235. Volker Zöller, President Consumer Goods EMEA at Essity: Leading into the Future

Hi, pleasure to be here. Thanks for inviting me. At least you've seen it. I think you made the right bet because we actually took the podcast seriously with time and we've created something that I think is pretty cool.

Don't call me old, call me senior.

Yeah, I mean first of all, Essity is a leading hygiene and health company with approximately 15 billion euros of global sales. We are roughly half in B2B, half in B2C and we are active in more than 150 countries. Myself, I'm the president of consumer goods EMEA, which is retail business in Europe, Middle East, Africa. That's round about five billion in the 15 billion portfolio. I'm 10 years in role and already 30 years with the company. And it's been what, five years since you had this chat with Daniel as he mentioned. I'm very curious how have these years been. I mean, I would say very busy, unprecedented, challenging, but I think also interesting at the same time. Actually, it started for us in 2019, if you remember 2019, the new European Commission, the Green Deal with a super high focus on sustainability and then 2020, the COVID year and especially for us being in health and hygiene. You remember the panic buying, the empty shelves of toilet papers, all discussions with our retail customers were very much about product availability. 2021 we had a pulp crisis. Pulp is the most important raw material in our biggest category. Then 2022 the terrible war in Ukraine started with an energy crisis. We're also very energy intensive in our production and then 2023, 2024 the years of hyperinflation of a downgrading consumer. So very, very interesting years and the big question is now what will 2025 bring?

Yeah, this is absolutely true. This is true. Yeah.

I think first of all we have managed the move to the fully digitized world very well. We have like many other companies we have moved in 2020 approximately 8,000 employees overnight in home office and there have been in my opinion two important success factors. Number one is the technical infrastructure worked very well. That's a precondition. And the other one is we have a very strong company culture and I think in our first podcast we also talked very much about company culture which is based on commitment, care, courage and collaboration and that was very, very helpful. Meanwhile we are working in hybrid mode so practically slightly different country by country. 40 to 50% of the working time is from home but we still believe that the office is the most important place to be and our employees have accepted this very, very well. But we have also invested quite some money in our office spaces. Meanwhile, it's a little bit different what our companies are doing. They are more trying to get some efficiencies. We have invested in this because we believe we need to make them more attractive and offer more space for collaboration and creativity.

No. Yeah. I think we always said that this is not a revolution, it's an evolution. We could build on the strong values of SCA in the past. So the care and the collaboration element were always very, very strong and we said we have to improve more on the commitment, on the courage to take the lead to lead and shape a market and this is in the last four or five years where we really have been focusing on.

This is something we are very, very proud of. We have moved one and a half years ago from I call it very functional office in the Munich area to the so-called HAT building in Munich. And this building has higher standards and certification when it comes to sustainability and digitization. But for us, it offers also unique possibilities to collaborate and work based on your individual needs. It's a great mix I'm always saying of our company's DNA which is very much in sustainability and in the digital area but also our beliefs in behavior like the care and the collaboration element. And I mean the intention of course was to make us an attractive employer and as you know in a very competitive market for talents and the satisfaction of our employees is very high and the office was now rated as you just said in the so-called Leaseman Index as the best workplace in Germany, something we are really proud of.

Yeah, we have the headquarters of Essity is in Stockholm in Sweden and then we have four business units. Myself leading the biggest consumer goods EMEA. We are headquartered in Munich, but in reality of course not everybody is working there. Then we have professional hygiene headquartered in Philadelphia. We have Health and Medical headquartered in Gothenburg and Consumer Goods Americas headquartered in Mexico.

No, it's let's say we have as I said before we have designed it for the individual needs of the people. We have people who need for example to work in a quiet area very focused. So there are zones where people are not talking but then we have also collaboration areas which are very open, look like a cafeteria you know and you are sitting there with your laptop. We have terraces with views to the mountains and stuff like that. So it's open space everything, it's very, very flexible and we have 45 meeting rooms only for one or two people. So if you have a conversation with a colleague you simply go, you cannot book them but you can also book big meeting rooms. So I think it offers really for every need we have a solution in this office.

Yes. Exactly. We have not only open space but we have also flexible desk which makes it also interesting because you are not forced to sit with your department. You can also sit with other departments with colleagues you join. And I think you have a lot of flexibility. We have approximately 400 people in our Munich headquarters and I think the satisfaction we have been checking this with a survey and so on. The satisfaction is very, very high but it's also attractive from a design point of view. You have a lot of flowers, sustainability, modern. So we enjoy our new home.

I mean I must say now I enjoy very much working in this new office. You know, I had in the old building, I had my own office including integrated meeting room, the coffee machine directly in front of my office and the assistant sitting next door. And there were days where I spent 10, 12 hours in my office and basically I have not seen anyone. And now we have actually six individual offices in the entire building for confidentiality reasons. I have one of this but it's actually a very, very small functional office. So if I want to spend time with the colleagues, I go to the collaboration areas and I'm trying to sit more or less every day with somebody different. This is interesting for our employees to see somebody from the senior management, but it's also super interesting for me to meet the colleagues. And for me, when you talk more about the digital world, maybe it was a little bit easier to adapt to these new ways of working because I'm used to manage a business and my organization leveraging digital tools. There are only two of my 12 line reports which are in the same office in the Munich office. For line managers being used to have the organization the same location, it was partially I would say a massive change but I think our culture of trust and empowerment was very helpful to manage this situation. So we have also supported our leaders managing this change, the transformation, the transfer to a home office and for us digitization remains very high on the agenda and we are trying of course or we're continuing to upskill our colleagues and also in the hybrid way of working.

No, yeah, our experience is it's increasing again but not to the levels pre-COVID and I think we all appreciate it's not only a cost question, it's also a well-being question. I mean when I reflect how much time I spend traveling before COVID, I think for us, for me it was a positive change that I do today much more via Teams.

Yeah. Yeah. I think the days of like going traveling always for like one meeting that's become the exception and not the norm.

Yeah, I mean digital has been without any question and is still a big disruptor in our business and in many, many areas. I mean it's in marketing for sure, digital marketing, but also supply chain we talked a little bit about supply chain earlier, but also in sales a lot of things have been changing concerning go to market. Our main sales channel is retail, i.e. brick and mortar. We have approximately 9% of our branded business in e-commerce and this varies of course country by country and category by category. And as you rightly said, we have also a couple of direct to consumer platforms like for example for washable absorbent underwear and this is for more saying high value products, low shelf rotation and a broad assortment. It's a very, very interesting sales channel but D2C is for me much more than a sales channel because it's our opportunity to interact directly with our consumers and it's a great source of innovation. So in washable absorbent underwear we get a lot of new ideas from our consumers. So overall the availability of data is a big change and I mean how we are doing business today generating insights, following the consumer journey or also as an enabler for net revenue management. I mean business looks completely different than five years ago.

I mean this is an area where Essity is extremely active. It's absolutely part of our company's DNA. We are recognized in Corporate Knights as one of the 100 most sustainable companies in the world. This is something we are really proud of and I mean we really take it, this is not marketing, this is we really do it and we also follow the United Nations Foundation and our own sustainability framework is following the 17 sustainability goals defined by the United Nations Foundation. Our focus is on avoiding plastic in some of our projects, of course plastic and also the packaging. It's by the nature of the tissue business, sustainable forest and fiber management, carbon footprint is a big topic, but also energy and water savings. I think what we are doing maybe a little bit differently than others, we are not only focusing on our own production, but we truly try to be end to end. That means in our sustainability concepts, we are involving suppliers on one side, but also the retail customers on the other side. So really end to end.

Sorry, go ahead.

Yeah, I think you should not always go with the flow. You should also sometimes go with what you believe in. And I think our company and including myself, we have a very, very strong commitment to DNI. My leadership team has worked out a so-called DNI manifesto and it is guiding us in our business what we are doing. Personally, I think everybody has experienced that diverse teams perform better and there is a higher level of employee satisfaction. So gender now we talked about gender, this is only one important criteria. In my management team I have more than 40% of females, I have eight different nationalities out of the 12 and a very diverse age structure. And when I saw LEAD, I felt that it stands absolutely for our target to empower female talent, it provides networking and training opportunities for our employees and this is something I'm truly passionate about to drive DNI in our organization. So this was for me an absolute privilege to sign the LEAD pledge with the CEO of LEAD, Allison Simon.

I mean for absolutely, absolutely. I mean diverse perspective and I think as I said enhances employee satisfaction and improves decision making and that leads to a better overall performance. I think I'm used now in the last years to work in international environment. This is another aspect that you have diverse. I mean I absolutely have seen performance improvements when you leave room also. It's not only to have diversity in the room but also leave space for diversity in a conversation. This is sometimes the more critical one. It's not tick the boxes but if you leave space for diversity in your room it improves definitely decision making and business performance.

I mean there are sector specific questions and challenges and individual company, even if you are market leader like in many European categories, we cannot solve this on our own. And this is why we have trade associations and they act as a voice of the industry in the work with the European Commission. I think this is much more powerful if you have an industry approach and these trade associations live from the engagement of the members and this is why we are there.

Yeah, I mean first of all I think the role of these industry bodies is to provide industry expertise and knowledge what the European Commission cannot have. I mean that's obvious and we are contributing, collaborating on consultations related to draft legislation and regulation. And I'm always saying a trade association works in certain parts like a company. You define your strategy, your focus areas, you work with task forces, you define an industry position respecting the limits of compliance of course, and you identify your main stakeholders, you start the activation supported by professional communications. I think the difference is more decision processes work very much more consensus driven while in the company it's maybe a little bit more hierarchical. And in the association for European brand manufacturers, of course the relationship to the retailers is also a very, very hot topic. We talk a lot about unfair trading practices and so on. And well yeah, this is a topic we are discussing in these industry bodies.

A little bit less regulated and a little bit more competitive. I would even cancel the word less. I think regulation per se is not something negative. Regulation for example in areas of health and hygiene where we are very active can be something very, very positive. I mean there's stronger consumer protection. We talked a little bit about sustainability, quality, safety standards. So it can be something very helpful and important. The challenge is more to get the right balance with the competitiveness. And there is an urgent need for Europe, I think the last days have shown that, to step up in competitiveness. And we have seen in the last years a level of regulatory framework which is not healthy. This is costly, impacts operational efficiency, slows down and very often also kills creativity and innovation. So I think a lot of this was done with a good intention but it caused enormous bureaucracy and by that loss of competitiveness. So this is definitely one of the challenges and there is an absolute high need and urgent need to get rid of some of this regulation. Another challenge we have in Europe of course energy prices. As I said earlier we are in a quite energy intensive environment and we have lost in many areas competitive competitiveness to the increase in energy cost and that limits of course also growth and employment. And last but not least, I think we also need to support sustainable innovation and investment. You have heard in the last days what Germany with the new government or actually even in the old constellation is trying to do. So I think protectionism is not the right answer. I think Europe has to increase the competitiveness. So I support what is ongoing there at the moment. But there is also a need for urgency.

I don't know. You know, we have seen also in the past situations where you could get depressed, but that doesn't help in this. We have to find our way as Europeans and we need to rely on our true friends. So, I'm always an optimistic person, Daniel.

I'm always saying follow your heart and be authentic. This would be my advice.