It would be difficult to find a major company or organization that hasn’t put significant effort into environmental, social, and governance issues over the past three years. As regulations, accepted social policies and environmental concerns have come to the forefront, the issues are far-reaching and impactful. Organizations should be paying attention.
For a company like Keter, the Israeli-founded leading manufacturer of resin-based home and garden products, ESG efforts are more than just a topical issue to be “dealt” with in order to continue doing business as usual.
Keter CEO Alejandro Pena has made ESG efforts a cornerstone of what the company looks to accomplish from a business perspective, as well as how it hopes to operate in the larger macro environment.
A Step Ahead
Most organizations are at the beginning of their journey when it comes to not simply understanding ESG, but how it will impact their business. They are just now grasping what ESG really means and how it can, and will, affect their businesses moving forward as well as how those principles will affect the communities they operate in and the opinions of their consumers.
Keter is not one of those organizations.
“When I became the CEO of the company, it was evident to me that we were not just a company with a purpose of creating value for our shareholders, but a company that has multiple stakeholders and multiple purposes,” Keter CEO Alejandro Pena said. “One of our responsibilities is not just to our shareholders, but to the communities that we’re in and to the environment and world that we live in.”
Pena believes that Keter, as a leading company in its industry, has the responsibility not just to attempt to follow guidelines, but to make them a core part of its business philosophy.
While some entities regard ESG efforts lightly and as an impediment to business, such as the state of Florida, Pena and Keter see ESG as a differentiator in the marketplace, as well as a way for the company to ingrain itself long term into the communities it operates in.
“One of our pillars is not only are we going to be a business driven by innovation and a leading company in our industry, but that we are also going to live by the values of being good to the environment and being good to our communities,” Alejandro Pena said. “Not only because it’s the right thing to do, but because I also believe that it will be a source of competitive advantage over the long term.”
Pena isn’t wrong about it being a competitive advantage, not just in the long term, but now.
Several studies, including one by First Insight and the Baker Retailing Center at The Wharton School of the University of Pennsylvania, have found that consumers are willing to spend more on products and services if they are sourced sustainably.
In a telling statistic, the report found that two years ago, 34% of Generation X consumers were willing to spend 10% more on a product or service if it was produced sustainably. Today, that number hovers at about 90%. That spending trend is undoubtedly good news for Pasquale Iannone, Keter’s chief financial officer, and the company’s stakeholders.
“We will continue to see markets evolve where consumers are going to increasingly become more and more aware of what’s good for the environment and what’s good for the world we live in,” Pena said. “They are going to demand companies be socially responsible, and we need to be at the forefront of this in our industry.”
In a sustainability report issued to various stakeholders at Keter, Alejandro Pena highlighted the Keter Everyday Sustainability Pledge the firm looks to use as a guiding philosophy during its manufacturing processes.
“Last year, we made significant progress in taking carbon out of our manufacturing processes by maintaining our use of recycled resin and driving efficiencies throughout our operations,” he wrote.
In addition to those efforts to produce a more environmentally-friendly product, Pena and Keter believe that it also helps create a sense of purpose and a unified culture for the people who work there.
“I think the impact has been very positive, both internally and externally,” Pena said. “I think it gives our employees something to be very proud of. To know that they’re working for a company that cares is important to our employees and, externally, it has really elevated our status with our largest, most important retailers.”
Keter uses resin to manufacture its goods, and Pena is aware of the potential ESG pitfalls when utilizing a material that is mostly derived from petroleum products.
As the global manufacturing and energy environment continues to move, albeit slowly, away from petroleum-based solutions, Pena sees Keter as an organization that can lead the way in making sustainability a path forward not just for Keter, but for others in that industry as well.
“I think our industry is still somewhat underdeveloped when it comes to sustainability,” Pena said. “We take it seriously because, particularly on the environmental side of things, we have a commitment to be good stewards of the environment, but also good citizens to the communities we work in.”
Production and Leadership
And those communities are growing. Keter operates 29 plants across Israel, Luxembourg, other parts of Europe, and North America, meaning its “community” is a good chunk of the known world.
This is an overlooked area in which Keter has limited its carbon footprint. The company is able to produce many products in the same places it is selling them, limiting transportation costs and, as Alejandro Pena and Keter learned during the supply chain disasters during the pandemic, hedging their bets when it comes to sourcing.
“About 60% of our production is in the country and the region where the product will eventually be consumed,” Pena said. “During the pandemic, we were able to leverage our global footprint and avoid long lead times that our competition had.”
While already a leader in its industry vertical, Keter aspires to also be a leader in a macro sense when it comes to sustainability, and Pena sees that coming to fruition by maintaining a customer-centric approach to doing business.
“We will continue to be a leader in our industry and our business model is such that when it comes to sustainability, we will be a global leader for known brands and consumer products overall,” Pena said.