Isabelle Kocher on the Importance of Empowerment and Double Materiality

We met with Isabelle Kocher, former CEO of Engie, who shared with us how the role of the company has changed in recent years and explained why the concepts of empowerment and double materiality are key to the future of organizations.

What do you think the current health crisis reveals?

The crisis does not change anything, and it changes everything. 

It doesn’t change anything because the limits we are currently facing were already there. There are long-standing reports on these failings, including health crises. I think we all read a lot of literature on the subject in the past few months. 

But it changes everything because there is a sudden, collective understanding that these limits exist.

Someone said to me the other day: “The problem with human beings is that the reptilian brain is not effective at assessing a risk, when it is a new experience, and the cost of ignoring that risk remains unknown.” 

What’s happening is that we’re all realizing what it costs. 

What this crisis is changing is the shared understanding that these limits exist and that the phases of development that lie ahead are completely different.

Does the role of the company change as a result?

The usefulness of the company – because, in the end, the purpose is to seek the usefulness of the company – we will have to think about it in this context of a different phase of development. 

What’s it going to look like? Even if we don’t have a precise map yet, there are still some clues. 

Development in a way that consumes much less materials.

In a way, materials that are more durable in the way they are going to be manufactured, but also more durable over time. 

This notion of programmed obsolescence, it’s the end, really. 

I think there is a very strong corporate responsibility here. Companies are expected to watch out for this, to stop pushing for consumption.

Many more services: personal care services, services that bring happiness. 

It is striking to see the absence of correlation between the consumer index and happiness index. It’s food for thought. 

Many more personal care services, many more services also to help develop:

• more efficient infrastructures, 
• more efficient buildings that will consume less, 
• more efficient industrial processes that will consume less energy, fewer materials, and more efficient infrastructures. 
  

In the next 20 years, at least, we should see very heavy investment in infrastructure. 

It really is a development phase. When I hear degrowth, something rises up inside me. Degrowth would mean that humanity is only ever able to do a little bit less of the same thing. 

But no, it’s a development phase that will be based on massive innovation.

How can one create agility in a company?

When I took over as CEO almost five years ago in a large group called Engie, where I had already spent 15 years, my predecessor gave me a big key. It was the symbol of authority.  It’s a very big, beautiful metal key.

When I look back at that period, I think the most structuring thing I did, before addressing the strategic roadmap, was to turn that big key into lots of little keys. Hundreds, thousands of little keys. 

When I took up this position, the group was in sharp decline. I will always remember that figure the year I was appointed: minus 9% organic growth. And it was intrinsic to the business, it was a kind of shrinkage.

I had this cliff in front of me, and I resisted the temptation, in the face of this crisis situation, to do what you might want to do, which is to fall back on directive authority. Well, I did the opposite. 

I did the opposite, which means I “empowered”. I’m looking for the French word that would best translate that term but, objectively, I don’t think it exists. 

Decentralize, delegate. It’s not exactly the same. They refer more to a concept of delegation of authority. Yes, of course, but that’s not all. 

What I asked everyone in the group at that time was, “Go dive into your ecosystem, go find out what you’re doing that really meets a critical need and what doesn’t. And then, try to identify what we’re not doing today and that we could do.” 

This empowerment generated a phenomenal energy. I honestly think that’s how we turned around the dynamic of the group.

How can this “empowerment” of employees be achieved without losing the direction of the organization as a whole?

There are a few prerequisites. 

First, you need a sense of direction that emerges from all of this, because otherwise, you may find yourself with everyone going different ways like a school of fish, and that’s not what a company is about. 

Secondly, this sense of direction must resonate with something that is an aspiration for this community of leaders. 

There would be a kind of contradiction if you gave employees the keys and then chose as a purpose something that is not deeply rooted in their values and aspirations.

So you have to find that balance of a common purpose that, at the same time:

• is born out of the many purposes that have emerged, and 
• corresponds to something in people’s hearts. 
  

And there, “Sky is the limit”, really. The potential of an organization that builds that momentum is extraordinary. 

In fact, we see that we are a far cry from CSR as it was originally understood. The notion of “Corporate Social Responsibility” was the first vocabulary used, but it was initially a bit forced onto the company from the outside. It led companies to show that yes, they were very clean from an environmental and social point of view by answering questions from the outside. 

What I’m describing is the opposite. It is a movement from within an entire company, an entire community that says, “This is our purpose, our project, we’re putting it on the table. We’re not perfect as a company, but this is our purpose, these are our projects. Come and help us make it happen ” 

You can see that the essence itself is completely different.

How do the purpose of the organization and the empowerment of employees contribute to the anti-fragility of the company?

It makes companies that perform better in the long run for at least two reasons. 

The first reason is that because the company embraces the needs that society expresses, it is much less likely to be out of touch with its environment. 

The second reason is that people express a form of preference, additional attraction to the company. During the period I’m describing to you, the number of resumes that Engie received quadrupled, if I remember correctly. That also translates into more customers, and more growth. So you’re going back in the right direction. 

That is, if I may say so, the attractiveness bonus. This bonus of attractiveness simply introduces greater efficiency in all areas.

Does this mean that a company can no longer be satisfied with financial success?

We are in a singular period where there are no more maps, no compasses or at least we are all aware that the maps and compasses of a few years ago don’t work anymore. 

Someone said to me the other day, “But the fires in Australia are great for GDP.” It’s true, when you look at things, GDP is flowing, not in stock and it’s only focused on the financial dimension. 

So the tools are going to be defined. There’s an extraordinary effervescence that is really a direct result of the crisis and what happened in people’s reptilian brains. There is an extraordinary buzz about redefining success, of an economy and of a company, an enterprise, more generally, and a company. 

I believe that companies must be part of this redefinition process. 

Companies have grumbled so much, they have complained so much about the fact that IFRS standards are not virtuous on a number of issues. Some companies do not have the right to let this chance go by. In my view they must, in one way or another, contribute to the development of what will define success. 

It will be the role of politicians to decide on it, to write it, because it is a democratic issue. It reflects a certain vision of the world and a certain social project.

But companies must participate and there are really issues of fundamental importance to discuss. I will mention one: that of simple materiality or double materiality. 

It may sound a bit dry, the vocabulary used by people who are working on these subjects, but it’s very important to understand it. What does it mean? 

If we measure the success of a company and its extra-financial performance in simple materiality, what are we measuring? We are measuring the company’s ability to withstand the risks associated with, for example, the approach of climatic limits. It is a concept of corporate resilience. It is important for shareholders because, when they invest in a company, they want to know if the company is resilient or not. 

Dual materiality means “Yes, okay, it’s important to know if the company is resilient, but we also want to know if the company has a positive impact or not on those limits”. ‍

Does the company have an activity that is restorative or destructive? What is its contribution to the problem? This is the double materiality. 

I believe that what is fundamental is precisely to defend a logic of dual materiality because I believe that companies have a positive role in society. They have a contributing role, a restorative role and single materiality, in a way, denies that. 

Taking sides in this debate is very important. Double materiality is Europe’s position, as opposed to an Anglo-Saxon position which is more, in line with their original tradition, a vision of simple materiality. 

We must participate in these discussions. 

How can investors be persuaded to support this vision of the company?

Another very important issue at play at the moment is whether the European Union will manage to channel European savings into something that is in line with its world view. Towards companies that implement the European world view vision in which companies contribute positively.

We should pay attention to the work being done on the European taxonomy, which is very structuring, which is a sort of classification of activities, a classification that will lead every investor to declare the percentage of their investment portfolio that is dedicated to activities considered positive or, in this case, green. 

Europe has decided to start with green, which, incidentally, raises questions for a number of people. Should we be green only, or should we have a more global vision that integrates social issues? This is a real debate, too. 

This European taxonomy is something that is extremely structuring, which is being played out today, which will be played out in the coming months. 

The redefinition of market indexes. It is a subject which is still largely under the radar, but which is also extraordinarily structuring. The large market indexes, which are basically the tools that investors use every day to invest or divest in companies, how can we make them evolve? That is another structuring work initiated by the European Union. 

What is at stake is that, as investors redirect European savings, the shift that is taking place right now happens in a way that supports the transition of businesses. 

I’m not sure we need shareholders who are simply exclusionary, who say, “I wash my hands of it, I’m getting out of this industry because, basically, it exposes me to reputational risk." 

But we need committed investors who accompany the transformation of companies, who demand from them, in some way, a credible transformation trajectory, and who support them to do so. From my point of view, that is investment.

The above interview was recorded during the 2020 edition of The NextGen Enterprise Summit.