How finance can help companies to walk the talk when it comes to sustainability

The journey to more sophisticated ESG reporting 

In 2020, we embarked on a journey at Ahold Delhaize to further professionalize our ESG data collection, reporting and performance management. Our Group was already reporting on more than 80 different non-financial KPIs via various departments, often with different methodologies and levels of coverage by market. We were making progress, but it felt inconsistent, sometimes unpredictable and we were often close but not fully on-target. So, our first step was to focus our efforts very pragmatically on four important indicators:  

1. carbon emissions from own operations,  
2. food waste,  
3. own-brand plastic packaging,  
4. and healthy sales.  

We chose these focus areas because they were strongly aligned with the ‘elevate healthy and sustainable’ component of our group strategy and because they are used as KPIs for our sustainable financing. While we continued to track other KPIs, these four received our main focus, attention and inclusion in our Group’s incentive plans. Only after clear progress was made here, have we gradually increased our level of scrutiny on additional sustainability-related KPIs such as diversity and inclusion and social compliance to provide more rigor on the Sustainability (S) and Governance (G)  elements of ESG reporting. And this is also visible in our recent Annual Report, where ESG is now fully integrated across the various sections, representing over 30% of the total pages.   

How finance drives sustainability transparency and credibility  

The finance community has played a critical role in Ahold Delhaize’s sustainability journey by providing clear guidance on both what we should measure and how, and by improving transparency to help translate our ambitions into concrete actions. We are doing this by creating common definitions, reporting methodologies and documentation standards and have incorporated them into a detailed ESG Accounting Manual. In addition, we work with frameworks, such as the Task Force on Climate-related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) standards. We also look at future developments and how these could potentially impact Ahold Delhaize, for example, the upcoming implementation of the Corporate Sustainability Reporting Directive (CSRD). The finance community supports our local teams with the implementation of the EU Taxonomy, a classification system that is used to clarify which investments are environmentally sustainable in the context of the European Green Deal.  

Furthermore, we have reviewed our data collection processes and controls and we are continuously working to ensure that reporting guidance for our local brands is straight-forward, easy to access and apply. This means, we continue to monitor for blind spots in our approach and refine guidelines to maximize relevancy and consistency across brands to support the ever-changing competitive and regulatory landscape. We have transferred primary reporting and performance management from the operation to finance. This way, our Group can leverage finance expertise to improve the quality and consistency of non-financial reporting. We still face many challenges in this area, for example, due to the lack of a dual ledger system or the availability of off-the-shelf ESG reporting systems. However, finance is constantly working with Health & Sustainability and our Operational and IT colleagues to identify opportunities to further enhance our data collection and reporting processes. 

Biggest wins from bringing in the finance function 

Thanks to the strong collaboration between our Finance and Health & Sustainability functions, we are starting to see big wins in this area: 

1. Increased measurability ensures better dialogues and more accountability 

At Ahold Delhaize, we have integrated ESG into our regular performance management drumbeat and it is now a core element of our incentive structures (representing 25% of our performance measures) to reflect our long-standing commitment to sustainability. This has driven thoughtful top-down and bottom-up conversations about the quality of our KPIs and how what we measure can lead to unintended (positive and negative) consequences. In addition, tracking our key KPIs on a more frequent and granular level has given us the insights to be smarter about how we set our targets and is allowing us to proactively drive improvements against our ambitions. 

2. Improved quality and accuracy of ESG data leads to higher external credibility

By closely examining our data collection and reporting processes, we monitor inconsistencies and errors in the application of guidance and improved our policies to better align our reporting with market and regulatory developments. As a result, we are improving the quality of our ESG data, which allows us to not only increase transparency, but to also generate more reliable insights into how we are progressing against our sustainability ambitions. This also translates into more credibility with our external stakeholders which is reflected in our AA rating on the MSCI Sustainability Index.

3. Transparency allows us to invest smarter, turning ambition into action 

We are now able to help the business to evaluate, plan and secure the necessary investments to deliver on our sustainability strategy. This is also an area where strong collaboration between the sustainability, commercial and operational teams are helping us to develop detailed roadmaps and scenario planning. And even though we have already started to incorporate sustainability considerations into our investment decisions (e.g., through the implementation of a carbon pricing model), we continue to enhance how we evaluate cost, scope and phasing choices of sustainability investments. One concrete example of how we secure the necessary funds for our sustainability plans has been through our strong sustainable financing such as the issuance of sustainability bonds. 

4. Bringing sustainability into the finance function unleashes new energy  

We have noticed a huge intrinsic motivation with the Group’s finance community to support the Ahold Delhaize sustainability transition. By expanding responsibilities and ownership beyond the Health & Sustainability teams, we have been able to make sustainability an even bigger and more relevant part of the operating model. In fact, item number one of our finance vision is to ‘embed healthy and sustainable into everything we do’. This has also proven to be an essential part of attracting new talent as we see an increasing internal drive of our associates to make a positive impact on the world that we live in. 

Next steps for sustainability finance 

As regulations further tighten and stakeholders’ interest in sustainability grows, continued transparency on ESG will help us to take even bigger steps on the many opportunities and challenges that come with this topic (e.g., increased focus on Scope 3 emissions, biodiversity and the demand for more visibility on the costs and benefits associated with sustainability). As such, we strongly believe that companies who are truly committed to sustainability will benefit from capitalizing on the expertise of finance to provide the trust, quality assurance and rigor to demonstrate that they are not just talking the talk but walking the walk when it comes to achieving their sustainability ambitions.