“More important than money”: Home Credit launches its ESG policy

Twenty years ago, the business world was a pretty simple numbers game. The measure of success for practically any shareholder was profit – and nothing but profit. Maximizing profits was the mantra of the day, and it often led to, shall we say, ethical compromises. Emerging and increasingly relevant social challenges – climate change, social exclusion and growing polarization in society – make it clear, however, that this numbers game is ultimately a dead end. More and more companies are moving away from the categorical imperative of profit and becoming part of the solution to these pressing problems.

Corporate social responsibility is not really complicated. It essentially boils down to a few basic patterns of behavior our parents drilled into us when we were children. Do not litter in the woods. Treat others with kindness. Look out for your little sister. Now, in the corporate environment we have to add a few more principles we did not need as much when we were children. Such as not judging people by the color of their skin, their religious beliefs or gender identity. Or that we should associate with people who do not cheat and will not end up in prison. Or that we should listen to minority voices.

In the last several years, this set of rules for the corporate world has been codified into what is known as ESG principles – short for Environmental, Social and Governance, the three main pillars of corporate social responsibility that more and more large corporations and small businesses alike are embracing. Often their motivations lie less in noble ideals about saving the planet (although hats off to exceptions such as Patagonia) or Kantian ethics and more in simple pragmatism. Companies know that a responsible approach will pay off in the long run and give them the opportunity to give back to society at the same time. But results are what counts, not the motives.

Perhaps surprisingly, ESG guidelines and policies draw in not only small businesses that have grown out of local communities, but also major multinationals that few would peg as models of responsibility at first glance. For illustration: Euro Stoxx 50 ESG, the European index of the largest ESG companies, includes companies like Total (oil), BASF (chemical), Ferrari (automotive) and ING (banking). This may be because enacting an ESG policy is not meant as an impulse for the PR division to go on the offensive with press releases about how the company is saving the planet. In other words, it is about the principles, not about a façade or public preconceptions. In 2019, Bloomberg’s 50 Sustainability & Climate Leaders project included – perhaps somewhat counterintuitively – Rio Tinto (mining) and Philip Morris (tobacco).

THE STORY OF HOME CREDIT

Most of these global corporations create and set up their ESG policies in their headquarters in Western Europe or North America, so the fact that Home Credit spent the last several months preparing and approving, and soon will be implementing, its new ESG policy from Prague makes it rather unique. “I think we’re quite exceptional in that regard, or at least I’m not aware of any other multinational that planned out its global ESG policy here in Prague,” commented Jan Růžička in an interview for INFO.CZ. As Chief External Affairs Officer in Home Credit Group, Jan Růžička is in charge of overseeing the creation and implementation of ESG rules.

The reason Home Credit decided to develop new ESG rules, Růžička explains, is complex. The main driver is, of course, the clear global trend that more and more companies will be following in the coming years. Over the last four years the volume of assets managed according to ESG principles has doubled to $40 trillion – and is projected to continue growing. “In 20 years on the market, we have proved that Home Credit already has a relatively robust system of rules related to and supporting sustainable business. In order to give them a unified, internationally recognized standard, we decided to create a comprehensive ESG policy,” explains Růžička, who considers such a policy to be an informal “license to operate” for corporations.

Unifying the existing sustainability policies – and adding some new ones – is not the only factor, however. Like most companies implementing ESG policies, Home Credit expects this measure to pay off in the long run. A fairly large amount of hard data shows that ESG policies pay off for companies in areas such as increased customer interest (especially from younger demographics), who develop a more positive relationship with the brand. “We can see that rules for sustainability and corporate social responsibility are important to our customers and our business partners. These rules help us as a company to share our corporate values with the public: taking responsibility for the consequences of our actions – how we treat people, what opportunities for personal development and growth we provide our employees, how we manage energy and waste, or fair play in business as a whole – and that is just as important to us as our profits and losses,” explains Růžička.

That is logical. All stakeholders – employees, customers and partners – can feel certain they will not experience discrimination on the basis of their age, gender, religious affiliation or social standing – or many other things. This may be the standard in most places in Europe, but many markets in Asia and elsewhere in the world do not yet provide sufficient inclusion of various groups.

One final factor in Home Credit’s decision to put together an ESG policy was the development of regulatory policies on world markets. Alongside the standard financial reporting, many major exchanges, along with the global players who provide the financing for international corporations, now also require formal reports on non-financial performance – how they are doing at meeting various ESG parameters – on using green energy, building relationships with employees, and respecting laws and regulation. Soon, large companies in the European Union will also be required to prepare these reports, so Home Credit believes quickly adapting to the new rules makes sense.

FINANCIAL LITERACY AND INCLUSION

Home Credit found the process from making the decision to actually creating and approving its new ESG policy relatively straightforward. Jan Růžička describes it like this: “From the very beginning our team felt very supported by top management including our CEO. So we mostly just had to find good examples of ESG policies that work. We worked a lot with McKinsey, UBS bank and the UK’s Aviva insurance company, for instance. This helped us set up a system with a truly international reach.”

In putting together the new manual, the company drew inspiration from global standards in ESG policies by GRI or SASB as well as multinational corporations where these practices are already in place and working well, such as J.P. Morgan, Generali and Hang Seng Bank as well as those already mentioned above.

In addition to financial inclusion and attempting to improve financial literacy, Home Credit’s new ESG policy addresses issues such as diversity, environmental protection, employee rights, choosing sustainable suppliers, and CSR and developing local communities.

One of the key areas of the ESG policy involves transparent reporting, i.e. verifying that a company is truly pursuing the principles it claims in its ESG policy. Home Credit plans to release a report each year presenting its environmental and social activities that year. “These annual ESG reports represent an important signal for our external partners. They show our employees and other stakeholders how we are meeting our non-financial obligations,” says Jan Růžička.

Since the board at Home Credit approved the new ESG guidelines late last year and they are set to take effect at the beginning of April, the first ESG report showing how Home Credit is changing its sustainability approach should come out this summer.