• Manufacturing, Business

There is only one corporate responsibility

Finnish MEP Sirpa Pietikäinen, a long-time member of the board of KONE, wants to encourage manufacturers to identify their customers’ fundamental needs and servitize their business. In her view, companies should record and report on the ESG impacts of their business as they do with finances – with the same set of standards.

According to Finnish Member of European Parliament Sirpa Pietikäinen (National Coalition Party, European People’s Party Group), understanding the Earth’s boundaries is no longer a matter of choice for corporate leaders. The ongoing climate and biodiversity crises are now a matter of life and death for companies.

“As a business leader, you cannot choose whether to understand the basic principles of corporate finance or not. One must know the field. The same is true for planetary boundaries. An understanding of the basics of ecology is vital in order to understand the operating environment of your company and steer innovation in the right direction.”

Pietikäinen points out that working with a narrow understanding of environmental responsibility limits business opportunities. In times of change, companies should seek to understand the needs their business is in fact fulfilling and plan a business model with solutions that answer these obligations within planetary boundaries – even if it means a change of direction.

“If an emission-free diesel engine is impossible to develop, the manufacturer should consider how it can harness the company’s expertise and creativity to meet the purpose that motors are used for – the need to move.”

Conservative thinking appears safe but leads astray

Pietikäinen believes the obstacles preventing companies from changing are often psychological.

“Many of the changes we are witnessing are exponential. The human mind, on the other hand, works in a linear manner, so it becomes difficult to understand the speed and scale of change. Conservative thinking gives us a sense of security. We are stuck in an outdated world view, subconsciously imagining endless natural resources. On the other hand, it is easy to evade responsibility when we have no way of showing who emitted the harmful particles and what impact it made.”

It is also easy to become side-tracked, focusing on small, partial improvements, such as replacing fossil fuels with bioenergy, whose production may end up harming ecosystems. Nonetheless, humanity is in a competition against time: we must invest in relevant factors to reach our goals on time.

Great dreams and ambition go a long way

Pietikäinen was a member of the Board of Directors of KONE corporation from 2006 to 2020. KONE is one of the largest and most successful Finnish companies, which is known for its elevators and lauded for its efforts in sustainability. The company began as a modest machine shop in Helsinki over 100 years ago and has become a global giant offering digital services. What can other Finnish companies learn from KONE?

Pietikäinen believes the secret to success is a certain kind of old-family business mindset, characterized by open-mindedness, big-picture thinking, a sense of responsibility, and moderated ambition.

“Dreams that are big enough will motivate you to step up and get to work. At KONE, sustainability is not separate from its business operations, but rather a part of everything the company does. Ambition is necessary if you want your business to grow, but it is important to have the patience to look beyond bumps in the road and wait for the return on investment.”

Pietikäinen sees many valuable and progressive companies in Finland. However, the market is small and there is not much risk capital available.

“We need a European risk capital system with both public and private money involved. On the other hand, investors need companies worth the investment: a strong leading company and smaller companies whose research, development and innovation projects create holistic, scalable concepts to answer their customer needs.”

Only one corporate responsibility

When it comes to regulation, Pietikäinen is keen to see bolder statements from trailblazing companies.

“Finland is a small country. Few entities dare to challenge others or make public statements admitting that standards can be improved. Industry lobbyists act on behalf of those who are most against change, and public debate is dominated by reactionary populism. When regulation is overly lax, minor additional tightening measures are made every few years, which wards off investors.”

Regulation, too, needs to reinvent itself, so businesses developing sustainable solutions are left with enough space to innovate.

“Holistic sustainability is new to regulators. Siloed regulation no longer works, and we are trying to fix it through experimentation. Instead of creating separate legislation on corporate responsibility, it could be integrated into existing legislation. Globally standardized ESG accounting and auditors would guide companies towards an integrated concept of risk: there would be only one uncertainty, which would include financial and ESG risks, and only one report presenting all this information,” Pietikäinen suggests.

This article is part of a series where different stakeholders discuss how Global Finland can be future-proofed and what role Finnish companies play in creating sustainable societies globally. The articles are published ahead of our virtual roundtable.

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