the plant and its neighborhood is naturally close. Fourth, cement production worldwide is estimated to generate five percent of the CO2 emissions caused by human activity. Although emissions trading have been set up as a mechanism to reduce CO2 emissions, we collectively have to develop mechanisms for its reduction, in the larger social interest. In short, the ‘Triple Bottom Line’ based measures are in tune with our family and business values.
For entrepreneurial and philanthropic reasons, businesses should proactively tackle social and environmental issues within their influence-sphere.
You are bringing an interesting new dimension to the discussion on corporate social responsibility. Do you think that this role of the business family is widely understood?
Family-run businesses tend to forget or play down their accountability towards society. This might become a trap for them. Earlier, it may have been enough for a strong entrepreneur to trust his instincts and gain support from his immediate surroundings. Entrepreneurial flair was the decisive factor. Today, however, external demands and requirements on companies have significantly increased. With them the pressure to professionalize within firms is also growing. A professional approach pays off, particularly in the extremely sensitive area of ecology.
You have set up and donated the funding for the ISB Chair on Family Business and Wealth Management. What was your intention behind this philanthropic move?
I hope that the Chair will share the message of harmony between business and society across family businesses in India, as most businesses here are family controlled and managed. Governance and wealth management are instruments to perpetuate family businesses. As I mentioned earlier, family businesses need a variety of inputs based on new research and knowledge, and several forums to exchange best practices in order to profit from all these initiatives. I see a huge demand for knowledge in this field, especially in India. I chose the ISB to share our philosophy and values, and learn from the experiences of Indian families because of the ISB’s qualities of excellence and excitement, despite being a young institution. The recent global FT ranking, where the ISB came out 20th, has proved me right.
Over generations, your family has been involved in philanthropy, as a means to build harmony across multiple social entities. Can you further outline your philanthropic interests?
My key interest in philanthropy is lifelong learning. I am deeply convinced that global progress in general, the protection of natural resources and the reduction of poverty, are all directly linked, with having well-trained, knowledgeable, and self-reliant people. Therefore my philanthropy focuses on two facets of learning – First, learning as a means for self-help especially, but not only, in the emerging market context and second, learning as a means to develop the next generation of responsible and decent leaders who have a good understanding of the coherence in a globalized world. My intention is also to foster the dissemination of economic knowledge. Everybody should have at least a basic understanding of how a business works.