How Inclusive Capitalism Can Empower the Underprivileged

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Gilbert Ghostine, CEO of Firmenich, and Wharton senior fellow Djordjija Petkoski discuss how Firmenich is working to address the needs of low-income consumers.

For Switzerland-based Firmenich, understanding the needs of low-income consumers in emerging markets and coming up with business solutions to solve their problems is a core aspect of its philosophy. For instance, the company — the world’s largest privately owned firm in the fragrances and flavor business — is working in the area of sanitation. Firmenich deploys its expertise in the area of smell to understand molecules that cause malodor in public toilets and to come up with breakthrough technologies to reduce odors.

Djordjija Petkoski, a senior fellow at Wharton’s Zicklin Center for Business Ethics Research, recently spoke with Gilbert Ghostine, CEO of Firmenich. In the interview, Ghostine discussed how inclusive capitalism can help solve the world’s problems while helping companies attract the best talent.

An edited transcript of the conversation follows.

Knowledge@Wharton: You worked for many years with Diageo [the leading alcoholic beverages company] which is a publicly traded company, and since 2014 you have been with Firmenich, a family-owned business. What would you say are the key advantages that family ownership provides in terms of developing a business model of inclusive capitalism?

Gilbert Ghostine: The advantage of Firmenich is that we have the governance of a publicly quoted company while being private held. We combine the best of both worlds. We combine the rigor and accountability of publicly quoted companies with the passion and medium-to-long-term vision of private companies. This combination is very powerful and is enabling us to stand out as leaders in our industry.

Knowledge@Wharton: When you engage with emerging economies like India, how important is job creation as part of your overall strategy?

Ghostine: It is a critical part of our strategy and it goes back to the role of business. What is the role of business? It is to create jobs, uncover opportunities through innovation, and create new consumption occasions. And, at the same time, pay taxes. Job creation in emerging markets is critical because it offers opportunities for youth and gives them a springboard to a better life.

Knowledge@Wharton: When it comes to job creation and leadership, empowerment of women is very important. What is your experience regarding this and what can other companies learn from that?

“Job creation in emerging markets is critical because it offers opportunities for youth and gives them a springboard to a better life.”

Ghostine: Women empowerment and equality touches every facet of our business. Not only internally at Firmenich, but also with our suppliers. One third of our executive committee, the team that runs Firmenich globally, is women. I appointed them after taking over as CEO. I can tell you that the current executive committee, with three women, is far more impactful and effective than it was in the past. It is not about only gender diversity. We have seven different nationalities in our executive committee. They bring a completely different perspective, and they make the discussion far richer, more inclusive, and more complete. This is reflected in our business.

Also, 40% of our leadership team across the company and 40% of our employee base are women. This means that our women colleagues are very well represented in the leadership of the company.

Firmenich was the first company in our industry, and one of only seven companies in the world, to receive the gender equality employer certification in 2018 from EDGE. (The Economic Dividends for Gender Equality is a leading business certification standard for gender equality.) This means equal pay for women and men having the same positions, the same jobs and the same qualifications. And, at the same time, having inclusive policies, flexible working policies that include women’s needs, and offering them training, coaching, and opportunities to help them fulfill their career aspirations. This is not easy. We operate in 100 countries and have 7,600 colleagues. In terms of number of employees, we are the third-biggest employer globally out of the seven to receive this gender equality certification.

Knowledge@Wharton: Firmenich is a science-based company. To what extent does the way you function motivate young people to work with you?

Ghostine: Yes, we are a science-driven organization. Science is at the heart of our company. We have 450 scientists of whom 250 have a PhD in science. The head of our research and development is a woman, and she is one of the most reputed science leaders in our industry.

But it’s not only about science. What is more important is that millennials and young consumers, women and men, want to work for responsible companies. They look at your track record and they want to work for companies that walk the talk. They are excited that Firmenich is leading in this space and is leveraging its science and its knowledge for the best interests of society. That is why they are excited to join us. We recruit on average 850 people a year and we have 7,600 employees, but last year, calendar year 2018, we received 100,000 resumes. For a company like Firmenich, a Switzerland-based, family-owned, business-to-business company to be receiving 100,000 resumes gives you an idea of how attracted people are towards working for responsible companies.

Knowledge@Wharton: You are now working towards changing the sanitation environment. Can you tell us about that and what your experience has been so far?

Ghostine: There are 4.5 billion people around the world who don’t have easy access to toilets. Of this, 3 billion people have access to public toilets, but most of the time, these smell very bad, so people prefer to go out in the bushes. The rest, 1.5 billion people, don’t have access even to public toilets. This is a serious problem. When we realized that the key deterrent to people not using public toilets is the unpleasant smell, it was our “a-ha” moment. We are experts in smell. We have been investing in understanding the receptors in the nose and the knowledge of smell since the 1930s. This is where we can leverage our expertise, our knowledge, and our scientists to help tackle this issue.

We have joined forces with the Bill and Melinda Gates Foundation, and together we have created a fund of $13 million. We have sent our best scientists to the worst latrines in the world, the public toilets in Africa and in India, in order to understand the molecules that cause malodor and to come up with breakthrough technologies to counter the malodor. This was part one of the exercise.

“We have sent our best scientists to the worst latrines in the world … in order to understand the molecules [that cause malodor] and to come up with breakthrough technologies to counter the malodor.”

We then we moved to part two, making these technologies available to consumers through different brands. This is where we have engaged with our customers, the global customers and the local and regional customers, to put these breakthrough malodor control technologies in their brands. The important point here is that we are helping them shift their brands from improving the quality of life to saving lives.

Some 500 million children under the age of five die every year because of sanitation issues and the diseases it creates. We are very proud that we have brands that have been launched with our technologies in Bangladesh and in South Africa. These brands are already in the market. There is a third component, which involves engaging with local governments, municipalities, and local NGOs in order to make sure that we execute effectively and that the latrines and public toilets are maintained properly.

We have also discovered a fourth component which is far broader. You could look at recycling the waste and use it as fertilizers, and at the same use the data from this waste to analyze health issues. This is why we joined forces with other likeminded companies who are part of the Toilet Board Coalition. These include companies that handle the hardware, and also financial institutions like the World Bank, the Africa Bank, the Southeast Asia Development Bank, etc. The idea is to join forces and partner together to reinvent the toilet economy.

Knowledge@Wharton: What are the most efficient ways of making the experience that Firmenich has — in building partnerships — more easily accessible to universities around the world?

Ghostine: I think what is interesting here is that the themes and the issues are very relevant for consumers today. If you think about what the connecting points are, we are talking about health, the environment, and sustainability. These three topics resonate very highly and very positively with young people. They will lean in and get positively and emotionally engaged with this journey. This is why I dedicate time to go to universities to give public addresses to the future leaders, to sensitize them more about these topics.

Take the issue of making public toilets more accessible. Because of lack of access to toilets, women are constrained to go to isolated places and near bushes and are vulnerable to being attacked by men and animals. Because they try and avoid going there, they end up with health issues. Further, they hold themselves back from going out for education or for work. Once they have access to clean toilets, they are empowered to have a normal, decent life.

Or, look at the work we do in Madagascar with the farmers. The only flower there that is not pollinated by the bees is vanilla. It is pollinated by hand. And this work is done by women. We pay the vanilla growers 5% premium to the vanilla market price and in return they have to use this to invest in the local communities. For example, this money has been used to build 42 wells. This is important because it empowers women. Instead of spending hours getting water from elsewhere, women can now get water from these wells. The time that they save allows these women to work in the vanilla farms or grow vanilla themselves. They can become entrepreneurs, they can educate their children, and so on.

Knowledge@Wharton: This in a way redefines our understanding of impact, because usually we have a very simplified way of seeing the consequences of our engagement. We typically stop with the outcomes and don’t look at the wider impact. How can one create a common ground between what is taught at leading universities in Europe and the U.S., and what is happening on the ground in Uganda or the Democratic Republic of Congo or Egypt or Lebanon? Is there something in common that will help the business community to help the new generation of leaders get a balanced knowledge and understanding at a global level?

“Don’t limit yourself to your comfort zone, because then you will be shutting off opportunities. Put yourself out there. Expose yourself to opportunities.”

Ghostine: The single biggest opportunity today is that we are all global citizens. Technology has made the world smaller. Regardless of where we live, if we have access to the internet then we have access to the same level of information that someone at Wharton or someone at Stanford has. Technology has also lowered the entry barrier to any business. Good entrepreneurs exist everywhere in the world and one needs to engage with them.

I think education is the single fastest social elevator in the world. When you give people access to education, regardless of if it is at the campus or through the MOOCs (massive open online courses), it will transform their perception of the world. It will also stimulate their entrepreneurial and their intrapreneurial mindset and they will be keen to make a significant difference to the world. What I look for is a dialogue. It is not a monologue. It is not about us telling our stories. It is about how we can create a movement where the inclusive capitalism business model that we are championing becomes the gold standard for the next generation of leaders.

Knowledge@Wharton: How do you think we can develop the concept of generational responsibility where everybody plays a role? Otherwise, inclusive capitalism will not be inclusive, because a good portion of the population is not part of that.

Ghostine: I think what is critical is that students should think in terms of legacy. Don’t look for a job, look for a challenge. Think about your legacy. Think about your impact on others. If you look at it only in terms a job or a salary, you have undersold yourself because you are capable of far more than that. Thanks to technology, the opportunity to make an impact is far bigger for the young generation today than it was in the past. For example, if you have a good concept that could resonate favorably with consumers, you just need to find a few micro-bloggers and micro-influencers and they can launch your brand. The barriers to entry are much lower today and this enables young people to become entrepreneurs. And because they understand the needs of consumers, because they are consumers themselves, they can come with ideas that could make a significant difference to society.

Knowledge@Wharton: Can you share some lessons from your life that can help young people figure out what they want to do in their lives?

Ghostine: I was very lucky. I come from Lebanon, a small country, and I had the opportunity to live and work on four continents — Africa, the U.S., Europe, and Asia. One key learning is don’t limit yourself to your comfort zone, because then you will be shutting off opportunities. Put yourself out there. Expose yourself to opportunities. That is how you will grow as a leader, and at the same time you will be able to unleash even bigger opportunities.

I had this challenge twice in my life. Once when I was running the Middle East and Africa and Eastern and Central Europe for Diageo, based out of Dubai. The company offered me an opportunity to move to the U.S. and run a big chunk of our business in North America. One voice in my head said, “You are comfortable in this part of the world. You know the business inside out. You are from the Middle East, you lived in Africa, you know these markets, you built this business. Why do you want to go to America where there is cut throat competition? You might fail.” During the same time, I was offered the opportunity by two other major FMCG companies to run their business in the Middle East and Africa. I turned down these opportunities and I went for the U.S. because I decided to go outside of my comfort zone. I wanted to see how high I could go. I also wanted to continue my learning journey.

I had this challenge again when I decided to leave Diageo after 21 years. I was offered an opportunity (at Firmenich) which was outside of my comfort zone. My background is not science. It is marketing. Also, Firmenich was a family-owned company with completely different governance. But I went for it. And this might have been the best move of my career because I love what I am doing, and you can see the impact on the organization and on society at the same time. So, I would say, challenge yourself and get out of your comfort zone.

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