CIECH is an international chemical group based in Poland with a strong position on global markets. It is the second largest manufacturer of soda ash and sodium bicarbonate in the European Union, the largest manufacturer of evaporated salt in Poland and the largest supplier of sodium silicates in Europe among others.
Its plants are located in Poland, Germany and Romania, and it employs over 3,000 people throughout the EU.
In the past, sustainability and ESG strategies were rather rare in the Central European (CE) region. Even if published, they were often detached from business strategies or lacked real ambition. This is about to change. Even in the CE region, an increasing number of companies are now coming up with sustainability strategies including net zero ambitions and banks are making pledges in ESG strategies about turning away from fossil fuels.
The recently published CIECH Group ESG strategy wants to increase the stakes even in this environment by making a 2040 carbon neutrality target a key ambition.
We asked Przemyslaw Wasilewski, Director of Investor Relations and ESG, to guide us through the strategy and tell us about how it was prepared and why the CIECH Group thinks carbon neutrality should be targeted by 2040.
The ESG strategy of the CIECH Group is a standalone strategy however, the ambitions and goals are interlinked with the operations and business ambitions of the group. CIECH Group had a clear preference for doing this because of the diversity of ESG topics, as well as to have an increased transparency towards the stakeholders who are the most interested in sustainability.
Where does the pressure come from?
Which is the stakeholder group that demanded the strategy the most? The short answer is: customers.
Even though the pressure for more ESG action is often perceived as coming mainly from the financial sector, it is not always the case, as we can see. As Przemyslaw Wasilewski from CIECH Group explains, the company is “part of global supply chains of companies all over the world. We have seen a significant increase in the demand for sustainability information in the last 2-3 years mostly from our customers. And they have the same pressure from their customers”. This does not mean though that customers are the only interested stakeholder group. Interest from shareholders and even employees increased significantly as well.
“We supply our products – especially soda ash – to global companies: glass producers and chemical companies. They have very ambitious decarbonization strategies and they simply expect us to take part in delivering on those.
We are part of their scope 3 emissions and they demand full transparency on carbon emissions. In this way, climate action is the most important topic for our customers. This is not the only topic though, as we also need to report water consumption, accident rates, diversity numbers and other data as well.”
Cooperation with customers is more than just reporting data. “Several customers require personal discussions about ESG topics. They not only require us to report, but also in direct conversations they want to discuss our sustainability plans and how we deliver them. I have not met an investor yet who asked as hard questions about ESG as customers do. It’s because customers simply know what to ask about – they know us from technical and process side much better than investors who are naturally focused more on financials and performance.”
What is the risk of not doing it?
Expectation and increased interest from customers has not always meant immediate action from the corporate sector. So the question is also what has changed in the last years and what is the risk of not doing ESG? As Przemyslaw Wasilewski explains, this is a question that is openly discussed with business partners. “Their answer is that currently this risk is still soft, because even for most of the global companies, these strategies and reports are still in development.
But everyone says that sooner or later they will cease cooperation with companies who do not comply with ESG related demands.”
On the other side, demand from customers in itself does not make it necessary to prepare a comprehensive ESG strategy material. However, the combination of the increasing demand from other stakeholders, being a listed company and the ambition to be a leader in sustainability has made this the right approach for CIECH Group.
Climate neutrality by 2040
The strategy itself is divided into eight areas. These areas cover all the 3 letters in “ESG” almost equally:
- E: two targets are about climate and energy and one other target about resource efficiency
- S: safety: employees and communities are each covered with one target
- G: value chain covering both customers and suppliers as well sustainability framework itself are represented here.
In line with stakeholder expectations, bold targets are defined for climate action: CIECH Group wants to fully eliminate coal from their own energy production by 2033 and to be climate neutral by 2040. When asked about why 2040 was selected as the neutrality target instead of the more widely used 2050 deadline, Przemyslaw Wasilewski refers again to alignment with the wishes of customers. “Some of our customers declared neutrality by 2040. Indeed the EU level and global ambitions have been the 2050 deadline. But the technological progress is so rapid that we think it is possible these goals will be changed and it is better to be prepared.”
Regarding coal, the issue is more complex. According to CIECH, coal might be a problem not only with stakeholders but also in the future with access to financing. Therefore, it will be necessary to achieve their coal elimination target. “My feeling is that in the future, ESG will be an integral part of every financing agreement we have.” The challenge though is that replacing coal in heat and steam production is not easy, currently gas firing, waste utilization and to some extend biomass are the only available technological options.
While for direct and indirect (scope 1 and 2) the targets are quantifiable for scope 3 emission, the calculation is still in development – as for most companies within and outside the chemicals sector – and CIECH Group has not yet defined a target.
Our employees are our neighbors
While climate change is the most discussed topic and a priority for the customer, social targets are still defined. CIECH Group considers the “S” in ESG equally important partially because the employees care about sustainability, and they very often are also members of the local communities who live around production areas. However, according to Przemyslaw Wasilewski, it is more challenging to define a measurable strategy for social areas.
“The problem is that we do not have equally good metrics to follow social performance.
Even basic things are missing, for example the definition of the gender pay gap or how to measure your relationship with local communities. Of course, there is a lot of work being done with these areas and hopefully the standard-setting bodies will solve this.”
In line with the above-mentioned challenges, CIECH Group defined diversity (female representation in management and the gender pay gap) and community relations as the center of its social efforts, with the latter focusing more on continuous engagement than on measurable improvements. Being an industrial company, safety has also been highlighted as a focus area with the ambition of zero accidents.
“Regarding diversity, the most important factor is to change the culture and mentality that prevents women from applying to the company because of the perception that this is a masculine business. We hope that if there will be more women in general, and we can identify and remove barriers, then with time it will naturally develop into a situation of having more women in managerial positions too. Looking at the people pool the situation is promising. In polytechnic schools more than 35% are women, in our core areas like chemistry it is even 80% in Poland.
So there is no underlying problem, it is up to us to attract female talents and to make it possible for them to utilize their full potential.”
ESG framework and culture change
As part of governance, the value chain and internal ESG culture are the highlight topics. The latter is not only important as an action but the existing framework as a starting point is an equally important question.
Sustainabilitynews.eu is all about best practice sharing so we also asked how the internal organization and the process of the strategy preparation appeared. In CIECH Group, the most important body of ESG coordination is the ESG committee headed by Investor Relations and the ESG Director. Other members are the directors of Environmental, Compliance, Risk, People and Communications departments. This committee was responsible for the ESG strategy preparation. The basis for selecting material topics was the SASB framework. Based on the selected topics, achievable but challenging targets were defined. Business units and sales were involved heavily as well. The strategy was approved by the Supervisory Board after detailed discussions.
One particular item of note in ESG management in CIECH Group is also the combined role of ESG and Investor Relations management. Przemyslaw Wasilewski states that “ESG and Investor Relations coordination demand very similar skills. ESG is the measurable form of corporate responsibility. In ESG you need to understand reporting both externally and within the company and you need to be able to gather information from various areas. You need to know about everything and summarize complicated issues into understandable communications. So it has much in common with investor relations.”
“We are a very lean company with only few levels of management. For us combining IR and ESG is an efficient solution”
Future steps and ambitions
The preparation of the strategy is only one step in becoming more sustainable, of course. The bigger and more difficult task is always to implement it and to make it a success.
“What we are doing now is to operationalize the strategy. We have long term goals and now we need to transfer these into measurable short term goals to give people annual targets. For some areas we are well prepared but there are some areas where we still need to develop the overall programs as well.”
The one remaining question is: What are the overall ambitions of CIECH Group in ESG? “On a global scale we are a relatively small company. But we definitely want to be a world class company in terms of ESG which probably means top TIER in Poland. Most importantly, we want to make our customers comfortable with working with us as suppliers. On the other hand delivering the strategy is very ambitious in itself.”
The ESG strategy of CIECH Group has a separate microsite with detailed information about the strategy and the company itself. The site can be reached on the following link: esgciech.com