Emma Gosling is group treasurer at Croda International, the FTSE 100 Consumer Care and Life Sciences company. Here, she tells The Treasurer about the importance of environmental, social and governance (ESG) in treasury.
ESG issues have been in Croda’s DNA from the very beginning. Croda’s first product in 1925 was lanolin, which is a unique wax obtained from refining sheep’s wool. That was where we started from, but sustainability has been a priority for Croda for a long time, and certainly very visible within the business over the past two decades.
We now have a large sustainability team and became one of the first large companies to put sustainability into our revolving credit facility (RCF) in 2019. We knew we were one of the first because there were no existing standards available on how to incorporate ESG into the RCF. The banks really wanted to include this as well, so this was a good starting point.
The success of the RCF was recognised in Croda’s winning submission for Small Treasury Team in the ACT’s 2021 Deals of the Year awards.
We monitor our carbon emissions, so we have metrics now in the RCF going up to 2030 as this was in line with the targets in our 2020–30 strategy. These metrics are audited and are included in our covenants. Depending on how successful we are in meeting these targets, we can either get a deduction on margin, or pay more margin. This provides a real incentive for meeting or exceeding the targets.
Any savings are then reinvested into Croda’s ESG spend, such as capital expenditure on ESG projects – the cash gets spent, it doesn’t all go to interest and margin.
Croda supports the United Nations Sustainable Development Goals and is committed to being the most sustainable supplier of innovative ingredients and to be Climate, Land and People Positive by 2030. I believe that finance will head more in this direction, too.
If we wanted to invest in money market funds (MMFs), there are ESG-focused MMFs that we can go to.
Our treasury team gets involved with the business to understand where we can act as business partners and keep up to date with trends so that we have measurable ESG targets with no ‘greenwash’.
Croda completes a number of external disclosures each year to make it easier to identify how its sustainability programme is helping to preserve the planet and business for future generations. These include frameworks from MSCI and Sustainalytics, and ratings from EcoVadis, which looks at environment, ethics, sustainable procurement practices, labour and human rights.
This framework is particularly important to our customers and is another resource that supports our continuous improvement. In 2021 we achieved a platinum medal, confirming our position in the top 1% of all companies under assessment with a score of 75/100.
Croda is also listed in the FTSE4Good UK 50 Index, designed to measure the performance of companies demonstrating strong ESG practices.
In 2021, a group materiality assessment allowed us to fine-tune our understanding of the sustainability issues and opportunities most material to our key stakeholder groups, and therefore most strategic for our business. Recurring themes from this included: transparency and traceability across the entire value chain; increasing regulations and reporting obligations; biodegradability and waste management; more proactive engagement; and wider collaboration to understand and address the interconnected nature of issues.
This exercise confirmed that our 2030 strategy and objectives resonate strongly with our stakeholders’ vision. The overwhelming message was a clear recognition of the progress we have made on sustainability, our solid disclosures and commitment to transparency.
You can read more about Croda’s sustainability activities at: croda.com/en-gb/sustainability
You can also read about The Treasurer’s review of the ESG regulatory landscape here: Sustainability rules to force more disclosures
Emma Gosling was speaking with Philip Smith, editor of The Treasurer