Leaders of the Pack

Smurfit Kappa’s RCF project embraces, drives, and pushes the boundaries of organisational ESG thinking

By setting five key performance indicator goals for a recent sustainability-linked RCF – and requiring success in all of them to gain the maximum margin benefit – Smurfit Kappa’s treasury team has demonstrated how a cross-functional project can unify a business. It also earns it the well-deserved 2021 Treasury4Good Award for Best Sustainable Finance Project.

Best Sustainable Finance Project

Smurfit Kappa

For Smurfit Kappa, the Dublin-headquartered paper-based packaging multinational, sustainability is really business-as-usual. The firm designs, manufactures, and supplies its products worldwide, operating in 36 countries across Europe and the Americas. Its circular business model  applies a sustainability lens to everything it does, from sustainable and responsible sourcing of renewable and recyclable raw materials, to responsible production of recyclable and biodegradable packaging solutions.

What’s more, since 2007, Smurfit Kappa has been publishing annual sustainable development reports, which have been independently assured by KPMG under Global Reporting Initiative (GRI) Guidelines since 2009. As part of its progressive approach, it recently upgraded its sustainability targets under its Better Planet 2050 commitment. Containing ambitious targets across many environmentally and socially strategic areas, this is the genesis of the firm’s Treasury4Good award-winning treasury project.

Ambitious targets

In January 2021, the company announced it was embedding ESG into its financing programme. It began by amending its standard RCF to become a €1.35bn sustainability-linked RCF. With its sustainability targets linked to five annualised ESG-related KPIs, if all are successful it could change the RCF margin by up to five basis points. The KPIs cover:

Emer Murnane, Assistant Group Treasurer, Smurfit Kappa, explains that all five KPIs were purposefully ambitious and of equal consequence in terms of margin impact. “This is important because we are demonstrating to our employees, our customers, suppliers, and our debt and equity investors that all areas of our strategic ESG priorities represented by the KPIs are important to us.”

Team effort

The success of the sustainability-linked RCF at Smurfit Kappa came down to treasury’s ability to interact with a variety of business units across the organisation. It worked closely with teams from sustainability, corporate planning, and finance, and was able to communicate the determination to prioritise ESG goals and KPIs, and the rewards for success. “This was instrumental in achieving buy-in to our ESG ambitions both across the business and across our wider stakeholder groups,” notes Murnane.

The close work with the sustainability team, in particular, gave treasury great insight into which KPIs to build in. While purposefully challenging, Murnane says this is where the close relationship treasury created with the sustainability department came into play. “Because they have a great deal of knowledge built up as a result of reporting on these metrics over many years, they were in a perfect position to help us set these benchmarks at challenging, but ultimately achievable, levels.”

Indeed, for Frank Greene, Smurfit Kappa’s Group Treasury Manager, Debt Funding & Risk Management, embedding KPIs in financing was “an excellent opportunity to move outside the treasury function by delving deeper into our operations to learn more about our wider business”.

The treasury team was also tasked with selecting specific banking partners to advise on the RCF. Murnane explains: “Choosing a banking partner for this project was very difficult, given the calibre of our relationship bank group in this area. We eventually selected Rabobank and ING to be our advisers. They have been hugely supportive and fantastic to work with.”

Ultimately, for Murnane, the experience gained from working with other departments and communicating across the business has proven invaluable for the long-term success of the project. “The relationships that we have built up during the project are absolutely relationships that we are carrying forward. And the treasury team is also excited to deepen its ESG involvement in the future.” TMI is similarly excited to present Smurfit Kappa’s treasury team with the Treasury4Good Award for the Best Sustainable Finance Project. Congratulations.