Achieving Sustainability Now: Hakan Bulgurlu on the Immediate Moral Imperative for Corporate Social Responsibility
Hakan Bulgurlu is a leading international businessman and environmentalist. He is the head of Arçelik, a leading global manufacturer of home appliances, where he has been CEO since 2015. Arçelik has annual revenues of five billion euros, is listed on the Istanbul Stock Exchange and its brands hold prominent leadership positions across global markets.
Under his leadership, Bulgurlu has helped grow the company into an inclusive, sustainable, and responsible business. His vision turned Arçelik into an Industry Leader in the Dow Jones Sustainability Index and saw the company included in the FTSE4Good Index for four consecutive years.
This year Arçelik has succeeded in becoming carbon-neutral in global production with its own carbon credits, achieving a major move and an industry first. He completed his undergraduate studies at the University of Texas, Austin and received his MBA from Northwestern University’s Kellogg School of Management and Hong Kong University of Science and Technology.
Sam Harshbarger (BT): What led you to embrace sustainability over your tenure as CEO of Arçelik? Was this something you brought to the company?
Hakan Bulgurlu (HB): Sustainability is both something that I had in mind coming into the job and something we already had at Arçelik. In today’s world, consumers give less and less importance to the brands of their appliances. All they care about is that they function well, that they’re durable, that they’re high quality, and that they do the job, essentially. This transition is especially visible with younger consumers. They're purchasing on their mobiles.
That said, the most important trend is towards sustainability, which means the appliance needs to consume less energy, water, and other resources to have a carbon footprint which is more acceptable to the consumer. Arçelik also uses recycled materials in producing the appliance and manage the cradle-to-grave of the appliance. We need to make sure that how the appliance is used and disposed of is a carefully-managed process and that we keep track of resources and waste involved.
I saw sustainability as a big opportunity and as low-hanging fruit that would have a lasting impact in giving purpose to our employees when I arrived at Arçelik. If our employees have a purpose, it’s much more important and motivating than having a high salary. We found that our engineers took much more pleasure and ownership in creating, for example, a washing machine that uses discarded pet water bottles in its plastic drums.
Now, not only customers have choices between different brands of washing machines, but there a sustainable option which uses discarded plastic. Consumers will choose sustainable appliances and are willing to pay more for it. That changes the game. From our engineers’ and our corporate perspective, using these pet bottles actually lowers the material cost of the plastic. So there's a net P&L impact as well, which motivates everybody to come up with more of these types of projects. Soon, every part of the company is working on something like this, and this transforms the business to a bottom-up model. This was an initial success and what we aimed at when we were coming in as a new management team and it’s worked.
Now, when it comes to Arçelik, of course, the focus has been sustainability for a long time, but it hadn't really been active up to that point. The intention of sustainability is there in our mission statement: “Respecting the world, respected worldwide.” This very clearly means respecting the planet we live on, our home. But it was something that had not been thought through in granular detail and that had not permeated to every part of the business. I think we just activated that in a much more significant way.
Today, we lead the Dow Jones Sustainability Index for our industry two years in a row, which is a big testament to our efforts. We also announced that we’ve been carbon neutral or net zero for two years, for 2019 and 2020. We’re doing this because we love the planet, yes, but we’re also doing it because it promises superior returns to our shareholders over the medium-term. I don't believe any company that is not sustainable today will be around in twenty years. They will disappear. There’s not going to be any exceptions to that rule, none. Sustainability is the single most important agenda for shareholders, investors and our planet.
BT: In March, you spoke with BBC about how you learned the value of trust during summers working at the Grand Bazaar in Istanbul. What responsibilities do companies have to consider the interests of broader classes of stakeholders, such as the general public, and gain their trust?
HB: Well, I mean, trust is a very fickle thing. It takes many, many years of accumulated good work to gain, and then it’s very easy to lose. As I mentioned earlier, unless you are doing environmental and social good, unless you are worrying about the environment, which is a finite resource, then you are not sustainable. In the bazaar I learned that if you gain the trust of a customer, they will come back repeatedly and prefer you over others, even if you are slightly more expensive. The issue of trust is central to consumers actually picking up and sticking with brands. For us, we want them to know that we are doing the best thing for the environment and society as a whole.
BT: In May, you wrote in a blog post, “this virus is a wake-up call and what’s coming next is an infinitely larger one that we will have great difficulty dealing with as humanity,” referring specifically to climate change. What have you learned from the COVID-19 pandemic about achieving sustainability in the long-run?
HB: First of all, I learned we can trust the government’s response to be the right one and urgent enough in fighting this problem. However, it has to be on us as consumers and business leaders who have to take leadership and be examples in the fight against the climate crisis, because essentially this is a pandemic. We will get better therapeutics. We will get vaccines. We will learn — I thought we would have learned by now — but we will definitely learn to social distance, wear masks, and wash our hands, and we will beat it. That doesn't mean there won’t be other ones. This will prepare us for any potential pandemics we may face in the future. From the response to COVID, I’ve learned a lot about human complacency — that unless it immediately impacts you in the short-term, humans do not take action and they think it’s somebody else’s problem. The issue there is that with the climate, it’s going to be absolute and it’s going to be very difficult to turn back.
I'm an optimist. I think that as humans we possess the technological capabilities, the know-how, the creativity, and the intelligence to tackle climate change. If put to the right use, we can come up with the right solutions. But rather than dealing with the problem now when it will cost relatively less and remains very much implementable, we’re horrendously choosing to delay. It’s unacceptable for the future. We’re going to look back at today's leaders and say: you did not do anything to mitigate what’s happening in the present, and that all of these people that are dying and suffering are actually your fault. I think young people will hold us accountable. So doing the right thing now is a matter of survival, in my opinion, of the human species. It’s an all-out effort, but it’s also a long, long fight ahead.
BT: Arçelik is the only Turkish industrial company in the Dow Jones Sustainability Index (DJSI) in the Emerging Markets Category. What challenges have you faced in meeting sustainability targets in emerging markets? What lessons have you learned others could benefit from?
HB: Obviously, emerging markets are coming from far behind in terms of sustainability because regulation is not quite there and we definitely need to actually take voluntary action in those markets to reduce emissions. However, right now, if you do the right thing and your competitor doesn’t and they sell cheap — it's difficult. So the single most important thing that needs to happen is education in these emerging markets. They need to become aware of these problems quickly and understand what they need to do to mitigate those problems. In Europe, the political support is moving in the right direction. But you have to remember that Europe is only eight percent of global emissions. So they can only be a good example to the world, nothing else. And unfortunately, nobody’s going to just follow a rich Europe's example. Therefore, education in these emerging markets is critical.
BT: The pandemic has put a hold on too many initiatives to combat climate change, and the formal withdrawal of the United States from the Paris climate agreement earlier this month marked a nadir for international coordination against the threat of climate change. What developments make you most hopeful going forward?
HB: I think COP26 next year will be a critical make-or-break meeting. I plan to be there. I can easily tell you that the most interesting part of all of it will be the change of leadership in the US going forward as soon as Biden is in. He’s going to sign right back on to the Paris Accord, which is very critical because I think you need a united world where China, the U.S., and Europe can work together as three big blocs in pushing the climate agenda. For the first time now, we are getting leadership around the world which can do this. With the three of them cooperating, I’m very optimistic that we will see a very different world. Now, this is going to be difficult for companies and countries to adapt to. The ones like us at Arçelik that are ready and leading will gain a huge advantage, competitive advantage, because I think regulations and penalties are going to go to a completely different level with this shift.
Now, even with that, are we going to be able to be successful? I don’t know. Unfortunately, even though I’m an optimist, I’m also a realist. I think we are going to have massive biodiversity loss. Continuing warming oceans will wipe out 90 percent of coral reefs, which means we won’t be able to preserve the vast biodiversity found in coral reefs. But I do have hope that by re-wilding, massive tree planting, and dramatic reductions in consumption habits, and by completely banning non-biodegradable plastic, we can and will make significant progress in both lowering the emissions and with reducing our carbon footprint.
We will come up with technologies that will actually open up a completely new gold rush. I call it the
“Green Gold Rush.” With governments putting enough funding out there, I think new technologies will come fast and we will see start-ups which will follow Google, Facebook, and Amazon’s trajectories in going from zero to multi-billion dollar companies in very short time periods if they find technologies that will address these issues that humanity will face. It’s a completely new area. I would love to be your age, and going through university now and focus all my energy on sustainability and sustainable technologies — because that is the future.