Smurfit Kappa Vision: To be a globally admired company dynamically delivering secure and superior returns to all our stakeholders.
The vision of Smurfit Kappa aspires to delivering secure and superior returns to all of our stakeholders. Reflecting on this in light of the COVID-19 pandemic, I notice three elements in particular that stand out.
Firstly, even three months ago I would not have put as much of an emphasis as I would now on the word secure.
Secondly, while I spend a lot of time emphasising that stakeholders refers to more than our shareholders, also involving our employees, our customers, our communities and our suppliers, never has the blend of these seemed more important than now.
Finally, superior now means much more to me than just larger. Better is not just bigger - there is an element of quality involved: quality of service to customers, of dedication of our staff, of care for the communities around us and a quality to the financial state and results of the Group.
What have I learned about how these three elements combine within Smurfit Kappa?
My primary concern as CEO, particularly over the last two months, is the safety of our 46,000 employees worldwide. Amongst our employees, we have had around 70 confirmed cases of COVID-19, close to 150 other suspected cases and tragically five employees have died from the disease, which emphasizes to us the seriousness of this pandemic, and our need to be involved in our people’s safety.
Our people work and live in 35 different countries, with different infection rates, and different Government and social attitudes to the pandemic. The result is that we face diverse regulatory environments, and changing work and life pressures as well as the existing spectrum of socio-economic conditions.
Smurfit Kappa has spent the last eight years building a strong company brand through innovation and customer orientation, with the tag line “Open the Future”. Through the process we have learnt the internal and external value of consistency, cohesion and communication. What we have also learned has helped us to formulate our response to the COVID-19 crisis.
Safe, Supported and Connected
We did not want the differences in regulations to drive us towards seeming like 35 different companies responding to COVID-19. We therefore set the challenge throughout the organisation to develop a coordinated approach to responding to the crisis. The result was that, under the headline of #TogetherStronger we have set about ensuring a number of principles are adhered to in all our facilities. The goal is that everyone feels “Safe, Supported and Connected”.
The principles are:
- To be primarily driven by the scientifically based WHO/CDC guidelines, with no exceptions
- To adhere to local country legislation as it goes beyond these guidelines
- To develop bespoke applications where necessary in unique circumstances
- To be flexible as the disease progresses and science advances
For us the results are tangible – in that all Smurfit Kappa facilities have been able to remain open, supporting vital supply chains, those of our administrative employees who can work from home do so and we can follow the WHO and local guidelines in the process. There has been a heartwarming dedication of staff everywhere, showing tolerance, respect trust and resilience. We have had employees telling us that they feel safer in work than in their own communities.
The Importance of Communication
Given the disrupted structure, the final piece that we have put in place is communication. Through weekly newsletters to all employees; encouragement to share through our social networking and intranet sites; encouragement for remote workers to keep connected; and periodic short surveys to gauge mood, understand attitudes and needs; we strive to keep people connected to one another and the organisation.
I have always been enormously proud of the people within Smurfit Kappa. I didn’t know it was possible but that pride has increased over the last couple of months.
A particular source of pride is the contribution that our people have made to that other key stakeholder - our communities. There are many examples. An educational publishing business we own in Ireland has made electronic resources free to stressed parents turned teachers. In Brazil we have taken on the responsibility of disinfecting a town in which we are the largest employer. Our people have come up with products we can make such as social distancing dividers, disposable furniture for hospitals or care facilities, bag-in-box dispensers for hand sanitizer in France, secure packaging for food parcels in the UK. There are many more examples of time, thought and effort that have gone into giving back to our communities in particular in troubled times.
With the security of the workforce achieved, we are able to offer security to our customers – physical supply but also peace of mind for their customers. Ultimately, while brands and supermarkets may be our direct customers, it is the consumer – the “man no longer on the street” - that is important. They need the reassurance that there is availability of food and essentials (and even the odd luxury such as hair trimming accessories) at a time when the supply chain is stressed. These need to be available in a timely matter either with retailers or through e-commerce. This requires production, packaging and supply chain efficiencies against a background of constraint and difficulty.
Our role is to ensure the availability of the packaging and as much service as we can provide in the supply chain. Managing customers’ needs and expectations involves keeping communication lines open remotely, understanding quantity and timing of orders when market patterns are far from normal, and being flexible within a production pattern that may have high absenteeism, restrictions on normal work patterns and evolving interactions between sales, planning and production.
And, of course, we are a business, with the need to remain financially stable in order to retain employees and provide a return for the owners of our 238 million shares.
With a view to managing the downside in order to maximize the upside, the Board of the company took the difficult decision to defer a dividend payable in May of this year. It was a decision based on prudence, in light of the increased macro uncertainty and with a commitment to providing an attractive and progressive dividend beyond the uncertainty of COVID-19. It was a tough decision, not least in light of good quarterly results, but during the emergency and with the potential of a recession of unknown length and depth, and combined with eased investment plans, we have a foundation of strength on which to build our strategic direction when we get out of the crisis, and don’t have to start rebuilding those foundations by filling a hole.
“Seeing the beginning of the end or the end of the beginning”
I don’t know if we are, to use Churchill’s famous phrase, seeing the beginning of the end or the end of the beginning of this awful pandemic, as certain countries cautiously ease restrictions and hope for favourable outcomes.
I don’t know what the business world will look like post-COVID under the “New Normal”, when “things will never be the same” (whatever happened to the catchphrase “Post-Brexit”!). I fully anticipate some differences, among them: a new view of supply chains; a greater appreciation of the need to be swift in response to changes, and an emphasis on innovation and on certain new ways of doing business.
There will also be areas of focus that existed before COVID-19. We continue to be concerned about the imprint we have on our planet, the need to redouble our sustainability efforts and our privileged position as a manufacturer of renewable, reusable, recyclable and bio-degradable products. I personally look forward to the less strategic but as important part of my job which involves visiting our facilities and meeting our people face to face.
Smurfit Kappa will re-look at our strategy, change some things, keep other things central to our strategy such as Better Planet Packaging, re-emphasise our customer innovation and introduce some other elements to help us expand in new ways. I look forward to that challenge.
Our plans and actions will continue to emphasise the “secure” part of our returns. If we get it right, these will also be “superior”. I will let our stakeholders judge both the dynamism and the degree of admiration they want to attribute to the company.
When, I became CEO of Smurfit Kappa in 2015, I set down our vision of being “a globally admired business, dynamically delivering secure and superior returns to all our shareholders”. This pandemic has made me realise the importance of living each word constituting that vision. We continue to be very proud of the company, the people and our contribution to innovation and our customers, and we anticipate that these efforts will be recognised by all of our stakeholders including our shareholders. Our culture allows us to continue to make excellent returns during this terrible time. Despite the challenges we retain a strong foundation in each of our 35 countries on which to implement our key learning of #togetherstronger.