Creating a leader in the blue economy
“We do not follow. We believe that doing better, and leading, and providing information about our experiences, through transparency, is better than sitting down and receiving instructions on how to behave. It is better to take the initiative, because if you take the initiative you have some control, and you can predict and you can forecast what the impacts on your business will be.”
José Soares dos Santos is speaking in his simple, wood-panelled office in central Lisbon. He is thoughtful, clear, articulate and candid as he explains how and why Jerónimo Martins, the Lisbon-based international food distribution and retail group chaired by his brother, Pedro Soares dos Santos, has become recognised for its actions on corporate sustainability.
Dos Santos also plays an even more important role in ocean conservation and the blue economy, via his family’s management of the Lisbon Oceanarium, through the Oceano Azul Foundation, and leadership in sustainable investment in and around the marine sector.
Jerónimo Martins is controlled by the dos Santos family, with José as Executive Chairman of its majority shareholder, Sociedade Francisco Manuel dos Santos. It operates more than 4,500 food stores, under different brands, in Colombia, Poland and Portugal, with more than 100,000 employees across food retail and distribution. The group has built a reputation for leading on social and environmental responsibility across its complex operations, recognised by entities including Euronext, the Global Child Forum, the Ethibel Excellence Investment Register and CDP Climate Change.
He says that a corporation does not need to see ESG leadership as a potential extra cost. “It costs around 20% more in capex as you build stores, as you build factories, as you do the transportations, the systems and so on and so forth. “What we do is we do not change the total amount of capex, we are just more rigorous in the returns on capex. In the past, you would waste part of the money, but with this discipline, while it is more expensive to equip the stores and more expensive to run the trucks, the distribution centres and the factories, the capex goes up but people are just more rigorous about it, and we have reduced a lot of waste in terms of investment, which is fantastic. There is a good discipline coming out of this.
“We also concluded early on that there is a bigger risk in doing nothing than there is in doing something. There is a bigger risk in consumer terms, in shareholder terms, in stakeholder terms, in doing nothing than using this discipline in reducing waste and optimising the resources that are given to you.”
Instilling proper discipline around key elements of ESG can have long-term beneficial effects on the operations of your company, says Dos Santos. He is scathing about executives who use the risk of impact to the P&L as an excuse for inaction; in fact, he has an economics lesson for them. “You really have to increase productivity in the company to accommodate the increased costs [associated with an ESG agenda] and at the end of the day it’s a good thing that we are working on productivity, because we get better and more efficient and we better serve our consumers.
“This is point number one: there are too many people who are just finding excuses not to dedicate time and resources to this. The other part is that I need to show value to my customers. What we have found is that, within reason, people are willing to pay to do the trade off and upgrade their consumption and their relationships to have better products which are more environmentally friendly.” He is also quietly scathing about organisations who say only wealthy consumers are willing to change their consumption habits to account for socially and environmentally sourced products.
“The operation of Jerónimo Martins in Poland is a discount operation. We have almost 4,000 Biedronka [discount food retail] stores there. We are fully committed because that’s how we can make the difference. We impose rules on ourselves and negotiate with our suppliers that they need to be more sustainable, and this has a big impact [because of the purchasing power of their operation], and if you see our results and you see competitive position in the market, they are untouched.” To suggest doing nothing would have been a financially superior option is not true, he says.
Working with suppliers is a time-consuming but essential process to reduce so-called Scope 3 emissions, the carbon and other environmental footprint of the entire supply chain. “The toughest question is, do you cut the relationship with the companies that are not doing these steps? We need to give them a chance to solve their problem. Then if we feel, or we know, they are not doing their best to solve their problem, we always find an alternative supplier that is able to do so.”
Jerónimo Martins invests in renewable energy systems. Since 2018, 100% of the electricity used for the Group’s operations in Portugal has come from renewable sources. It is crucial to get employees and executives incentivised for an ESG strategy. Dos Santos says the process started within Jerónimo Martins around seven years ago. “The first phase was convincing people and working with people, finding solutions, learning about the process. Then there was a point around four years ago when we decided to put these objectives in the managers’ objectives. So, they had remuneration linked to this, and then instead of a problem, you find solutions. It motivates people. And then it’s amazing, people are reinventing the business, and we have sustained margins, we have increased market shares, so we can see this is working.”
Biography / key highlights
1986: Graduates in Marine Biology from Lisbon Classic University
1995: First becomes a member of the Board of Directors of Jerónimo Martins, his family's company
2009 (until 2018): Board member of Fundação Francisco Manuel dos Santos
2012: Becomes Executive President of Sociedade Francisco Manuel dos Santos BV
2015: Becomes Chairman of Oceanário de Lisboa
2016: Becomes Chairman of the Board of Trustees and Directors of Oceano Azul Foundation
2020: Becomes Chairman and Trustee of the Board of Fundação Francisco Manuel dos Santos