Edition #1 – For internal use only
Industry leadership in sustainability
In 2019, Arçelik became the Industry Leader in the Dow Jones Sustainability Indices (DJSI) Household Durables Category – take a closer look at the pioneer world index that tracks leading companies based on their sustainability performance and hear more about Arçelik's sustainability journey from Hakan Bulgurlu, Arçelik CEO.
Arçelik became the industry leader in the Dow Jones Sustainability Index (DJSI) Household Durables category in 2019. For the past three years, Arçelik has been the only Turkish industrial company to be listed on the DJSI in the Emerging Markets Category and now leads the industry in SAM Corporate Sustainability Assessment (CSA) based on its total sustainability score in 2019.
The DJSI is the world’s leading sustainability index and tracks global companies based on their environmental, social and governance (ESG) practices. More than 2,500 companies were analyzed by the DJSI in 2019 and only 10% of the best forming brands were listed in the index. The index assesses companies based on responses to between 80 and 120 industry-specific questions across 61 industries.
Every year, SAM publishes a list of industry leaders and these leaders are defined as the top performing companies in each of the industries that are represented in the SAM CSA and DJSI. The DJSI industry leader signifies the highest scoring company with respect to its individual industry.
The cyclical Household Durables category includes home electronics and furnishings and household appliances. It is characterized by constantly changing consumer preferences for customized products, advances in technology (IoT) and automation, and increasing demand for eco-friendly products and smart homes. Successful companies in this industry stand out through brand management, innovation, product quality and safety and customer service.
As the industry leader in its category, Arçelik proactively integrates sustainability into its business operations by focusing on product stewardship, operational eco-efficiency, responsible sourcing, enhanced transparency and product labeling, as well as end-of-life solutions for customers. Arçelik’s CEO Hakan Bulgurlu discusses the overall DJSI process and the industry leadership:
What has 2019 meant for Arçelik's sustainability agenda and could you summarize where we stand now with regard to 2020 targets?
We are pleased to close 2019 with pioneering projects and practices in sustainability, a key pillar of our business strategy. We maintained our superior performance in 2019 with a goal to foster sustainable innovation and make a positive impact on the environment, on society and on our business. Arçelik was named Industry Leader in the Dow Jones Sustainability Index (DJSI) Household Durables Category in 2019. Being included in DJSI Emerging Markets for three consecutive years, we now lead the industry based on our total score.
To further strengthen our sustainability efforts, we established our Sustainability Department in 2019 under Quality, Sustainability and Corporate Affairs Directorate which distinguishes Arçelik from other Koç Holding affiliates as the only organization to set up a separate sustainability unit. Our Corporate Brand and Projects team, also established in 2019 within the Global Communications Directorate, coordinates sustainability communication.
Owing to our sustainability-driven management approach, we continued our efforts to reach 2020 targets that are linked to the United Nations Sustainable Development Goals (SDGs). To integrate sustainability into decision making and business practices with a strong devotion across the organization, we launched Sustainability as a Business Model Project. This project is positioned around the purpose of leveraging the company brands and reputation by putting sustainability at the heart of our business.
In 2019, we continued our efforts for green energy transition by achieving additional 2MWp renewable energy installation in our plants.
Following our achievements in water and energy reduction in manufacturing over the last four years, a key highlight for 2019 was to set our long-term sustainability targets for 2025 and 2030, along with In Touch Technology, our new sustainability communication framework, which will soon be released in our 2019 Sustainability Report.
We worked on increasing the number of women in leadership positions and empower them through gender equality programs which encouraged us to set ambitious targets for 2030.
Compared to 2020 targets, which are the remaining focus areas and which new areas have been added? Based on which internal and external factors are the new areas determined?
At Arçelik, we closely embrace sustainability trends. Our 2025-2030 targets are set in line with the global trends, commitments of our industry and global companies. The weight of circularity is emphasized, and new areas are included such as brand related targets, HR targets, number of female director targets with science, technology or engineering background, inclusion and diversity in the workforce.
The 2030 targets point to where Arçelik should stand in the area of sustainability 10 years from now. Could you share our strengths and areas of improvement?
Our long-term sustainability targets are aligned with the SDGs, with our strongest angle being SDG 12, Responsible Production and Consumption. We remain dedicated to improving Arçelik on all grounds however, I believe there is still room for improvement in social goals. Our Corporate Brand and Projects team and HR team are working collaboratively to foster social targets and actions with other departments and create shared value for the entire value chain. As a global company, it is our responsibility to focus both on our strengths and strive to build our muscles further.
What are the areas we should focus on the most in the coming period to maintain our position as the Industry Leader in DJSI?
DJSI is the gold standard of assessing the sustainability performance of the world's largest companies. Taken as a reference for sustainable business, there is intense competition between companies in DSJI where the leading performers in each category are listed. Having held the Industry Leader position in the Household Durables Category for the past 12 years, Electrolux is only 2 points behind us. Most of our competitors are strong global players of the industry. We had the highest scores at environmental reporting, brand management, labour practice indicators. There’s still room for improvement in some areas related to corporate governance, information security, cybersecurity, social reporting and human rights. This is a very reputable recognition for us and maintaining the leadership position will be our key goal going forward.
Considering the current local and global trends, what are the main challenges and opportunities for our sector and our company?
The challenge ahead comes mainly from the transition to a low carbon economy with climate catastrophe being the main agenda topic. 40% of household energy consumption is associated with the use of home appliances. Offering the most energy efficient products to the consumer is our key business objective and we have to take the lead. EU Green Deal, EU energy labelling framework and the Science Based Targets requires companies to set bold targets to decrease the GHG emissions. The renewable energy and the carbon neutrality targets are determined based on these scenarios.
Additionally, we focus on water management. We have production facilities in water-stressed regions such as South Africa, Pakistan and India. To understand both the opportunities and the areas of improvement for water efficient production, we partnered with the IFC (International Finance Corporation) and they prepared a report based on our water consumption and water efficiency projects. Our 2030 water reduction targets are set in line with these reports.
The plastic crisis is another pillar that we need to work on persistently. As of 2020, only 8,6% of the world economy is circular, a negative trend that need special attention. Our innovations carrying the circularity principle at the core are manifested in unique products. This is illustrated by our washing machine and washer dryers’ tub manufactured from recycled PET bottles, one of the most notable innovations to come out of Arçelik. This inspired our subsidiary Arçelik LG and they started using PET bottles in mass production of air conditioners in 2019. Many other initiatives such as turning ghost fishnets into oven parts, expanding the use recycled plastics in the vacuum cleaners, introduction of the microfiber filtering technology proved our commitment to responsible innovation.
As a global company, we made it our mission to do everything within our power, as time is running out in the fight against environmental degradation.