Felix Jansen: Operating in insulation industry is no short of a challenge. On a highly competitive market with little room to differentiate your products from the rest, how did the company fare in 2016?
Kari Lehtinen: I would describe our improved financial results for 2016 as a good performance. We didn't get too much tailwind from the market as such, yet we improved both our profitability and cash flow. Also our productivity improved year-on-year. I would attribute this achievement to the internal initiatives that are part of our longer-term sustainability and efficiency road map.
Could you describe these initiatives for us?
Certainly. Let me start by saying that in our business we incorporate triple bottom line thinking – economic, environmental and social performance. As one example, our commitment to reducing energy consumption by 30% of 2011 figures by 2020 is a tremendous driver for product innovation and operational efficiency. This in turn continues to create real value for our shareholders, customers and society.
In the more traditional sustainability metrics, we increased energy efficiency by 1.4% and increased our capability to reduce emissions with new cleaning technology. We continued our PAROC Rewool recycling activities and expanded certification of first-tier suppliers to an impressive 75%, also adding logistics suppliers and more countries to the audit list.
You mentioned social performance as one of the key elements of your business approach. Could you elaborate on that a bit more?
In 2016, we began implementing safety behaviour, leadership and employee value proposition programmes, the latter of which aims at engaging potential and existing staff in the benefits and opportunities of working at Paroc. We try to put more and more effort on identifying and nurturing talent, developing good leadership, engaging our people in the company’s direction and culture, and fostering collaboration both within and between teams. I think the new HR leadership we put in place towards the end of 2016 is ideal to promote these aspects.
We also introduced a Fair Play channel for external stakeholders to report any ethical concerns, as a follow-up to a similar, well-received channel for employees during 2015. Thanks to our efforts to put systems in place the previous year, in 2016, we were fully compliant in accordance with the OFAC, EU and UN sanctions requirements.
What megatrends do you expect to influence the insulation market in the long run?
Climate change and urbanisation are major trials for our planet. Noise and air pollution are fast joining more traditional concerns, such as energy consumption and waste. Paroc building solutions help our customers to mitigate risks, to reach targets set by the EU and various authorities, and to increase their competitiveness. Innovating and creating better products also helps our own productivity.
And that brings us to a third megatrend – digitalisation. Technology has brought our customers and Paroc new opportunities to make the complex simple, to increase the efficiency of building solutions and internal operations, and so take sustainability to a whole new level. As an example, Paroc plans to channel 50% of sales via digital tools already by 2019.
2017 must feel special for you as Paroc celebrates its 80-year anniversary. Where do you see the company in a next few years from now?
I am grateful to our customers, employees and business partners for helping us to leverage the power of sustainability. Our pragmatic, performance-driven approach to working, coupled with a curiosity to understand new things and embrace change will help us meet the coming challenges face on. If I look at the short-term future, the next two to three years, I believe our challenging business environment will continue. We will see modest industry growth in Europe as well as economic and political uncertainty. To succeed will be tough for Paroc. But we have never been a stranger to challenges.