ESG at Bolster: sustainable value creation that is feasible in practice
In a world where sustainability is increasingly prominent, Bolster believes it is crucial not only to inform people about our ambitions, but also about how we achieve them. As a committed shareholder, we shoulder our responsibility in this regard. This responsibility concerns not just us but also our portfolio companies, our investors and society. We work together to achieve a sustainable impact.
Our colleagues Martijn Fakkert and Wouter Spaargaren discuss the values and key principles that are important to Bolster as investor.
Martijn Fakkert (right in the photo), Investment Manager and member of the Bolster ESG team.
“Sustainable value creation isn’t just about financial returns, but also about making strategic and societal choices that have long-term value. Aspects that strengthen the distinctive character of our companies.”
Wouter Spaargaren (left in the photo), Finance Manager and member of the Bolster ESG team.
“It’s important that we don’t just look at the short term, but also at how our investments create value over the long term, both societal and financial. We greatly enjoy seeking out the win-wins in the area of sustainability. These can range from investing in employee satisfaction to installing solar panels.”
We collaborate with portfolio companies that wish to do business in an honest and responsible manner.
Why is Bolster active in sustainability?
Wouter: At Bolster, we believe that ESG (Environmental, Social and Governance) is an important topic with which we communicate our values and principles. For us, it isn’t just a question of following the right guidelines, but also about actually doing the right thing. It’s about doing business with honesty: saying what you do and doing what you say.
Martijn: The intrinsic motivation lies in the fact that we don’t just invest in great companies, but also really want to have a positive impact. We invest in companies that believe sustainability and respect for society are important and that come up with a lot of good initiatives ad hoc. We work with our companies’ management teams on professionalization and that also involves a structured approach to sustainability. This helps us and our companies to safeguard progress on sustainability and embed sustainability firmly in their strategy, business processes and product development.
We greatly enjoy seeking out the win-wins in the area of sustainability.
Why are you members of Bolster’s ESG team?
Martijn: I’m inspired by the dynamics and the complexity of the challenges we encounter. Sometimes we have to act quickly to seize opportunities, while at other times, calm and patience are needed to arrive at a well-considered approach. This makes the work not only interesting but also dynamic and relevant to the companies we work with.
In my role, I try to make sure that we provide a good example and that our ESG strategy is clear, both in-house and externally. We’re constantly evaluating where we can still make improvements ourselves and what we can require of our companies. This means that both in our ESG strategy and our day-to-day work, we must continue to think about ways of advancing sustainability and integrity. Initiatives such as the solar panel project have demonstrated that we add value by pooling the strengths of our companies.
Wouter: Each day is different and that makes our work varied and exciting. My experience at a Big Four organization taught me to work with a wide variety of companies, which has enabled me to take a look behind the scenes at various organizations. I bring this experience to my current role at Bolster.
I work on ESG reports and try to convince companies of the value of these reports. At first, it was difficult at times to convince our portfolio companies of the usefulness of these reports, but by letting them experience how valuable this is for clients, existing and potential employees, and financiers, I now see increasing acceptance and appreciation. It’s great to see how our portfolio companies make progress year by year.
What does value creation mean for Bolster?
Wouter: Traditionally, value creation mainly concerned financial returns, but nowadays it also encompasses ESG criteria, such as social well-being and the environment. As well as making a profit, we also want to contribute to sustainability. This can be done, for example, by installing solar panels, conducting staff satisfaction surveys, or providing support in the field of cyber security. The point is that you should not only make the company grow financially, but also have a positive impact on society.
Martijn: Value creation is really about the long term. You can achieve a short-term rise in profits, for example, by reducing staff costs, but this may have negative consequences over the long term. Investing in staff or new departments doesn’t always deliver anything immediately, but it’s an investment in the future of the company. For example, we observe that good human resources policy ensures low levels of staff turnover and absenteeism due to illness. These are important aspects of sustainability that boost a company’s value over the long term.
Wouter: The corporate culture also plays a crucial role in this regard. If employee churn is high and you keep having to onboard new recruits, this can put pressure on the company’s continuity and culture. Ultimately, it’s important to find the right balance between financial and ESG aspects.
We want to focus on issues that really matter and not lose ourselves in endless checklists.
When are the ESG aims at odds with achieving a financial return?
Martijn: Tensions may sometimes arise between ESG ambitions and economic feasibility. One of our companies frequently weighs up the extent to which it will source things locally or from Asia. Look, the tough ESG criteria, such as preventing human rights abuses, are binding when sourcing goods from Asia, but you can consider, for example, whether the carbon footprint of transporting goods to the Netherlands has been priced in properly. If you do price this in properly, sourcing locally becomes more attractive. In this case, it turned out that only the customers were not yet prepared to pay for this.
This example serves to illustrate the fact that it isn’t yet commercially feasible to further strengthen sustainability, because the company would then price itself out of the market. This is a real shame, because the intrinsic motivation does exist. It’s therefore important to find a balance between sustainability and economic feasibility, and to search out win-win situations, such as simple energy-saving measures. In many cases, investing in sustainability does not at all have to done be at the expense of profitability and that’s what we want to focus on.
Wouter: Investing in staff and sustainability can create value over the long term, even if it doesn’t produce results immediately. The important thing is to keep making the right choices for the long term and in this way achieve sustainable growth.
A major challenge is to bring everyone on board, both our own colleagues at Bolster and those at the portfolio companies. This is because it mustn’t become a checklist exercise, but a real, integrated part of operational management. It’s important to involve both the management board members and the operational team in the entire process and to ensure that everyone is committed to ESG initiatives. This is why the long-term vision is so important.
How do we deal with processes and suppliers throughout the entire supply chain at our portfolio companies from the point of view of ESG?
Wouter: It’s important to take responsibility for the whole chain, from suppliers to end product. This means visiting your suppliers regularly and checking working conditions, among other things. During our Due Diligence investigation, we therefore focus particularly on working conditions at foreign factories of our companies.
Martijn: A good example of this is one of our portfolio companies with a factory in Vietnam, where transformational working conditions have been introduced because the Managing Director wants to take good care of his employees. Examples are health insurance for employees and their families, a free hot meal during the working day, and a car being made available for employees to use at weekends. This resulted in very low staff turnover and high employee satisfaction. Great, isn’t it?
It’s about doing business with honesty: saying what you do and doing what you say.
What will the future bring?
Wouter: We want to continue reporting on sustainability. For this, we use an online platform that enables portfolio companies to select suitable initiatives. Progress on initiatives are subsequently discussed annually with our companies’ management teams.
Martijn: Our goal is also to continue supporting our portfolio companies with practical tools for sustainability. For example, each year we tackle new topics that could help our companies to implement improvements. Examples of projects are gathering feedback from employees, installing solar panels, and holding a knowledge session on fire insurance. We’re currently preparing a knowledge session on communication about ESG.
Would you like to know more about our ESG initiatives and future projects? Follow us on LinkedIn, sign up for our newsletter (in Dutch) via this link or contact Martijn and Wouter to find out about our latest updates and insights!