Green » DSM co-CEO on thinking holistically

“I was called a maverick CFO,” says Geraldine Matchett, finance leader of Dutch life sciences group Royal DSM who became co-CEO of the business in early 2020.

That’s not too surprising, given her unusual step into running finance at the group that has been transforming from a chemicals specialist into a life/biosciences company in nutrition, health and sustainable living, known for its long-standing triple-P bottom line approach to sustainability.

Born to Swiss and British parents and raised in France, Matchett studied physical and human geography at University of Reading before undertaking a masters in sustainable development at University of Cambridge.

It was as she describes as “a strange journey” that began in the water industry as she sought to address how “everything hangs together” before pivoting to finance, which she understood to be an “enabler and also a language, helping to identify what matters, and what requires attention. “Often finance is what determines what happens and what doesn’t happen,” she says.

In 2014, following a decade in various finance roles leading to CFO at Swiss group SGS, Matchett was hired to become finance leader of DSM, a company widely regarded as being at the forefront of sustainability-focused companies.

Having a strong fit to a company that espoused the triple P bottom line (people, planet, profit) ambition was one thing, but Matchett also had to meet DSM’s aspirations of transforming  the company to a life sciences and materials sciences company whilst delivering on its ambitious financial growth targets including high single-digit EBITDA growth.

“Clearly the message was: you’re not coming here just to do what was done before, but to help the transformation journey, and to bring even higher the integration of sustainability in everything we do,” she says.

Matchett needed to help drive  this transformation: divesting the industrial more commodity chemicals portfolio and investing the proceeds in its nutrition business would make it a lot less cyclical and would deliver greater value.

It meant moving to a more consumer-oriented specialty offering in nutrition. “Moving from making products, to complete tailored and customised solutions including B2C. It required a lot of science, a lot of innovation, and a lot of ability to start integrating more service elements,” she says.

In materials it meant meeting environmental trends. “We focused on swapping heavy materials like steel for sustainable light materials in vehicles, looking at circularity and recyclability, bio-based materials, connected vehicles and connected cities, a whole set of mega trends, to bring us up the value chain,” says Matchett.

The following year the reset was presented to the financial community, eager to understand how the group would make the transformation while delivering on their expectations. In order to ensure this outcome, Matchett says the DSM management team announced a three-year portfolio standstill, “to really work on being organised correctly, a lot of change had been done portfolio wise with a lot of acquisitions in the period 2010-2015, but had not yet really been fully integrated, embedded and made operational properly,” she says.

If there were any concerns that Matchett’s commitment to DSM’s transformation might have been misplaced, they were short-lived. “We went from a return on capital employed (ROCE) of 7 percent, up to the mid-teens and we moved EBITDA margins from 12-13 percent to close to 20 percent,” she says.

On 16 February 2021 DSM reported adjusted EBITDA 1 percent lower at €1.53bn in its 2020 full year resylts compared to 2019 while sales rose one percent over the same period to €8.1bn. By the start of April, the group’s market value stood at just under €27bn.

Holistic view

Matchett’s strengths can be traced back to a broad set of experiences. From being a trainee at Thames Water, she worked in audit at KPMG in London, specialising in the consumer, pharmaceutical and energy division, before becoming a senior auditor at Deloitte in Switzerland.

But it was in a decade at Swiss inspection and testing giant SGS that she was able to develop a series of financial skills as group financial controller and then CFO of this global multinational “that serves every sector of the economy, in pretty much every country in the world.”

Matchett says she spent a lot of time travelling around the world visiting the group’s operations. “I felt really comfortable in that melting pot of cultures and passions,” she says.

She came to the CFO role shortly after the global financial crisis (GFC) when SGS “needed a refresh” and says it was “quite a challenge to suddenly have to pull a lot of things together very fast while being so new in the role.”

A big learning was the need to work based on trust with the team around her. “When you can co-create  you get a lot of energy from the people around you, and you can help each other do great things,” she says.

The opportunity to join DSM meant, rather like with SGS, working for a company that uses its scientific knowledge to make good things happen in the world. “That’s something that I love,” says Matchett, “ I go and talk to colleagues in the labs, who get so excited about chemistry, biotechnology, physics or electronics, and we discuss what it can mean in terms of positive impact on the world,” she says.

When it came to finessing the finance function, Matchett led a verticalisation of its structure, which had been very division-based up until then, “and as a result we didn’t have much harmonisation, and we were not leveraging scale,” she says. “With a globalised function you can really drive standards and consistency and efficiency,” she adds.

Then came the scaling of the shared service organisation and rationalising ways of working, to the formula of being a “purpose-led, performance driven company- to support and embed ESG and our triple p bottom line ambitions, already since 2010 these are reflected in the incentives, equally split between financial and non-financial measures.

“When you do that, it is fully walking the talk of being a holistic stakeholder company, but you also have to have very trustworthy data in all aspects of the non-financial KPIs as well. So in order to do that, we upped our standards. We now have reasonable assurance auditing on all of our non-financial KPIs,” says Matchett.

“In order to embed sustainability thinking further we introduced an internal price of carbon. Very early we were one of the first companies to do that with 50 euros per tonne, which some years ago was seen as quite high, but might in fact need revision soon, ” she informs.

“We were also one of the first companies to have an RCF (revolving credit facility) with the interest rate linked to our reduction of greenhouse gas emissions. We’ve committed to TCFD (Task Force on Climate Related Disclosures) on climate straight away. We were also one of the first companies to disclose the impact of climate change on our company, and what it means,” she adds.

Real world thinking

As an industrial group, Matchett says that DSM’s efforts to deliver a sustainable way of doing business are challenging but credible. “An insurance company can commit to reduce their greenhouse gas footprint by simply buying electricity from renewable source and they’re done.

“Whereas if you have a real production footprint, where technologies are not so easy to substitute, where you have to buy raw materials that come from a supply chain that has its own footprint, and you have physical transport of goods, there are many challenges.

“We know it’s hard, and we don’t have all of the answers yet, but we have a pretty clear roadmap in place of how we get to our 2030 targets  and we have an absolute determination and conviction that we will get to net zero. People then listen because we’re part of a sector where this requires really difficult thinking,” she says.

Matchett says DSM adopts a three-layered approach, starting with improving its own footprint, such as an absolute reduction of greenhouse gases by 30 percent by 2030 or reduced water usage.  “You have to do that, otherwise you don’t have credibility. If you’re not willing to take the pain yourself, then you have a problem,” she says.

“But the even more important category is what we call enable. How do we enable our customers to manage and address some of their ESG ambitions, through providing them with solutions that help them on that journey” she says, referencing the example of an animal feed ingredient DSM is developing for the dairy industry. “It will reduce methane emissions from cows, by at least 30 percent significantly reducing the environmental footprint of dairy and beef products, a key source of protein around the world.”

The third leg is advocating for change. “There is still a reluctance or hesitation in working with the private sector, on the part of NGOs and governments, where it was historically more about being confrontational, about naming and shaming.

“For many years the key focus was on forcing change through regulation when in fact a lot of corporates can and want to step up to the plate themselves and show how we can have a lot of positive impact , so let’s work together,” says Matchett.

Independent approach

In February 2021, Matchett was named co-CEO of DSM – while keeping her CFO hat – along with Dimitri de Vreeze, a pragmatic response to the moment when the group’s managing board of five was whittled down to two after the others were hired elsewhere or retired. “We saw a lot of advantages in working together, and not a particular need to pick one versus the other,” she says.

Matchett also describes this as “very much a DSM style decision, as we tend to do things our way when we think it works best for us,” she says.

“It was the same when we became very active on ESG and triple P, well before it was fashionable. At the time we were met with quite a lot of scepticism, whether that was wise and should we just be focusing on financial performance,” she says.

She adds that two co-CEOs are better placed to lead an ESG driven company because of the amount of ground that needs to be covered with a stakeholder-led agenda, combining all aspects of operational efficiency and performance, customer centricity, while also proactively advocating on the environment and social impact. “To continue to move fast on inclusion and diversity, where the top position matters, we realised that being two could actually be very helpful,” says Matchett.

Over the course of the last year in which the  pandemic impacted, the format also helped as  “you can be present for more people in the organisation, for more ,” stakeholders outside the organisation, than if it was just one person,” she adds.

In 2020 DSM completed three biosciences acquisitions, CSK in food specialties, Glycom in early life nutrition and the Erber businesses Biomin and Romer Labs in animal and human nutrition, for a combined value of €1.7bn. In September, the group announced the divestment of its resins and functional materials arm and associated business to Covestro, a transaction expected to close in the first half of 2021.

Matchett says: “We continue to advance our strategic agenda with the biosciences acquisitions that we did in the middle of the crisis in our nutrition business”.

“We also announced the large divestment of one of our materials businesses. So, it was not a lost year by any means, despite the fact that the pandemic was going on,” she adds.

A founding  member of A4S (Accounting for Sustainability) and the WBCSD (World Business Council for Sustainable Development), she reflects on the thoughts of WBCSD president, former CFO and CEO of logistics giant TNT, that “accountants will save the world”.

“Of course people say: ‘Did I hear you right?’. But he’s right in many respects, if you really are going to say this is the value that you bring to the world, you need to make sure that your accountants are fully excited about contributing to that, in very hands on, pragmatic ways.

“The world is not only interested in whether a company is delivering good financials, they are also interested in knowing how our activities impact the environment, and  society,” says Matchett.

She says now is the time to have common standards around sustainability, “as this is as logical as a balance sheet, cash flow or other disclosures under GAAP”, as she notes the IFRS Foundation’s reaction to the WEF initiative around convergence of ESG standards.

“The faster we can get to this, the more you hard wire the fact that this matters, and that a company should not call itself successful only because it delivers good financials today. That is unfortunately still the predominant measure.

“But things are moving. This year we have [UN Climate Change Conference] COP 26, which is going to be critical I think in this context, and also the UN food systems summit, which is really bringing all the stakeholders around food systems together

“I’m much more optimistic today than I would have been say four years ago,” says Matchett.

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