Philips again receives high S&P Global Ratings evaluation for its ESG practices

In 2021, Philips achieved a top score of 90 out of 100 in S&P Global Ratings’ assessment of its Environmental, Social, and Governance (ESG) strategies, targets, and performance – the highest score awarded by S&P in these areas. This year, with a score of 91, Philips delivers an even stronger performance and the highest that S&P Global Ratings has awarded to date.

S&P Global Ratings’ ESG Evaluation assesses a company’s ESG strategy and ability to prepare for potential future risks and opportunities and is used by investors as a forward looking, long-term opinion of a company’s readiness for disruptive ESG risks and opportunities. S&P concluded that “sustainability is embedded in Philips’ corporate strategy” and that the company has “built a digital, integrated, and solution-based business model before most of its global peers”.  Key to that achievement was Philips’ ability “to respond to key challenges in the health care industry, such as inequality in the access and affordability of care, and the shortage of medical professionals”.

“As a purpose-driven health technology company dedicated to improving people’s lives, we are deeply conscious of our responsibility both to society and to protecting the planet, which is why strong ESG commitments are core to our strategy of doing business responsibly and sustainably,” said Frans van Houten, CEO of Royal Philips. “With investors increasingly looking for companies that not only see sustainability as an environmental and social responsibility but also an opportunity for growth, I am very pleased that S&P Global Ratings have again awarded Philips a top score in their latest ESG Evaluation.”

Environmental

In 2021, Philips stepped up its acclaimed supplier sustainability program with the goal of having at least 50% of its suppliers (based on spend) committed to science-based targets (SBTs) for CO₂ emissions reduction by 2025, a move that could potentially result in a 7x multiplier on CO₂ emissions reduction in the company’s own operations. Combined with its own carbon neutrality, which dates back to 2020, the achievement of 28% of relevant suppliers committed to SBTs by the end of 2021 resulted in S&P Global Ratings concluding that Philips had “achieved more ambitious targets in its direct operations than many of its industry peers” and “has the infrastructure and practices to maintain high environmental standards in its supply chain.” In terms of mitigating downstream emissions, the report also recognized Philips’ commitment to EcoDesign and the circular economy.

Social

Reflecting Philips’ commitment to delivering suites of systems, smart devices, software, and services across the continuum of care, and the company’s strong regional footprint, the report states that Philips is “better positioned than many [of its] industry peers to provide access to medical care to customers and communities.” It also concludes that “the connected nature of Philips’ products and services has also supported its penetration in markets with limited health care infrastructure.” S&P Global Ratings also recognized the part played by the Philips Foundation in helping to reduce healthcare inequality in underserved communities. In terms of being an ethical employer, it also notes that Philips’ commitment to paying a living wage and its management of human rights in its supply chain “sets the company apart from its peers.”

Governance

In the Governance domain, S&P Global Ratings notes that “Philips’ governance structure follows the Dutch Corporate Governance Code . . .”, which the report views as “aligned with international best practices”. It also notes that the company’s supervisory board is “diverse in terms of gender and nationality” and that its supervisory board members have wide-ranging experience in subject areas relevant to implementing the company’s strategy. In terms of disclosure, it reports that “Philips has comprehensive financial and sustainability disclosures audited by an external auditor. . .”, including “policies on most material environmental and social risks, and approaches used to calculate key performance indicators, including green revenue, environmental profit and loss account, and millions of lives improved.”

Preparedness for the future

In its opinion on Philips’ preparedness for the future, S&P Global Ratings rated the company as ‘Best in Class’, stating that “Philips’ senior leadership has anticipated secular trends in the industry ahead of most global peers, including the shift to digital, integrated, and solution-based care”, and that as a result “the group will more likely benefit from the unprecedented acceleration in digital care caused by the [COVID-19] pandemic.” It also notes that Philips’ global network of research and development centers is “more geographically diverse than many [of the company’s] global peers”, and that the company has “prioritized innovation that leverages data science, artificial intelligence, and software development.”

Philips’ fully integrated ESG framework, which includes its products, services, solutions, circular business models and innovation, energy consumption, supply chains, diversity & inclusion and financial instruments is a core element of its purpose to make the world healthier and more sustainable through innovation. In 2021, the company’s ESG achievements included 1.7 billion lives improved by Philips’ healthcare and personal health products, services, and solutions (of which 167 million lives improved were in underserved communities); 16% of sales derived from circular revenues; and continued carbon neutrality in its own operations.

To read the full report click here.