Ecolab Inc. (ECL) Earnings Call Transcript & Summary

Greetings, and welcome to Ecolab's ESG discussion. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Monahan. Mr. Monahan, you may begin.

Thank you. Hello, everyone, and welcome to Ecolab's ESG webcast. Leading our call today will be Christophe Beck, Ecolab's President and Chief Operating Officer. Before we begin, please note that these slides along with other sustainability, diversity and governance information as well as background material in our company are available on Ecolab's website at ecolab.com. We note that this webcast and the associated slides may include estimates of future performance. These would be forward-looking statements, and actual results could differ materially from those projected. Factors that could cause actual results to differ are described under the Risk Factors section in our September 25, 2020, Form 8-K in our posted materials. Following the presentation, we will hold a question-and-answer period. [Operator Instructions] As shown by our agenda, Christophe will be joined today by Emilio Tenuta, Ecolab's Senior VP of Sustainability; Anne Gotte, our Senior VP of Global Talent; and Mike McCormick, our Executive VP and General Counsel. As many of you know, ESG is integral to Ecolab's business proposition and a principal growth driver. The faster we grow, the bigger our benefit to customers, and the bigger our ESG benefit to the world. As reflected by the agenda, we will discuss these in greater depth with you today. So with a lot to cover, I'm pleased to turn the call over to Christophe Beck.

Thank you so much, Mike, and good morning to everyone. Great to be together with you and to have this opportunity to spend most of the time today to rediscuss our purpose and our long-term impact goals, which is an unusual discussion, but a very usual discussion for us internally and with our customers. Because particular, well ESG is not a sideshow. It's our main show. This is what we do. And that's the way we grow, as you've heard it as well so from Mike, and you will be hearing it from the whole team as we go forward this morning. Now if we step back and we look a little bit at the world's challenges, the ones that are the closest to our heart at least, well let's think about water scarcity. Let's talk about food safety. Let's think about public health and infection prevention, as obviously shown with COVID-19 since the beginning of this year in 2020. And climate change that hasn't gone anywhere during that time. It's just kept becoming an even bigger problem as we move forward. And society, when we think about social justice that we've been experiencing during 2020 and taking care of all stakeholders, being communities, customers, people living around us, and obviously so, nature. Those are big challenges that are out there that are front and standard for us and our teams everywhere around the world. And when we think about what we do as a company, which is described by our purpose, which is to protect people and what's vital. Think about the impact that we have and how much we manage already today, which shows a little bit so how much we can influence the course of our customers' operations and their impact, obviously in the communities and in nature. Let's start with water, where today we manage over 1 trillion gallons globally in almost 3 million customers site. When you think about food, we help customers manage 36% of the global food supply, 40% of the milk that's being produced as well. Think about public health. In 2020, we will have helped 40 billion hands to be cleaned, which was obviously substantial in a year with COVID-19. On climate change, we helped produce 20% of the world's power, which we know is a big chunk of the generation of the CO2 out there. And when we go a little bit beyond those natural challenges, thinking about society, well we are a people company serving 3 million customer locations around the world. And those customer locations are obviously operated by people, being a small restaurant with a few people, or a car plant or a steel mill with a few thousand as well and impacting millions around them in their own communities. And we operate in over 170 countries around the world. So what we do truly matters for many stakeholders everywhere around the world. And the good news for us as well is the way we help our customers address those challenges is by bringing the very best that Ecolab has to offer, starting with breakthrough technology. We've been famous at that so for 97 years being ahead of innovation continuously. It's to have our 25,000 team around the world being on site; understanding customers' problems, processes, challenges that they have around them; and obviously their own ambition and bringing the right technology in order to address those challenges. They can bring as well global know-how from anywhere around the world. And that's been especially demonstrated during this pandemic. Especially remotely, people do not even need to be on-site for that. Someone in Mumbai, India can be helped with someone in Germany for a specific problem that we can bring as well remotely. And last but not least, we are with ECOLAB3D, so one of the most advanced Internet of Things cloud data platforms in the world. And this allows, obviously, so to understand how are things operating at our customers' location, what could go wrong? And how can we prevent any issues that will happening before they happen? By bringing it all together, we help our customers produce the best results. can be more products, better products at the lower total operating costs. What this means is ultimately that they use less water, less energy, create less waste and are more productive. If that happens, well, they get more products at the lower total cost, which is a good deal for them as well. And that translates into our main metric, which we call eROI, which is ultimately the equation that is fairly simple. It's the impact that they have on their total cost by reducing the impact on the environment, as mentioned by reducing the usage of natural resources. And what they do in the community, is divided by the investments that they make in Ecolab. And our traditional metric is ultimately so to promise at least 25% return on their own investments. And if we think in terms of our journey as well where we're well on our way. We have objectives, so for 2030 and 2050. We'll talk more about that today obviously. But when we think what we've accomplished already in 2019, well think about it. We've already helped save over 200 billion gallons of water last year, which is the annual drinking needs equivalent of over 700 million people. And you can see on energy, on waste and as well on CO2, how much our impact as a company is absolutely essential to the evolution of our world around us. And last but not least, when we think about water, on the left, I shared with you what we delivered 2019, what we're expecting as well to deliver in 2020 and towards 2030, towards our goal of saving enough water for 1 billion people out there. Well, saving water means growing faster. Or growing faster the company, means saving more water, saving more energy, saving more waste created as well. So those 2 go really hand in hand. What we do for our customers impacting the environment drives our bottom line as well as our customers' bottom line, which is why those 2 stories are totally integrated for us. And ESG is at the core of everything we do. So with that, I'd like to pass it to our Chief Sustainability Officer, Emilio, that many of you know, who is going to share with you how we do it and a few examples as well. So with that, Emilio?

Thanks, Christophe. Good morning, everyone. It's great to be with you today. Let's now take a look at how we partner with our customers to achieve sustainable growth. Our approach and what's most material to us is the exponential impact in helping our customers achieve superior business results while also striving to reach their sustainability goals. And that also translates into our world-class operations where ESG is integral to everything we do. Now here's an example of how this comes to life, this approach. Our innovation, Aquanomic and on-premise, low-water, low-temperature laundry program aims to deliver superior results, performance and sustainability benefits too, such as 40% water and energy cost savings with this unique technology. Here's another example with Archer Daniels Midland, ADM, a multinational food and commodity company that adopted Ecolab 3D TRASAR, a smart technology which continuously monitors and controls water and process systems in real time to improve operational performance while saving water, energy and cost. By implementing Ecolab 3D TRASAR across 200 applications worldwide, ADM saved 2.3 billion gallons of water. Now here's the thing. ADM is one customer. They saved more water than Ecolab uses in 1 year. And the way we do that is by leveraging our secure cloud-based global digital platform for customers that Christophe talked about called ECOLAB3D. What truly sets us apart is how we combine real-time data in our decades of industry expertise, our global data footprint, the on-site expertise of 25,000 field associates and 24/7 monitoring support from our system assurance to maximize performance, optimize costs and save our customers water. ECOLAB3D has set the standard that enables us to share best practices and key learnings to deliver superior customer performance along with water, energy and cost savings from a program level across an entire plant and ultimately enterprise-wide for our customers globally. Now let me highlight what our customer impact means in terms of long-term sustainability goals, growth and leadership. Given our unique approach and innovation, our solutions and services place us in the middle of some of the world's biggest challenges around water, climate, food and health. And we can help our customers advance their goals in these critical areas, both in their operations and their communities. Simply put, the more we help our customers save, the more we collectively grow. And we are standing -- we're really starting from a really good place. Take for instance water. Our goal is to help our customers conserve collectively 300 billion gallons of water by 2030. Through 2019, we achieved customer water savings of 206 billion gallons. Here's why focusing on water is so important. The World Resource Institute, WRI, last year updated an alarming global water stat, that business as usual will lead to a 40% freshwater deficit by 2030. As of last year, that water gap has widened. It's now 56%. We know we need to do more around this critical issue on water. And that's why we've taken the lead with our founding companies, including the UN CEO Water Mandate, to launch the Water Resilience Coalition. The coalition has set a bold collective 2030 pledge to positively impact water use globally. In fact, the Water Resilience Coalition calculated that the biggest 150 companies can impact 1/3 of the industrial freshwater used globally. As an example of one of the companies we partnered with, Microsoft, they set a long-term water positive goal this year. As a WRC founding member, most of Microsoft's water footprint is focused in their first [ deep ] hyperscale data centers in support of the cloud and all the digital devices that we power every day in the world. When you think about it, it's a virtuous cycle. ECOLAB3D's digital solutions enable Microsoft to achieve their operational water goal through smart water management of their data centers, while their Azure cloud enables our cloud-based global digital platform for customers to save water and deliver business results around the world. It's truly a story of 2 companies working together with global reach, empowering each other to do better. Like in all of our examples I've shared today, our customer impact approach is also put into practice within our own world-class operations, expanding beyond the E to include for the first-time public goals on diversity and inclusion. ESG is integral to everything we do. And now Anne Gotte will take us through our S leadership.

Thank you, Emilio. Good morning. I appreciate the opportunity to share part of our social leadership story with you. As mentioned, ESG is integral to our model, its success and its growth. You've heard us say, we're a people company serving people, our customers, who protect people and the resources vital to life. So also our DE&I work affects every facet of our operating model and is integrated across our business to ensure its impact in our workplace, workforce, marketplace and our communities. We acknowledge our responsibilities and opportunities to make an impact both inside and outside the walls of our organization. And as Emilio mentioned, while our publicly declared 2030 goals are new, our commitment to advancing diversity, equity and inclusion is long-standing and core to our values. The examples below showcase accomplishments and progress that we're proud of. We celebrate these milestones and the great team who has brought them to life. But while we're proud of our progress and all that's led to it, we're much more focused on what's ahead, how we can do more, be better and continue to drive diversity, equity and inclusion, not only within our company, but through the impacts that we can have with our customers and our communities as well. I'd like to walk you through our commitment. First, we will increase representation of women and people of color in roles manager level and above by 50%. In doing so, we will become 100% representative of the qualified labor markets and applicant pools in the U.S. and around the world. Second, we will maintain our pay equity in the U.S. and continue to expand this work globally. We also believe that in a fully inclusive workplace, there should be no discrepancy in turnover rates across groups based on gender or race and ethnicity, so we have a goal 0 there. We intend to double our U.S. diverse supplier spend every year for the next 3 to deliver an 8x increase by 2023, on our way to greater spend in 2030. We're currently assessing those longer-term goals, and we'll have more to share soon. Importantly, as we consider our role as a community partner, we seek to align 80% of our giving towards those organizations, causes and initiatives that support our company's ESG objectives. These goals are ambitious. And of course, driving outcomes for 2030 requires coordinated efforts across our investments, processes and programs today. Our approach is to cast a wide net, ensuring that we continue to drive DE&I as a fully embedded part of who we are and how we grow. Our model is shown here, and behind each of these tiles is real work with performance indicators. Let me share just a few ways we're working to bring our 2030 outcomes to life. Starting at the top left, we are proud of the strong development opportunities in place for high-potential black leaders, including training through the executive leadership counsel and internal mentoring programs sponsored by Ecolab's very own Black Leaders Forum. Additionally, we have both internally and externally supported mentoring and development experiences for women and people of color across the enterprise. Moving to the right, to drive accountability, progress and a close focus on those areas that require our attention most. We provide extensively -- extensive, excuse me, monthly talent metrics, including representation, pipeline strength, hiring and turnover trends and diverse slate data to our C-suite leaders. These are reviewed with the CEO, and areas of strength and opportunities for improvement are discussed and acted upon. In the second row, you will see that we are proud of our best practice parental leave benefits. And this year, we also provided associates with enhanced resources for child and elder care. I think we can all agree that this year has introduced new, and in some cases, very difficult challenges in navigating our work and personal commitments. We also know that this has affected some people more than others and has affected us all differently. We've worked to provide important support for our associates and their families where it's needed most. While these are a few examples, I hope they provide perspective around how we approach diversity, equity and inclusion. We're quite proud of our team, 45,000-strong around the world. They fuel our growth. They help us achieve our potential. And every day, they bring our business model to life. For our extraordinary team to be at their very best, we know a diverse, equitable and inclusive workplace is vital. To deliver that, we must continue to adjust and adapt to serve our critical stakeholders, which include markets, customers and associates. As we grow as an organization, our opportunity as an employer grows too, and this inspires us. Your interest in this part of Ecolab is exciting to me, and I'm deeply grateful for the chance to have shared some of your -- our story with you. With that, I'm happy to turn this in to Mike McCormick, who will discuss our governance leadership.

Thanks, Anne. Just like we're a leader in the E and the S of ESG, we're also strong in the G. And here are a few points to consider on the 4 foundational elements of our governance framework to demonstrate this. Of course, when talking about governance, we need to start at the top of the organization, the Board. We have an independent, well-qualified and highly engaged Board of Directors, a Board that's not only well qualified, but also diverse, with 38% women and 15% racially diverse. Relative to the ESG topic, we, at the Board-level, have safety, health and environmental committee. Not only does this demonstrate our -- the importance of these topics are to us, its very effective governance structure to guide many aspects of our ESG initiatives. Sound executive compensation programs and oversight is another important element of good governance. Our executive compensation practices are aligned with stockholder interests. And we follow a pay-for-performance philosophy that is well documented in our annual proxy statements. We also believe our governance documents set out strong stockholder rights, including annual election of directors, majority voting standard for director elections, and proxy access, just to name a few. We combine those rights with a proactive stockholder engagement program that's long-standing. Finally, we were recognized for our transparency and accuracy and disclosure in general and as it relates to ESG topics. All of these elements combine for a strong governance record. With that, I'll turn it back over to Christophe for some closing remarks. Christophe?

Thanks so much, Mike. Well, just to align to what you just said, so for us, obviously our number one priority is to deliver our promise to our shareholders, but we know that in order to get there, obviously we need to do the right thing the right way. And the only way to get there is to have a great diverse team. We know they perform much, much better, obviously. It's to have satisfied customers and to have customers that can impact the community in a good way. And while they do so, they do it in a way, which is good for their own bottom line ultimately. And that's why when we think in terms of overall stakeholder management, while we have our clear priorities, that we consider all of them. So if we think about the big trends out there, well, they might be challenges for the world obviously. And by helping address them, well, we help grow faster as well as a company, which is kind of an interesting and good situation to be in. You've heard from Emilio on this before. That's what we thought that the freshwater deficit, which is basically how much the world uses versus how much the world can provide. Well, we thought it could be a 40% deficit, that we would be asking for 40% more than what nature can provide ultimately. Well, you've heard that number has changed to 56%, which means the situation, so it has gotten worse. We will need by 2050 because we will be a couple of billion more people as well on the planet, well, we will need more food, like 35%. We will have, so more aging population as well, with 22% of the population of age 60 or plus by 2050. And we will need 25% more energy as well by 2050. So more water, more food and ultimately, more energy. Those are trends that are tricky for the world, but those are trends that we can address. And this is what our company contributes to. And while we do that, ultimately, we help as well the environment and our shareholders. So we've made very clear commitments as well. So towards 2050, with an in-between goal obviously of us being water net positive by 2050. We will be half there by 2030. The same for C02 as well, 100% by 2050, 50% by 2030. It's to be 100% equitable company as well. So to have the right team in order to drive the right performance the right way as well going forward and goal 0 for safety, which ultimately is not a 2050 goal. This is one that we experience every single day because it's about our people's life. And when we think in terms of recognition, we've gotten a lot out there. We're not driven by those, but we're proud obviously still to get them. thinking about the Dow Jones Sustainability Indices, well we've been in the past few years, 5 years, we've been so part of that in this -- in North America. And for the first time now, we're part of the global Dow Jones Sustainability Index as well, which is a great news obviously for us. We've become as well a Just company, #22 globally and #1 in the chemical industry. The MSCI, we've gotten so the AAA for 6 years in a row, proud of that. And last but not least, we've been working really hard for years in order to get the threshold that allowed us ultimately to become one of the 100 Best Companies for Working Mother, which is one recognition that we just got as well this year, which is really something that we're proud of, especially for so our teams and our norm that we have in our large organization. And last but not least, we want to make sure that we are as transparent as we can be with everyone out there. It's true internally as well. We want to have our community know where we are, where we're going, how much progress we're making. Where we're not making the progress that we should, what are we going to do in order to correct that as well and to be totally transparent as well with the outside community? So it brings me to the close. And what's driving me every single day so coming to the company, which is a little bit different obviously today since we're mostly working from home as such, but 80% of our team that we have at Ecolab is there, serving customers, producing products and delivering products as well, remote monitoring operations, our customers. As well, remotely our operations have been running during this pandemic. But it's really to be part of a journey of a company that is doing so much good for the world out there. And while we do that, we grow faster and make more money, which is a good way of business to fund our future opportunities in order to get an even bigger impact as well at the end of the day. So I'd like to end where we started. As Mike was saying, so ESG for us is not a sideshow. This is core to our business. This is what we do. And we are driven by it because our customers demand it, because the consumers and the communities are demanding it as well. So it's a very good story for communities, our customers, our company and ultimately for our shareholders. So with that, I'd like to pass it back to Mike Monahan, so -- who's going to be our emcee for all the questions that we're going to get as well, so to engage in the discussion.

Thanks, Christophe. That concludes our formal remarks. We'll now start our question-and-answer period. [Operator Instructions] So let's begin. First question is on sustainability. What is your approach to climate and science-based targets? And have you committed to net 0 emissions by 2050?

Thanks, Mike. I'll pass it to Emilio. But before we get there, so yes, we've clearly made a bold commitment. That was in December 2019, so a year from now where we pledged that the 1.5°C degrees, which is the UN Business Ambition in order to get this by 2050 and 50% by 2030. But the stats, Emilio?

Wonderful. Thank you, Christophe. Yes, so following our UN business ambition climate pledge commitment, we got to work and developed a glide path. Part of that glide path was to really establish science-based targets, which were approved by the Science Based Target initiative in June of this year. That was, to Christophe's point, based on the -- that we're on a path to achieve a 50% greenhouse gas emissions reduction by 2030. Just a couple of steps on the way that you should be aware of. We're in the process of electrifying our fleet of service vehicles. That's one big focus for us in North America and Europe, which is our biggest regions. Another is that we're on pace to be using 100% renewable electricity in our global operations, which is also part of our RE100 commitment that we made. Which is exciting because through some of the projects, renewable energy projects, electricity projects that we've done this year, we will be essentially a company securing 58% of electricity used from renewable sources. So we're well ahead of pace towards that 100% by 2030 when it comes to RE100. And we've also expanded water and energy efficiency projects within our plants, our operations around the world. Of course, we're leveraging our industrial water solutions, some of the solutions that you heard about today related to ECOLAB3D in that platform in our major facilities around the world. And then finally as part of the Science Based Target initiative, we also work with our supply chain partners, our suppliers, to achieve significant carbon reduction targets. So working with them that represent 70% of our Scope 3 emissions and aligning them with Science Based Targets by 2024. Now the good news here is that these chemical companies are also our customers. They also leverage our water and energy solutions. Examples would be Dow as a raw material supplier that would be strategic to us, who they are also a customer and we're enabling them to also achieve their carbon reductions as well. So with that, Mike, I'll pass it back to you.

Thanks, Emilio. Another question on sustainability. The mentioned water savings are impressive. Can you share more granularity on your projected water savings, particularly on regions with water scarcity issues?

So I'll start with this one, Mike, and then I'll pass it back to Emilio as well in here. So we're getting so many questions off through the feed, which is really, really cool, by the way. So talking about our projected water savings, as you've heard, globally we've committed to get to 300 billion gallon, which is this drinking need equivalent for 1 billion people. At the same time, being part of the Water Resilience Coalition of the UN Global Compact and being one of the founding members, we've pledged to help reduce by 50% by 2030 the net usage of water in the water-stressed areas and 100% by 2050. So we have the 2 dimensions, the global view, and we have the view in the water-stressed area. I don't know, Emilio, anything you'd like to add to that?

Yes. I think you've nailed it. I think the opportunity exists at what's trending right now is for more and more companies to really set context-based targets, or what we'll call a water-positive goal, moving away from what we used to do a generation ago, which was an efficiency goal across the enterprise. So focusing where the risk is the greatest. And the approach that we're taking and what our customers are focused on is really reducing their operational water withdrawal demand first and foremost, with solutions, some of the solutions that we talked about today related to ECOLAB3D, but also then implementing solutions outside of the fence line, which include replenishment. So these are nature-based solutions that allow them to also increase supply within the watershed. And then finally, what is really also getting a lot of momentum is the alliance for water stewardship, and the ability for companies to really start to drive collective action in the watershed.

Thanks. We have another sustainability question. Ecolab has been a leader in ESG before ESG became a focus item in the world. What would you say has been a real increased focus in terms of ESG in the last couple of years that might be an increase from what the company did before?

Yes. That's a great question, and I'll say 2 things. The first one, we started in 1923. And when I started in the company, so 13 years ago, one of my project was to understand what sustainability 2.0, so for the company. And interestingly enough instead of going forward, I tried to go backward and say, "So where did we come from in 1923?" Many of you probably know that our company was called Economics Laboratory, which was driven by a very innovative idea by then, which was helping customers, hotel customers, ultimately, well, operate their rooms even better because they were cleaning their carpet even quicker, so they could put their rooms back on the market much quicker because they were using less water, needed less labor, less energy and created less waste. That was in 1923 and drove that idea of Economics Laboratory. By doing so, they were ultimately so making more money, which brings me to the second point. What has increased the focus and what has accelerated our journey on ESG is the understanding of customers that preserving natural resources well, was not just a nice thing to do, but was something that was good financially for their own P&L. Straight in terms of costs and then there is the added benefit obviously of consumers, for consumer companies that by even more of your products if you do them the right way and it's coming from a company that's doing the right thing as well. So that's why this concept of eROI, which is ultimately saying well, if you reduce your impact on the environment because you use less natural resources, well ultimately, your P&L is going to be better. And we all are driven by financial performance as well. Well, if we see that by doing the right thing, I have a better financial performance, well I'm going to do more of that, which has been driving as well our growth over the past few years.

And I'll just add one more thing to that, Christophe, is the third point would be that more and more of our customers are reporting on nonfinancial metrics around climate and water. And so given what Christophe talked about, we have an opportunity to align with their climate and water commitments. That also aligns with our TCFD or Task Force on Climate-related Financial Disclosure, and achieving FASB metrics, which are really important to them.

Thanks, Emilio. Another sustainably question, are there -- related to what you just said. "Are there any considerations to the disclosure alignment under either FASB or TCFD framework?"

I guess you have a lot to talk about Emilio on this one. This is a complicated world with all the different frameworks that are existing out there, but yes, we are disclosing for both of them. So FASB and TCFD annually in our sustainability package, which is coming usually a few months after the annual report of the 10-K as well. So more to come, but you show the answer is yes, Emilio?

Yes. Yes. In our 2019 GRI, we for the first time, had a FASB table that we reported on. And also we reported on our TCFD efforts that includes -- we continue to be guided by TCFD's scenario planning, and we will continue to step up that reporting in 2020.

Thanks for that. We have a D&I question. "What talent mechanisms do you have in place to ensure diverse candidates are considered throughout the recruiting process?"

So maybe one thing, so -- and I'll pass it to Anne, obviously, so who knows way more than I do about the mechanics on how to get it done. But what's important, we are hiring over 8,000 people per year. So we have a lot to work with and to do the right thing for our organization. I'd like just to say 2 things. The first one is that we have very clear principles of what we expect our hiring managers to do and not to do in order to make sure we drive the right outcome. And second, we review the outcome of what's being done as well at the Executive Committee on a monthly basis. And sometimes, we love what we see, and sometimes we don't, and we do something about it. But why don't you tell us a little bit more, Anne, on how that's working?

Yes, absolutely. So if what Christophe talked about is setting the right principles in place at the front end and then having the right outcomes in place on the back end, I'll just share a little bit about what sits in the middle of that. And the first is that we work really hard to first attract and be an attractive employment opportunity for diverse candidates. That is rooted in our employment brand, first, and also in very thoughtful strategic sourcing. We want to make sure that we are going to universities, conferences and other partnerships that allow us access to the most diverse talent in the marketplace. The second thing that we do is really focus on what internal support is necessary. So with our recruiters, there is a clear and widely activated expectation that our slate should resemble the market for a specific job. That is, if a marketplace for talent is 50% female, then so too our slate should be. And that should be reflected all the way through the hiring process up to that time of selection. And then finally, we work very closely with our managers to make sure that they have the skill and the support to have a bias-free process as well as work with them on how to make sure that the candidate experience feels inclusive. It's really important that we find the best diverse talent in the marketplace. It's also really important that, that talent wants to work for Ecolab. And so our efforts are focused on both.

Thanks, Anne. We have another sustainability question. "Are you setting context-based water targets?"

So yes. Emilio so will probably tell you more on that. But when I think about the Water Resilience Coalition, when we got all those companies together, we've been debating quite at length that question of saying is it a global view or is it really context-based? In other words, really making sure that we save the most water where water is the most needed or the most scarce as such. And the Water Resilience Coalition is focused on those areas which are clearly defined. And we set our goals around them as well since we're part of that framework as well. Emilio?

Yes. And in fact Christophe, that means considering the current conditions in the local watershed really around 3 critical areas: availability, quality and value. And it begins with a water risk assessment to understand the shared water challenges within that watershed. From there, we can focus on targets and interventions on 2 fronts. First, reducing operational water demand through reuse and recycle technologies. We have 2 really great examples of this within Ecolab, implementing a context-based water target approach at our Taicang, China plant in lower Yangtze, which led to a zero liquid process discharge plant, which is in -- a great story, a water stewardship case history that you can find on ecolab.com. And then we have a case study on ecolab.com around our Southern California facility, City of Industry, which is another great example of how we set context-based water targets and some of the achievements around delivering about over 2 million gallons of water savings within their operations. The second is, in some cases, we also implement the water restoration project that tackles the availability or quality challenges as well. So those are some of the ways that we look at context-based water targets, not only within our operations, but also helping our customers achieve their goals as well.

Thanks, Emilio. We have another sustainability question. "Is zero waste and a circular economy important to Ecolab?"

It's a great question. Broadly, yes. This is our model. Ultimately as you've heard, the way we address the challenges of our customers is ultimately so by reducing the need of natural resources and the ways that they are creating. So ultimately this is improving, and we end up towards our ambition of getting closer to the 0. But when we think a little bit back as well over the past years and decades as well as such, when we think about the way we distribute our product as well, well at the very beginning, those were liquid products that people were using, so from a drug or ready-to-use. Then we've moved towards concentrate product. Well, sometimes, it's between 10 and 20x less that you need to transport because you re-dilute them ultimately at the point of use. Then we've moved to solid products, which is reducing even more dramatically as well the water you need, the packaging you need, the waste that's being created. And that helps as well as such. And I'll just mention one last point. We're doing as well pilot projects, like the Loop project in the U.K. in partnership with TerraCycle, and a few major consumer goods companies and retailers as well to find a way to reuse containers that consumers are using, eating the product, sending it back to many locations. That can be restaurants, post office or many places around the U.K. We clean them back. They are being refilled. And then they go back ultimately as well so to our -- to consumers. So in many different ways, but what's important is really that circular economy, well, it's the way we run the company. This is not a new thing so for us. Emilio, anything you'd like to add to that?

I would just add that incorporating circular design principles and practices in our packaging is continuously how we innovate. And I would just say that reuse, recyclability of our solution is a big thing. We've focused on reducing single-use plastic. We look at recyclable plastic materials, moving away from virgin. And then the other big thing is we're used -- looking at reusable packaging in a way, like our PORTA-FEED program within the industrial division, where we innovated in that area to eliminate drum. So we continually look for ways to find system engineering approaches to really eliminate the issue.

Thanks. Firstly, an inclusion question, "What is Ecolab's approach to building diverse and inclusive teams?"

So I'll pass it to Anne. But for me, what's most important is really making sure, that's taken a few years to get there and we're still on that journey, it's to share with our teams that building diverse teams is a good thing for them because diverse teams are performing better. They're fun to work with. They're more creative. They're more entrepreneurial as well. And we've seen that as a snowball process in a way because we are a highly competitive company, sorry. So when we see that it's working in one place around the world, well, the other ones are trying to do the same thing as well. And that's helping us move forward and even faster in terms of building those diverse teams. But Anne, what's your experience?

Well, I would build on what you said. I completely agree, and especially that the more diverse teams are more fun to work on, I think that that's definitely true. I think that it's important to say, for the sake of brevity, that we have really worked to embed diversity and inclusion into how we think about the development and promotion practices for all of our talent as well as the culture that we create. One specific example that I'll offer is the work that we did earlier this summer in light of George Floyd's murder. We hosted an enterprise-wide day of understanding. And the reason why this is important, lots of companies did this for all the right reasons, was we took the time to have over 1,800 people in small group conversations led by our top 100 leaders here in the U.S. This created an opportunity for people to share their perspectives and feelings, but also brought those leaders with us on a journey into their own empathy and learning. When you have people at that level of the organization, again the top 100, facilitating and actively leading conversations about race, about bias, about access and equity, you start to really drive a level of understanding that pervades our entire culture. That's simply one example. I think that there are certainly more where that came from. Another piece that I would just call out that's incremental to Christophe's great remarks is how much we rely on our employee resource groups. We have enjoyed double-digit employee resource group growth, both globally and within the U.S. for the last 4 years running. These are vibrant groups of associates that really help us create and activate the culture that we're most excited about, again that culture that really speaks to our employment brand promise and brings in that diverse talent, keeps that diverse talent and allows that talent to advance in our organization successfully.

Thanks. Back to sustainability. "We understand your water positive goal that you are focused on as a part of a replenishment strategy. Where are you doing it? And how do you select where you'll implement those type of investments?"

We have great projects here. Emilio, why don't you share a few?

Sure. So 2-point water positive goal, it really involves multiple components. And yes we have indeed implemented water replenishment strategies. Again when we think of our water positive goal, we're storing greater than 50% of our water withdrawal and achieving the alliance for water storage of certification in those high-risk watersheds, of which we identify those high-risk watersheds by doing a water risk assessment that we monitor every year. And so when we look at those projects, one that -- or actually a couple that come to mind, we have a -- we have several facilities in Southern California, City of Industry, where we actually adopted a context-based water target, as we mentioned before. Driving operational efficiency was the first step in that positive -- net positive water goal, reducing water use by 4.3 million gallons and delivering $87,000 in savings by optimizing water energy and operational costs. We also have been focused on implementing water replenishment projects. To date, we have implemented water restoration projects in 2 areas, one in the state of Minnesota, the Minnesota Headwater Fund, and then another in Louisiana down in Garyville, of which in Garyville, by the way, we also have seen a 32% water intensity reduction year-to-date, which is a significant improvement within the fence line, but also implementing a restoration project outside the fence line in Loch Leven that led to over 100 million gallons of replenishment water benefit that we've verified for that area, which again goes to increasing supply as part of that water positive goal.

Thanks. One more. "When you mentioned total value delivery, is that net of Ecolab's cost to the customer?"

Thanks, Mike. Actually, we usually take the definition of the customer. And some, so want to have it with, and someone have it without a net of our cost. But the way we report internally is separate. This is the eROI definition. It's really what's the total value that's been delivered for the customers versus the investment that they're making in that work that we're doing, so for them, and that's the ratio of natural return as such. But we have customers asking things in a different way. So we adjust for that, but we make sure that in our own calculation for our whole reporting as a company, we're consistent in the way we do that. So we do both. But net-net, it's separate in the way we report globally.

Thanks. Another sustainability question. "With a greater push for disclosure, data and metrics from multiple sides and with those requests increasing, how do you prioritize what to disclose?" And related to that, "And what can Ecolab do to lead the effort to standardize some of these key metrics, especially for your industry?"

So the current world is not totally easy right now. So when we talk about reporting, there's a lot of different framework as such. We've talked about the FASB, the TCFD as well earlier. But we are part of those efforts of harmonizing, and one of them is the work being done by the World Economic Forum that have brought the big accounting firms together, many companies around the world and trying to find ways that we can have similar approaches to measuring and reporting the numbers. For us, we see that as a very good thing because it drives transparency, consistency. We all talk about the same thing, and ultimately accountability internally and externally against our promise. But with that, Emilio, you've been much more into that than I've been.

Yes. You're right, Christophe. The wider objective here is to encourage greater cooperation and alignment among existing standards, which is obviously an opportunity for us to catalyze progress toward a systemic solution that allows us all to be compared very much the same, but also keeping in mind the autonomy that every company is unique in terms of the value they deliver. And so there's a bit of being relevant as well. And so for the -- what -- the reason we like the World Economic Forum, to Christophe's point, is because it is trying to set universal metrics that are core, but it also allows us to demonstrate the relevance that each company has in delivering value and growth which is unique to us. And so we're going to continue to work with them as a leader because we feel that we can shape those metrics going forward, which is obviously good for all of us.

Thanks. Question on ECOLAB3D. "Is it an open platform, in other words, published API, data sharing, third-party collaboration and so forth?"

So it's not an open platform. It's an open platform for a company, a customer that's connected to ECOLAB3D. As a background, ECOLAB3D came from our water business where we could invest way more in sensing, measuring, controlling technology in plants because we were having much larger businesses with a steel mill for instance, or a car manufacturing plant or pharma producing plants as well than if you take sort of a small restaurant, which was very hard the years back. So we have 40,000 plants that are connected to ECOLAB3D, which is quite massive. But we have it connected now and open for the 3 million customer location that we have right now. And I'd like to say that, yes, it's open for one customer getting all their data from all their plants and units around the world. But at the same time, it gives them the opportunity to compare themselves against peers without knowing the name of them, obviously, out of confidentiality, but also to compare across industries or across regions as well trying to understand what's the best performance. If you take beer production for instance, while they're very much focused on how much water do they use in order to produce a hectoliter of beer, well they want to know, "How am I producing in that plant versus at a plant within my own company? How do I compare with other companies out there? And how do I compare with our industries as well in how I'm cleaning my operations? For instance, how much water do I need? And how can I learn as well from them as a matter of fact as well at the same time?" So it's open for our customers, but it's not open for the public as such.

One more in sustainability. "Could you give more insight on how you move forward with your carbon target?"

So Emilio will have most of the details, but not all of the details. We want to be perfectly honest as well. With the ambition of being so carbon-neutral by 2050. We don't have all the answers. We are evolving every year with new innovations that we develop, but innovation that we learned from other companies as well from institutions out there. We have a reasonably good road map for the next 10 years. For the next 30 years, there's still some more work to do. And to add, Emilio?

Yes, well said. I think that's exactly right. And the things that we are -- see in front of us, things like the electrification of the fleet, obviously, technology and the class of vehicles is going to really help us to support how we take our mobility to the next level. And that's something that we're looking with milestones along the way out to 2030. The other is we're really in a good place with the electricity and the RE100 target that we have being 58% by the end of this year of our renewal -- of our electricity being sourced by renewable electricity. The third is really to work with our suppliers and engaging with them to really drive execution of setting really robust carbon reduction targets that are science-based. And that's where we're -- my team and the global supply chain team are working together to really drive action that will only benefit the industry. And of course we have a role to play with our water and energy management solutions.

Thanks, Emilio. Another question is, "What is the process for ensuring companies you acquire fall in line with your internal ESG goals?"

So they don't always perfectly fall in line. But what's important is to think about how do we do M&A in our company. And we've been extremely successful at it or over the many years that we've been doing that, over 100 acquisitions that we've made over the past 10 years. And we really always make sure beyond the fact that valuations still needs to be right, which is always the tricky thresholds that we do not mess around. We are extremely disciplined on it. Well, we want to make sure that the model is the same. And the model is the 4 quadrants that I showed as well before. It's bringing technology with people, innovation and data management. Most of the companies, if not all of the companies, that we acquire, so follow that type of model in whatever industry that they serve. But there is also this cultural components where it's probably one of the most important one. We want to make sure that when we bring a company part of our family, well the cultural match works. And this is very much aligned with what Anne was saying as well before, which doesn't mean that we are all at the same progress level as such. But if we think about it, many companies that we've acquired, like CID Lines as well earlier this year, while we're much focused on animal health, biosecurity, making sure that chicken and pigs were safe and healthy before they were even going into the food chain, if I may say, well we've added the dimension of saying, "Well, try to position that in a way that it's better for the environment, it's better for the bottom line of our -- of their customers ultimately, so we've helped them add value as well to their own business proposition." So it starts with a reasonable alignment status, and then we try to build on it in order to make them even better.

So another question on sustainability. And we recognize we're reaching the top of the hour, so perhaps this will be our last question before we close off for the day. "How reliant are you to be on offsets to meet your carbon reduction targets?"

Emilio, why don't you start and I'll build on that?

Sure. So great question because there's a lot of discussion within the industry about offsets. And from a Science Based Target initiative perspective, their view on it is this: that there, first and foremost, it's about decarbonizing the economy. It's about taking and driving efficiency to really reduce carbon footprint, which also includes water and energy management within your facility before you start to look at offsets, which is a much longer-term proposition in many ways. The Science Based Target initiative has agreed that it's part of the strategy, to Christophe's point, as you look at going to net 0 2050, we realize that we're going to need offsets. But to begin with, it starts with really driving decarbonizing your operations before you move through offsets. Right, Mike?

Okay. We've got one more before we finish off. And very timely, I guess. "What is Ecolab doing around health and wellness broadly, and specifically during 2020 given the pandemic?"

2020 was a special year for the whole world, and especially so for us. We were naturally surprised when the outbreak started in Wuhan and then moved around the world. This was not part of our plans. But when we stepped back, we really saw so how can we leverage all our strength, all our capabilities in order to help our 3 million customers out there, in order to understand, well what's COVID-19? How can we help them as well so get prepared to go through that pandemic in a way that they can keep operating? If that was feasible as well, how can they protect their own operators or teams? And how can they protect as well their consumers, guests, patients, whatever industry that we were serving? So that's become really so an enhanced mission for us as a company. You've heard about our purpose, protecting people and what's vital to life. Well, it's never been more true than in 2020. And that's been true for our own people as well where we've made absolutely sure that they had the right training, the right protective equipment, that we were understanding what they could do or not do in whatever end market, in what country as well. We've learned a lot. We've improved a lot. We've strengthened our value proposition, our programs, our technology and the way we serve our customers as well. So bottom line 2020 has been a year that we will all remember. But I think it's going to be here where we will remember that it's been a year where we've gotten to the next level as well as an organization. And I'd like to end where we started ultimately. Well what's all driving us in this company is that the faster we grow, the bigger our impact. And when we think about the challenges that the world is facing today being water scarcity, public health with COVID-19, but not only. We know there's many other risks out there in terms of infection prevention and food safety issues that are still here to stay, and climate change naturally. Well, this is what we do every single day. And to see the impact we have, the progress we have and more that we impact, the faster we grow. Well, this is what's driving us, make us feel good and ultimately helping our investors feel better too. So all around a pretty cool story. So with that, Michael, I get back to you.

Thanks, Christophe. A great place to end here. So that wraps up our call. This call and the slides will be available for replay on our website. We hope today has been helpful to you. We look forward to continuing our conversation and to our continued progress ahead. So thank you for your time and participation, and our best wishes for the rest of the day.

Ladies and gentlemen, thank you for your participation. This does conclude today's call. You may disconnect your lines, and have a wonderful day.