Combining sustainability and innovation to drive resilient growth at Croda

In this podcast, Heidrick & Struggles’ Louis Besland speaks with Steve Foots, CEO of Croda, an FTSE 100 company and a leader in the specialty chemicals sector. Foots shares his experiences in integrating a purpose-led sustainability approach into the company’s strategy by changing behavior and in using smart science to improve lives. He stresses the need to embrace sustainability while focusing on innovation in order to drive growth. According to Foots, sustainability is an investment, not a cost, and vital to future-proofing the organization.

Some questions answered in this episode include the following:

• (2:24) How compatible is specialty chemicals with sustainability?
• (4:29) Can you describe what your purpose-led strategy means and what changes it triggers in terms of culture, organization, structure, and leadership skills?
• (7:05) What does behavioral change mean practically for the executive team, or for all leaders in your company?
• (8:10) How do you engage not only the organization but also how your board supports you in your transformation?
• (11:44) How are you preparing your leaders to face the challenges of the future?

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to the Heidrick & Struggles Leadership Podcast, the premier provider of leadership consulting, culture shaping, and senior-level executive search services. Every day, we’re privileged to talk with fascinating people who are shaping the future through their leadership and vision. In each episode, you’ll hear a different perspective from thought leaders and innovators. Thanks for listening to the Heidrick & Struggles Leadership Podcast.

Louis Besland: Hi, I’m Louis Besland, partner at Heidrick & Struggles and a member of the global Industrial Practice. In today’s podcast, I’m speaking to Steve Foots, CEO of Croda, an FTSE 100 company and a leader in the specialty chemicals sector. Steve joined Croda as a graduate trainee in 1990 and has held a number of senior management positions in the group. He was appointed Group CEO in 2012. Steve, welcome, and thank you for taking the time to speak with us today.

Steve Foots: It’s a pleasure, Louis.

Louis Besland: Steve, you lead Croda, a B2B company in a sector that is not necessarily well known to those who don’t work in this sector. Could you describe what Croda does?

Steve Foots: Croda is the name behind the high-performance, innovative ingredients in some of the biggest, most successful brands in the world. We create, make, and sell specialty ingredients that are relied on by consumers and industries everywhere. For example, we put the anti-wrinkle active in the anti-wrinkle skin creams globally, and more recently we’re classed as a critical supplier of vaccine ingredients in several leading COVID vaccines. Most of our ingredients are made from natural and renewable raw materials.

Louis Besland: How would you describe the evolution of Croda over the past ten years under your leadership?

Steve Foots: Croda was formed in 1925, and I’m the seventh chief executive of the organization. So it’s not like football managers, who rotate far quicker in that industry. Croda continues to expand very well—we’ve doubled in size in the past ten years and probably quadrupled our share price value over that period. So we’re a bigger, stronger organization now and more pointed toward consumer end markets and toward emerging markets as well.

Louis Besland: You are in the specialty chemicals sector. How compatible is specialty chemicals with sustainability?

Steve Foots: I would say first that they aren’t mutually exclusive. Sustainability is an investment, not a cost, and our industry has a huge responsibility to increase the positive impacts of our actions while reducing the negative impacts. And it doesn’t really matter where you are in our industry—petrochemicals, diversified chemicals, or specialty chemicals—but from wherever you start, you have to improve as an organization from your sustainability credentials; otherwise, your business in the future will be substantially weaker, and a lot of your customers will take their business away from you. And many investors, if you’re a public company, will take their business away from you as well. So it’s really important that organizations grasp sustainability, the full extent of it, and include it centrally in their business plans and their strategy going forward. At Croda, we take it very seriously; it’s at the heart of our current strategy. It isn’t part of it; it’s central to it.

And the combination of innovation and sustainability together drives this resilient growth. You can be the best innovator in the world, but if you don’t have products with sustainability credentials, you won’t sell your products at the speed you want going forward. And vice versa: if you have the best bio-based ingredients in the world but they’re not giving your customers some innovation, then again you won’t sell your products as well. So you need the combination of both innovation and sustainability to drive your growth. Everybody uses the words “specialty chemicals” very widely, but the definition for me is all about giving your customers something that nobody else can give them, and they want it and need it, but they want to create great value with that. That’s the definition of specialty chemicals. It isn’t about extending a specification, putting it in a different drum, and calling it something different. It has to have great value to your customer, and it has to create value for them as well.

Louis Besland: Recently, you put in place a purpose-led strategy. Can you describe what that means and what changes it triggers in terms of culture, organization, structure, and leadership skills?

Steve Foots: We created our purpose—“smart science to improve lives”—about three years ago, and we wanted all of our employees to feel that they’re working for a greater good, more so than just showing up for their day job. And we really meant that. And it’s about changing behavior. So whether we are making more batches right the first time to reduce carbon dioxide emissions or whether it’s to help solve the biggest medical crisis of our generation, as with our involvement in the vaccine ingredients, we’re using our smart science to save lives. It’s really all about this behavior change in your organization, getting everyone in the organization to really understand that their actions are more powerful than they believe. And it’s pointed toward our purpose. So that should drive and that will drive continuous improvement in the organization, which is what we want at all levels. And we’re not there yet, but we are deeply embedding this around the organization.

The new generation of leaders, not just in the chemicals industry, clearly wants to drive great profit performance and financial performance, but they have to be much more rounded leaders—whether that’s in safety improvement performance or sustainability improvement—like they’ve never been before, and I think that’s really crucial. The next generation of leaders really needs to have this armory in them, and our job as a company is to make sure that we try and develop that with them. It’s all about leadership in the end. Your top team in the organization has to speak really clearly, consistently, and with genuine authenticity about this.

It’s very evident from our recruitment that more and more people who are coming into the organization are coming in because they think we’re doing the right thing. So the brand of Croda is improving because of this. Our job is also to convert the leaders who have been in the organization for many years and to help them change their views to allow them to bring on the next generation as well.

Purpose is not just a slogan. It may be for some organizations, but for Croda, it’s very deep and meaningful, and we have to stand by our actions in everything we do going forward.

Louis Besland: You mentioned the behavioral change. What does behavioral change mean practically for the executive team, or for all leaders in your company?

Steve Foots: We start with the view that the nonfinancial performance of the organization is as important as the financial performance. So when we review the financial performance, we also review the nonfinancial performance of the organization. And the point I’m trying to make with everybody is that we should be disappointed if we create great profit growth but our carbon dioxide scope on emissions goes up at the same time. We don’t think they’re mutually exclusive; we actually think that we can apply our innovation to our factories as much as we can to our research and development. And we believe going forward that we can continue to deliver great financial performance, but it will be as a consequence of great nonfinancial performance as well. It’s important that we see sustainability in that manner. It’s not a cost; it’s an investment in the organization’s future.

Louis Besland: And is this the way the board sees this as well? How do you engage not only the organization but also how your board supports you in that transformation?

Steve Foots: The board has been hugely supportive, and they get sustainability, and they get it because they can see the potential transformative value it has for the organization.

Croda’s history has always been in natural ingredients. When we started making products, in 1925, we made them from wool grease, which was from the fleece of wool. This is arguably one of the most natural ingredients even today. And if I look at where we are now, about 65% of our product range is from bio-based renewable ingredients. So we’ve got an ideal position to develop our stories with our customers. A lot of it is about accelerating the transition with our customers to more bio-based ingredients, but you have to do that with innovation.

And the board’s involvement has been significant, probably more so than many other boards. In fact, in arriving at our purpose, we held an internal competition around the world, gathering 1,300 responses to questions around what we should stand for in terms of our purpose. And the board and executive committee read every one of them, and we arrived at “smart science to improve lives.” So we engaged the organization by engaging ourselves first. Once we engaged ourselves, and increased awareness at the start, it was much easier to deliver this throughout the organization. The board played a crucial role in helping determine our purpose and was really excited about rolling it out.

And I can’t think of a better example of playing out our purpose of smart science to improve lives than the announcement recently of Croda’s involvement in the Pfizer vaccine. We are now innovating in what is the biggest medical crisis of our time in the biggest medical drug of its time. It’s quite appropriate that Croda’s involvement is central to that through our innovation. It brings to life our purpose in a very big way.

Louis Besland: And along those lines, how do you see the future of Croda?

Steve Foots: It’s all about sustainability. The question we ask most in the organization is through that sustainability lens, which is which markets are likely to be the fastest growing in the future and, just as important, which markets are going to die away and reduce significantly? And you have to be on the right side, whether it’s legislation change or consumer behavior changes. And there are great opportunities out there. But if you’re on the wrong side of those market changes, you could have a much weaker business.

Markets are changing much more quickly today than I’ve seen in my 30 years in the industry, so organizations that really understand sustainability, that are focused on customers in a laser-like way, trying to meet their unmet needs and anticipating what they need beyond today, will be the successful companies of the future. So, effectively, it’s linking innovation to sustainability.

To summarize, the next decade is polarizing around sustainability, and the modern company and the modern leadership in those companies have to really understand that nonfinancial performance is just as important if not more important than financial performance and that they’re not mutually exclusive.

Louis Besland: How are you preparing your leaders to face those challenges of the future?

Steve Foots: In our judgments in decision making and in how we recruit, who we recruit, and how we train and develop them within the organization.

We appointed a president of sustainability to our executive committee for the first time last year, and also for the first time last year we included sustainability metrics in our remuneration for the top 300 colleagues in the organization. So we’ve got something to guide us there in sustainabilty.

And we’ve got ambitious targets: by 2030, we want to be climate, land, and people positive. And we’ve got very detailed objectives around each of those three work streams, and that is really critical. What we’ve seen so far is a really great response from the organization. Many people in the organization are excited about helping and supporting those ambitions, and that’s the most important thing in the end, because what we want to do is drive that behavior change in the organization effectively. Then we’ll innovate better, we’ll innovate more. And our customers hopefully will like that, if we keep close to them, and we’ll be a stronger business financially because of that.

And that’s the whole thinking. It’s like a virtuous circle, and it’s powerful. But at the heart of it is to get the organization galvanized around the idea that this is not just an initiative. It’s more than that; it’s a way of life that is going to be with us all now and forever.

Louis Besland: Is there an outside model that you look at—a sector or a company or a leader?

Steve Foots: I like organizations that have had a great track record for a long period of time, but a track record that is in innovation and, increasingly, sustainability. So any organization that has done it over the years, whether that’s a football team, whether that’s in technology, or whether that’s in our industry, and there are plenty of those organizations out there that have done a great job. We have a list of our most admired peers in our industry, and they’re in there because of that longevity of success.

In terms of leadership, the thing I get inspired by is “beyond incredible” leaders, I call them—people who can imagine the unimaginable in their organization and take the organization to a higher level, one that was probably dreamed of many years before that. And there are not many of those people around, and we need more of those people, whether it’s in politics or in sports or in the chemicals industry. But these people do exist, and when you see them, they really inspire you. And, of course, I tend to look at the technology companies of America, such as Amazon, Facebook, Google, or Apple, that are transforming mindsets, and why can’t we have that in our industry as well? We can. It’s just a matter of leadership and ambition and confidence.

Louis Besland: What is the most important lesson you’ve learned over the past ten years as a CEO of a purpose-led company?

Steve Foots: Keep innovating. It’s all about innovation for me at the start of it, but it’s also about making sure your organization is fully engaged in the whole area of sustainability and that everyone really gets it for the right reasons. And making sure that your organization continues to focus on its customers and understands, really deeply understands, what the customer really wants from the organization in the next few years, not today. So it’s meeting unmet needs. We’re big innovators at Croda, and our resilience comes from giving customers what they want when they want it, and making it very difficult for them to reformulate your products.

Louis Besland: Steve, thank you for making the time to speak with us today.

Steve Foots: Thanks, Louis. It was a pleasure.

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