This blog first appeared as Steve Wunker's piece for Forbes
By Steve Wunker
Can sustainability be profitable? For BBVA, one of the largest banks in Europe and Latin America, it isn’t even a question. The company has committed wholeheartedly to making sustainability central to its business practices. This isn’t a matter of high-mindedness or social cause – although the company recognizes the public benefits – but rather a profit-driven business decision. BBVA believes these profit motives should appear in the calculations of many more businesses considering how seriously to invest in sustainability.
BBVA, founded in 1857, grew from beginnings in Bilbao, Spain to become a leading global bank through capturing new markets via both organic and merger-led expansion over several decades. It was an early leader in the area of “digital transformation,” announcing its initiatives back in 2007. This forward-looking orientation translated into initially committing to invest €100 billion in sustainability between 2018 and 2025.
I spoke with Javier Rodriguez Soler, BBVA’s Global Head of Sustainability, to learn about the business logic of making sustainability profitable, and how such a large organization aspires to weave sustainability across wide-ranging operations in more than 25 countries. He related four ways that BBVA is making it happen:
1 - Clarify the Profit Opportunity – Rodriguez Soler began with the business upside, which gains executives’ attention and guides their priorities. He explained, “We’re convinced that the most urgent task for humanity is to reverse climate change. And, being a for-profit organization, we see it as the greatest business opportunity in our lifetime. The world will need to spend $500 trillion on this to 2050, which is 5% of global GDP. That is the biggest investment in human history.”
2 - Create Competitive Advantages – While BBVA sees a need for other financial institutions to step in given the huge amounts of capital required, for the near-term it believes it has a strong competitive advantage. Rodriguez Soler says, “When we talk to our commercial clients, all want help with this – power companies, oil and gas enterprises, automakers. This is on the agenda of all big companies. We have deal flow from our expertise, but also the volume of business creates better pricing and better returns. For example, we have an internal tool called the Transition Risk Indicator which we can use sector-by-sector to classify our clients, how well they’re positioned vs. peers, and how they can improve their TRI score. If they’re well-positioned in TRI, we tell them we’d like to bank them more and they receive better pricing. Those with poor positioning get our advice on how to improve, and that can lead to other banking business too such as equity capital markets as well as mergers and acquisitions.”
3 - Influence the Market – BBVA is a giant in both commercial and retail banking. In retail, i.e. banking individual consumers, the dynamics are distinct. Rodriguez Soler explains, “Not all of our customers are aware of what’s happening with the environment. Awareness can be lower in emerging markets, even though they’ll be more affected. Part of our work is to let people know what’s going on. We have tens of millions of customers and we’re communicating with them about it. For instance, our app, which has been recognized as a leader in digital experience in Europe for the past five years in a row, has a carbon footprint calculator embedded in that. Then we tell customers about the products and solutions that we offer for sustainability, like financing for solar panels and electric vehicles.”
4- Organize Accordingly – To achieve these ambitions, Rodriguez Soler is working in a unique reporting and organizational structure. At BBVA, sustainability is not split off into some Center of Excellence, but rather is an operating business with profit and loss responsibility. Sustainability-related activities in more than 25 country operating units report up to Rodriguez Soler in addition to normal line reporting channels, including business development. Leaders of these country business and product lines also co-report to Rodriguez Soler and their usual line managers. And Rodriguez Soler reports both directly to the CEO as well as to the Chairman – the only person in the company with that dual line of reporting, which helps to ensure both business performance as well as long-term strategic and mission alignment.
Rodriguez Soler believes that the way businesses co-report influences their behavior in ways that a Center of Excellence never could. “I’ve learned that you need to have official authority to do the right thing and convince people. That gets things done. The organization is not only connected with the whole bank, but it also has the right hierarchical connections to give instructions and not just convince.”
Eventually, this structure might become obsolete. Rodriguez Soler says, “Eventually, we won’t have a unit for sustainability, just as we no longer have a digital unit anymore because the whole bank is digital banking. If I succeed, we won’t need the unit anymore.”
Has it always been easy? Far from it. Rodriguez Soler says, “At first, I wasn’t so aware of the divergence within the bank about what people were aware of and thinking. Some people were very committed, and others not. It was a big challenge to get people to be at least a seven out of ten, and we can’t stop working on that.”
The results are speaking for themselves. BBVA has obtained the best global score in the banking category in the Dow Jones Sustainability Index. The company has also doubled its financial commitment, now pledging to invest €200 billion into sustainability between 2018 and 2025. The big money reflects the size of the profit opportunity.
Rodriguez Soler has some final advice for other firms about making sustainability profitable. “Don’t procrastinate. The easy thing is to continue with inertia, but the biggest risk is not to take a risk. If you’re not a step ahead, companies will lose their positions and individuals will lose their jobs. Embrace it!”