At this year’s Annual Investor Conference, we wanted to bring to life the types of companies we invest in and how we engage with them. Austrian company Lenzing joined us to tell us more about what they do and to discuss an issue they had with pollution in one of their Asian facilities.
Lenzing – Materials innovation underpins sustainable fashion
Stephanie Kniep, head of investor relations at Lenzing kicked off the session by explaining what the company does; they produce wood-based fibres derived from cellulose. Lenzing sells the fibres to a range of end markets including the fashion industry where their products such as TENCEL are higher quality, environmentally friendly alternatives to cotton. The production method reduces water and pesticide usage and 99.9% of the chemicals used in the process are reclaimed in a closed loop system rather than entering waste water streams. To put this product in to context, you can buy an array of clothes made of TENCEL at GAP.
The Changing Markets Foundation report
Last year, Lenzing’s factory in West Java, Indonesia was named in the Changing Markets Foundation ‘Dirty Fashion’ report, which denounced bad practices in viscose manufacturing. Accusations included poor waste handling, water pollution, sulphur emissions and an accident caused by a gas leakage injuring several people.
WHEB’s head of research Seb Beloe then had an open discussion on stage with Stephanie and Peter Bartsch, Head of Corporate Sustainability at Lenzing about the report and how Lenzing reacted.
WHEB discovered the report through our ongoing monitoring of portfolio companies. We contacted the authors of the report to better understand the allegations and then engaged with Lenzing to encourage them to respond. Peter explained how they reacted. “We had a discussion internally and took the decision to talk to Changing Markets to understand how we can support their initiative and learn more about how we can develop their suggested roadmap to improve. We looked at the individual issues and made changes, such as increasing the waste capacity in line with the growth in production.”
Responding to NGO criticism
Lenzing decided to go further with their improvements, which WHEB fully supported. Alongside their internal programs to reduce these types of issues through monitoring and technological improvements, they produced a longer-term strategy for Lenzing. “We clearly defined 10 reduction targets and decided to have one standard for all our factories across the world. In Indonesia, we were compliant but being compliant is not good enough today, we need to go further which is why we want to implement a group standard so all our facilities operate in the same sustainable way.”
Seb Beloe was keen to know how long this will take. Peter replied that they should have the global standard in place by 2022 as it will need some investment.
Seb commended Lenzing for their response to the report. “In my experience companies often become very defensive when they see an NGO report that criticizes them. Many of your industry peers adopted that attitude and tried to undermine the report so I think it is very commendable that you engaged with it and used it as an opportunity to improve.”
To finish the session, Lenzing explained what they have learnt from this process. Peter said “We need to go beyond compliance, we always need to be a little bit ahead of regulation because it’s a moving target. Open discussion is very important as well and we have communicated with our clients and they have been pleased with our changes and the roadmap we are working towards.”