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. Thank you, Mr. Monahan. You may now begin.

Thank you. Hello, everyone, and welcome to Ecolab's 2022 ESG webcast. Leading our call today will be Christophe Beck, Ecolab's Chairman and CEO. Before we begin, please note that these slides along with other sustainability, diversity and governance information as well as background materials 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 that 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 most recent Form 10-K in our posted materials. Following the presentation, we will hold a question-and-answer period. [Operator Instructions] And now here's Christophe.

Okay. Thank you so much, Mike. Good to be here with all of you together. I think it's the third time that we have that webinar since ESG has become such a hot topic and a good topic so for all of us. So we've been at ESG was not called that way for a very long time in our company. We've been at E, the environmental side, so for 99 years, we'll be celebrating our anniversary in 2023, so next year. And on the S and G for a long time, but much more intensively, I would say, over the past 10 and 15 years. So overall, with ESG, we've learned a lot and sometimes the hard way as well. And that's the whole idea of that webinar today. It's to share our progress, share our learnings and answer as well to all the questions that you might have. So together with me, Emilio Tenuta, who is our Chief Sustainability Officer, is going to cover the E part. We've Laurie Marsh, our Head of Human Resources, who is going to talk to us and answer any questions you might have as well afterwards; and Mike McCormick, our General Counsel as well, so has been long on the G part of ESG who will be covering as well as in his section. And then I'll wrap up on a few thoughts and then opening up for a Q&A. So if we start with the facts and the challenges that we're all facing, they're pretty daunting, as we all know. We will be -- and that's a good news. We will be 30% more people by 2050. That's roughly 2 billion people who are going to join us on Earth, but those people also will need more food. And that's why we will need 35% more food, more calories as well as the diets are shifting as well so towards more meat and proteins as well as so by 2050. And we'll need 25% more energy as well at the same time by 2050. So more people consuming more and having a bigger impact on the planet. What's even more daunting is the fact that the stress and shortages are starting right now. When we talk about food shortages, it's something that we are experiencing with the invasion in Eastern Europe, obviously, but also because of the drought that seems to be happening in countries like France and India as well, so for instance, and when we think about the climate change, well, we can talk more in detail about that. But last year, when the world was predicting so to be improving as well in terms of emissions of GHG, we went exactly the wrong way. So the trends are not exactly heading in the right direction. And last but not least, so a topic that we'll be covering quite extensively today, the water stress, which was expected to be 40% by 2030. In other words, the world would need 40% more water than what the world can provide. Well, in the last few years, that has moved to 56%, which means that we're not exactly heading in the right direction. So big challenges, big issues that we have here, but big opportunities as well so for us as we see it as a company because we can truly help. We're the largest water company in the world. We have managed over 1 trillion of gallons as well. A 1/3 of the world water supply, a 1/4 of the population being protected with what we do as well with people who are on the ground and delivering those solutions as well. So for 3 million customers in 172 countries that we have around the world. And the way we help has been true for a very long time, which is really promising to our customers that we will help them provide better outcomes, more, better quality, safer products as well at the lower total cost because they will reduce the usage of natural resources and impact on the environment as well, which is how we do it by bringing ultimately technology expertise, sharing know-how within a customer across industries as well and helping customers as well understand where they're heading and how we can prevent as well the worst to happen or even better to improve their performance down the road. And when we think about sustainability at Ecolabs or many are talking about the green premium that running sustainable operations comes at a cost. We don't see it so. And that's why our metric, which we call eROI, commits to our customers to provide them with a return that's north of 25%, their investment versus the value that we create as well so for them, which is a combination of business outcomes whatever they produce, the performance of the operations and the environmental impact, which drives a total dollar value, which you can divide obviously by the investment that's being made. So this is good for our customers, but it's good for us as well because the more water we save -- you're familiar with our ambition to have save enough water for 1 billion people by 2030 was the faster we grow. And the closer our customers want to get to net zero, the more technology they need, the higher the margins as well that's driving growth and that's driving margins as well for us. So -- which is one of the many reasons why 80% of the global customers out there have chosen to partner with us to get on the journey towards net zero or whatever the commitment that they've made. So at the end of the day ESG is core to what we do is the main driver for growth and margins as well, and we like where we're going. And I look forward as well so to sharing in a little bit more details with you, starting with Emilio, who is going to cover the E part. So with that, Emilio?

Thanks, Christophe, and good morning, everyone. It is great to be with you. And I've got to emphasize that you heard earlier that our digital CSR, our corporate responsibility report and our GRI report, our global reporting initiative, is available as of today on ecolab.com. So we're really thrilled, as Christophe said, to really come to you today with really 3 big takeaways from our discussion that we're going to have. First, we're delivering, as you heard from Christophe, in many cases, outpacing on our targets and really important in that it includes how we help our customers delivery and exceed on their goals. And we do that at the highest return. We use our universal metric we call eROI. And then thirdly, very importantly is that we're also sharing our knowledge and practices on the big global priorities related to ESG. And so to that point, I'd like to share a bit about our ESG leaderships and highlights from this past year that we're really proud of. First, let me start with we're an early adopter of the World Economic Forum stakeholder capitalism metrics, which is really over 100 companies coming together now for over a year on harmonizing the ESG metrics, there's 21 core metrics, and we continue to report that out in our CSR. One of the other key metrics that is in that report will be around advancing our climate-related financial disclosure, TCFD which is the task force for climate-related financial disclosure. This past year, we completed a scenario analysis and climate risk assessment of our enterprise. So it will be more in our TCFD index in our GRI. And lastly, we are thrilled to announce that the formation of our Ecolab global sustainability network which is important because obviously it's an employee like group that really drives awareness and engagement on the company's sustainability actions and leadership, which is so important to really engaging our associates. It was launched on Earth Day to drive culture, inclusion and engagement with associates really embedding sustainability in everything they do. Now Christophe mentioned this a minute ago, but I want to highlight some of the work we're doing to really share our knowledge and deliver on global priorities around the world, around an industry collaboration to solve the world's water crisis with the UN Global Compact Water Resilience Coalition. Through this initiative, our aim is to bring together a 150 of the largest companies impacting 1/3 of the global freshwater use, targeting 100 priority basins, impacting 3 billion people living in water-stressed areas. So today, as you can see on the slide, we have 30 companies with a collective market impact, market cap of $3.5 trillion. And with one singular focus, which is to bring really the -- together the CEOs of the largest companies around a net positive water pledge by 2050, halfway there by 2030, a role that Ecolab is very familiar with, as I share with you, our solutions and services, our 2 tracks of goals that we have. First and foremost, how we impact our customers where we have the greatest impact, but that also translates into our world-class operations. So let me begin by sharing our 2021 results in our operational goals on this slide. So our 2030 operational impact goals also includes targets for Ecolab on our net positive water pledge, a 50% reduction in emissions by 2030 on the road to net zero by 2050. And we're also supporting a diverse and inclusive workforce and of course, ensuring that our associates are safe every day. We remain committed each year to advancing our progress by really establishing annual targets that we hold ourselves accountable to. And it's embedded throughout the organization and all the different functions that help us deliver it. As you can see, we're having an outpacing outsized impact on our 2021 operational targets and 2030 goals, which includes getting to our 100% renewable electricity goal by 2030. Earlier, you probably recall that we announced that we signed a virtual power purchase agreement that will support the construction and operation of a wind farm in Western Finland. So what's excited about that is that with this wind project, when it becomes operational at the end of 2023, we'll actually be able to move from 69% renewables today from a power perspective to 80% by 2023, and then ultimately, obviously, on the road to 100% by 2030. And here we are, it's only 2023. So the opportunity is that we're really ahead of pace on our renewable strategy and our climate goals. So as great as that is, I think the important aspect that I want to share with you today is that we're doing some really ahead of -- we're ahead of pace on our operational targets, but the greatest impact we're going to have is through our customers. So this is our track on and dashboard on our 2030 goal progress through 2021 and as it relates to the work we do with our customers, leveraging our innovation and expertise, working with our customers around 3 million customer locations every day. And so driving progress around these 4 targets, water, climate, food and health. Again, as you can see, we're outpacing our publicly stated customer outcome goals across all 4 of these targets. Now let me bring this to life with 2 examples. And we have 2 customer examples. Let me start first with a global company, an energy company that we've been partnered with really to help them enable them to reach their net zero energy targets. We help them through the connected chemistry and our advanced analytics and expertise around really maximizing the ethylene production and optimizing the energy use that goes along with that, that ultimately led to a greenhouse gas reduction of 44,000 metric tons of CO2 emissions in 1 year. And by the way, in eROI, our universal metric of greater than 75%. So let's move to another example in a different industry. This happens to be a large food and beverage processor, one of the largest in the world. They committed to responsible, sustainable operations in every facet of their business. This is another example where they committed to a net zero target, but the challenge was many of their operations were at-risk watershed areas, which obviously made it tricky. And so the opportunity to partner with Ecolab to leverage 3D TRASAR technology, our smart technology that played a major role in boosting their water and energy efficiency, not only in their critical utilities but also in their clean-in-place operations to really optimize cleaning efficiency and improve their cleaning turnaround, which led to significant water and energy reductions that made a more resilient in the face of climate change, but also enables them to grow and to meet their demand in the markets they were serving. So I think you see a consistent theme here. And existing theme through these examples in my presentation is that we're delivering on our targets. And more importantly, we're helping our customers deliver on their both business and sustainability goals at the highest return and all while sharing the knowledge and practices around these ESG priorities. And so with that, as Christophe said, ESG is core to everything we do, I just covered our achievements on the E, our environmental side, and I'm going to ask Laurie Marsh to do the same on the social side.

Wow. Thank you, Emilio. As you heard in both Christophe and Emilio's remarks, ESG is certainly core to who we are. So it really should come as no surprise that the social pillar is uniquely focused on the value we place on our people because it's our people serving people to ultimately protect people all around the world is why we place a focus on the health of our talent. Our approach to social continues to be anchored to a comprehensive framework, which captures and informs the work we are focusing on and is designed to drive expanded diversity equity inclusion or DEI outcomes. The first 2 columns represent internally facing work, while the second 2 columns represent externally facing work. This framework doesn't include the strategies, goals or objectives that sit behind that, but these -- this framework is designed to systematically advance Ecolab's DEI ambitions. This slide also illustrates our 2030 DEI goals and our year-to-date progress. So on the left, I'll start with the people column. Starting there, we seek to increase our management level, gender diversity to 35% with the ultimate goal of gender parity and also increased management level ethnic or racial diversity to 25% as we seek to meet full representation of the U.S. workforce. In just 2 years, we've had nearly 75% of the way there towards our goal. And we feel that this strong early progress leaves us firmly on track to deliver against the 2030 goal we set. Moving to the second pillar or place column. I'm happy to report that with 2 third-party external pay equity audits under our belt and the third underway in 2022, we have sustained 100% pay equity in the U.S. through incredibly strong governance and adherence to our pay-for-performance philosophy. In the partner -- or in the pillar of partners, we committed to focusing on expanding our partnerships with the first diverse U.S. suppliers at a level of 5x our spend by 2030. One year in, we are 35% of the way there and overdelivering against our 2021 target. And finally, with regard to our focus on community, we intend to ensure at least 80% of our community giving is focused on at-risk and vulnerable communities. To date, we've also overdelivered on our strong results, ensuring that in 2021, 76% of our corporate giving is aligned to ESG goals and leaves us firmly on pace to overdeliver again in our community giving targets. We are also very proud that we retained our team in this incredibly highly competitive talent market. Our ability to successfully retain our team is attributed to the many ways we cared for and demonstrated our commitment to our people as they cared for our customers. This includes protecting their pay, listening frequently, significantly expanding our offerings to help our employees manage their whole life. And while we certainly experienced an uptick in attrition, we experienced less talent disruption than our customers and peers with an 87% overall retention rate and a 94% retention rate at our management level. In addition to retaining our team, we also exceeded our representation goals in 2021 over delivering on our targets for women and persons of color. Further proof of our progress in place is shown here. Our strong track record on pay equity in the U.S., 0 differences in turnover and persons of color versus their white counterparts and numerous awards from prestigious firms, all are evidence of Ecolab's strong position in the market. The pandemic also influenced the way all of our employees see work as part of their whole life experience. Consequently, we approach the future of work in a more comprehensive way, focusing on all workforce segments. Regardless of where people do their job, we've made strong progress in our approach to future of work, finding ways to incorporate flexibility, collaboration, connection and well-being into the work and lives of our people while an equal measure continually actively listening and learning from our people on our approach. Given my remarks on future of work, it should come as little surprise that listening to our people is core to our engagement strategy. Last year, we selected Humu as our partner to deliver on our strategy of frequent and agile listening to ensure we keep pulse on what matters most to our teams. An outcome of these biannual surveys was that we were able to get fast and nimble insights that help make us better. Managers of people then receive a steady drumbeat of nudges or simple in practice tips that help them get stronger in areas most important to their team. Our latest results were incredibly strong. We heard from 89% of our global workforce which represents best-in-class representation and our measures on retention and inclusion exceeded the normal range of Humu by 2 to 4 percentage points. And lastly, we are also deeply committed to making faster progress through partnerships with our suppliers and more importantly, our customers. We delivered on our commitment to increase our spend with U.S. diverse suppliers by achieving 2x our annual spend in 2021 compared to 2020. We are also especially honored to receive exclusive invitation from our long-standing customer at McDonald's to partner and pledge to make notable and meaningful progress in DEI through strategy, representation, supplier spend and new and expanded partnerships and programs. That partnership, combined with our pledge to report diversity spend to many of our large customers shown here further demonstrates our commitment to provide visibility and transparency to our own progress and accountability. And now as I hand it up to my good friend and my colleague, Mike McCormick, to share more about governance and action, I thank you for the time to share more about how ESG is core to who we are. Our unique focus on the social pillar and the value we place on our people, people who serve people to ultimately protect people and the planet all around the world is why the health of our talent is so vital. Mike, over to you.

Great. Thank you, Laurie. Well, like environmental and social, we think we score really well on the governance components of ESG. So looking at the 4 pillars of strong governance framework, which are depicted here on this slide. Here are a couple of highlights. So I'll start with Board oversight. We think we have a highly engaged, well-qualified and independent Board that is well balanced from a diversity standpoint with 42% women and 17% people of color. Relative to ESG oversight, we've had a standing safety, health and environmental community for over 10 years. That committee has direct oversight over many of the components of our ESG strategy and initiatives, and we think that the structure is a leading practice. With respect to executive comp, we believe our executive compensation practices are well aligned with stockholder interest with strong pay-for-performance linkage. Importantly, our compensation programs reward ESG progress since our teams are rewarded as we drive and grow our business. And because so many of our customers' offerings track and drive sustainability benefits, as Emilio explained, we drive our overarching sustainability goals as we drive our business. It's a pretty unique business model. Shareholder rights are also strong on our governance model with annual election of directors, a majority vote for director elections and proxy access, just a few examples of how we stay accountable to our shareholders. Likewise, we highly value input from our shareholders. So we have a robust shareholder engagement program, which includes regular outbound conversations with the governments, experts at our institutional shareholders. Finally, we have really strong disclosure practices. An example of this can be seen in the context of the SEC's proposed climate impact disclosure rules. So I'm going to talk about that for a minute here. We're well positioned to address the proposed rules. The rule will follow the TCFD framework, which Emilio alluded to earlier, which Ecolab adopted in 2017 as it relates to our sustainability disclosures. Components of the framework, as shown on the slide include oversight strategy, risk management and metrics and targets, all of which we address and report on already today. In 2021 -- in our 2021 corporate responsibility report released today, we shared our progress in completing a detailed TCFD-aligned climate risk assessment, which is highly relevant to the proposed rule. In terms of our view of the proposed rule, we're closely reviewing the rule and have been participating in the public comment process. Historically, we've been a leader in our sustainability and climate reporting, putting us well ahead of most other companies. There are, of course, a few components of the proposed rule we modify. But on the whole, we are supportive of the direction of the rule and are in a really good position to comply. On a related point, I'd note we are likewise in really good shape to address the EU taxonomy, which is the relevant sustainability disclosure framework in the European Union. So finally, to be good in governance, you need to evolve your practices, and we have a couple of examples as shown on this slide of how we've done so in the recent past. So first, earlier this year, we strengthened the authority of our Lead Director and Committee Chairs, including the set, meeting agendas and established committee assignments. We also recently rotated 2 of our committee chairs, and I note that we now have 3 of our 5 committees led by women. Lastly, as you see on the chart to the bottom of the slide, with recent director additions and retirements, we believe we have a great balance in terms of Board tenure. In short, our governance practices, including our historically strong and engaged Board have been and continue to be a strategic advantage for Ecolab. I'll try -- I'll turn it back over to Christophe for some closing remarks before the Q&A.

Okay. Thank you so much, Mike, Emilio and Laurie. As you can see, so once again, so ESG is a great way to think about our company, the way we run the company, the way we deliver value for our customers on all 3 aspects in terms of environmental impact, in terms of social impact, making sure we have the very best teams ever and that we can govern our company as well as we can align with our values. It's a journey, a journey that started 99 years ago. It's a journey that's never going to end, obviously. So we're learning. We're learning the hard way. It's been difficult years, obviously, over the past few years, but it's been a great road map and a great driver for us to get really better. Because for us, ESG is the key driver for growth by doing what's right, the right way. So in summary, what does that mean? Well, one of the key things in terms of ESG is really start to deliver on our promises and especially the promises that have been made by our customers that we jointly, obviously, own as such. So for us, it stops and it ends with that as well, making sure that not only the longer-term commitments are being delivered, but year in and year out, we deliver as well together with our customers on the commitments that we have made, they have made as well together. The good news and tricky news at the same time, we're facing huge challenges. As mentioned before, the world is not going exactly the right way, as mentioned earlier as well. When you think about ESG, we should have reduced by 4% last year as a whole, and we increased by 6%. This is not a good news. Obviously, it's of a climate change overall. But ultimately, for us, working together with customers, help us get them better, having a better impact as well, bending those curves and ultimately, so driving growth for us because the more we help our customers save the faster we grow and the closer they get to net zero, the more technology, the higher margin offerings they need as well, which is a good story for all 3, for us, for our customers and ultimately, so for the environment. And that's opening up huge opportunities for us. Our market opportunity at the time is $152 billion out there. keeps growing because we add new end markets, new offerings as well to it. And we want to keep a small share remaining the leader of the overall market, but really having the market growing while we grow even faster and gain share wherever we operate, but that's all good news. And as you can see as well, even on that chart, the good thing in the Ecolab story is that ultimately, if our customers that are buying products from us today would buy everything from us in order to get the best impact in terms of environmental improvement. Well, we would more than triple or quadruple the size of the company, as you can see, so $56 billion out there. So this is a good thing for shareholders as well at the same time. But we keep in mind as well that we need to deliver on our own internal promises, which is the small part of our impact as well. As you've seen from Emilio and from Laurie and from Mike is really making sure that we run our operation towards the best ideal state with the objective that we set as well and get every single year as well a bit closer to where we should be and especially so staying ahead of our target on an annual basis. So at the end of the day, we'd like to say that our company is one of those companies that are doing well by doing good, and there are some good facts backing that up, obviously. So on one hand, it's a growth story. We've always been a growth story as a company. That's been true over time. That's been true last year, that's been true the way we started as well, so this year and really driving double-digit EPS as well as a long-term objective by capturing more market opportunity of this $152 billion market I just talked about as well, by doing what's right and helping customers as well as to save enough water, like in 2021, as you've heard from Emilio. So enough water for the drinking needs of over 700 million people on our path to get to the 1 billion as well. So hand-in-hand impact and performance as well as a company. And what's really critical in our model is that we have those 25,000 field experts that are serving the 3 million customers all around the world as well who can put in action all the recommendations and the plans that we develop [ brings ] together with our customers. And ultimately, I think that we strengthened last year and during this COVID special times as well our position as the world sustainability company, which is growing fast by growing its impact through our customers, as we've always done so for a very long time. So with that, I'd like to open it up for questions. And Mike Monahan, you can help me with that as well. We're going to take them off one by one, as they come in and the whole team here is for you to answer any questions that you might have. So with that, Mike, back to you.

Thanks, Christophe. [Operator Instructions] First question we have is environmental. How do you deliver net zero customers? And what actions and programs are you using to reduce them?

Good question. Well, for us -- I'm going to say a few things, and then I'm going to pass it as well. So to my friend Emilio as well. So who has a lot of experience. So with that, well, net zero is, first, a new term, but it's a huge opportunity for us. First, because, well, we have no choice. And as an industry and together with our customers, it's something that we need to curb. As mentioned before, the world went wrong way in '21. We need to correct that collectively. That's asking, obviously, so more of our offerings from our customers to us. And second, many customers have made commitments by 25%, by 2030, by 2050 and have a lot of time to get on pace and on path in order to get there in time as well. And here, we can help. So they come and ask even more as well so from us, which is driving our growth. So if I just mentioned the 2 interesting examples, and I'll pass it to Emilio afterwards, one that has been very public is what we do for tech companies, for their data centers as well that are using so much water. While most of them have declared to be water neutral or water positive by 2030, and we've developed plans with them to get there. All this is other examples that I talked about the last week, which one of the major steel company around the world that wants to double its steel capacity without using any incremental water as well. While that's one of the examples of what customers might be asking from us as well, which means better outcomes, more steel in that case, without increases the impact on the environment. But I don't know, Emilio, if you want to add any piece to that?

Yes. Christophe, I think you said it really well. I think the other part I wanted to add was the growth that we're seeing around net zero by our customers, over 1,200 companies have put in place science-based targets, which is really an incredible -- and that continues to grow each day. And so we see a big opportunity to build the awareness around how finding carbon reduction solutions at Ecolab provides, but also including the world that water plays in connecting to energy that ultimately drives greenhouse gas reduction. And another example, Christophe, that I'll add is take a major brewing company. Their universal metric is looking at how much water it takes to produce a liter of beer. So today, universally, it's 3.5 liters per liter of beer. And their goal for some of these companies is to move to something like 2.5 liters per liter of beer. That in addition to becoming net zero breweries, that's a big deal and being able to drive a holistic strategy, which what Ecolab can provide using advanced analytics, the cloud and smart technology like 3D TRASAR to help them conserve, reuse and recycle enables them to get there and reduce their carbon footprint. So I just wanted to add that component to the story.

Thanks, Emilio. We have another question. Your goal is to deliver at least 25% eROI to customers. Can you comment on how that compares to competitors and where you see Ecolab most competitively advantaged?

So I haven't heard yet on customers or competitors making that kind of a commitment besides what we do. So most of our competitors that provide technological solutions on wastewater treatment or on boilers or on sensing technology and so on. And no one provides an end-to-end offering as we do, which is really -- sorry, if we talk about water, starting with the entrance of the water in the operations and the discharge as well, if there is any. And our objective is ultimately to create no discharge, which is the whole idea of net zero as well. So that gives us a significant advantage to provide this eROI saying, well, you're going to have better outcomes, you're going to have better productivity, you're going to have a better usage of natural resources and impact as well, and that's going to reduce your total cost. That's what we've been doing so for 99 years. This is not new, and our customers are very familiar with that. And I would say, one of the best way to measure the positive outcome on our company of that strategy is that we've been able to keep positive pricing, which is another way of saying, we never go backwards in pricing, year in and year out in every of our businesses because, ultimately, so we cannot take a share of the incremental value we create so for our customers, which helps to building those margin on a longer-term basis as well. So good for customers because no green premium. They can operate in a more sustainable way and improve the P&L and at the same time, so for Ecolab on a longer-term basis, it helps improve our margins as well at the same time.

Thank you, Christophe. Here's one for Laurie. Is Ecolab being materially impacted by the great resignation and rising wage inflation? What actions are you implementing? And as a result, how has employee turnover trended in the last few years?

Thanks, Mike. As I mentioned in my previous remarks, attrition is quite low compared to many of our competitors for our talent. Our employees stay principally because of our unique culture and purpose and remain highly engaged as a consequence. And we know this because of our recent engagement survey that I referenced. That being said, it is a tight labor market, and we have seen some limited impact in certain sales, service and warehouse manufacturing positions in some specific regions where there is greater competition for labor. Our teams are responding incredibly well here, and it really hasn't importantly had a meaningful impact on our operations or our customers. The majority of our employees have and require advanced degrees and training. As a result, we haven't seen much impact across our collective business due to wage pressure. We do have a few more open positions than normal, but again, this hasn't had any impact on sales or client service levels, and we're staying close to the market trends to ensure we remain competitive and retain our best talent. And then finally, I want to point out that Ecolab requires a variety of high demand, unique locational and technical skills for our entry-level positions. Consequently, our entry-level wages are on average 2x to 3x higher than minimum wage across our significant locations of operation. And as a consequence, we just aren't experiencing the same level of wage inflation for our entry-level jobs that other industries may be experiencing.

Thanks, Laurie. We have another question. Could you provide more information on how the Internet of Things and technology is enabling your eROI to be greater than 25% as well as advancing Ecolab's ESG goals?

So I'll start. So leveraging IoT or digital at the highest return while advancing ESG is really at the heart of what we do at Ecolab. And as you heard from our opening presentation, there's a growing number of multinationals that are focused on climate disclosure. They're looking at how they integrate their climate disclosure. And in many cases, their water assessments in their reporting. And it's all about building water resilience. It's building resilience, which is something that is a priority for ESG investors who are investing in those companies. And so digital technology and solutions such as 3D TRASAR and Ecolab 3D cloud can help our customers build resilience by enabling them to really understand their operations 24/7, 365 every year to really drive and minimize the challenges from water stress, climate impacts as well as any disruption from supplier impacts by enabling them to have the data and the analytics to really understand the impact through their operations. So yes, the answer is yes.

But the other important thing I'd like to mention is that since we have so many plants that are connected, we know what good looks like. Within one customer, you mentioned so a brewery, for instance, they might have 100 breweries around the world. Well, they know because we connect all those plants to the Ecolab 3D cloud. They know, we know what's the best performing plants out there. And how do they get to the best performance so you can start sharing best practices as well. We can do that. So obviously, so within an industry across customers doing the right way, protecting, obviously, it's our intellectual property, but also across industries, across geographies as well. So the fact that we connect so many of those systems around the world helps us to understand what's the best performance and how to get to the best performance as well, which at the end of the day, drives as well a better eROI.

Another one on environmental. What actions are you taking with your suppliers to help them reduce their emissions?

So I'll take that one. Yes, we at Ecolab as a science-based target that was approved in 2020. Part of that target really is focused on not only our Scope 1 and Scope 2 operational emissions but also our Scope 3 emissions, specifically that we're targeting those suppliers that make up 70% of our emissions that they also have science-based aligned goals by 2024, ultimately getting us to our goal by 2050 of being -- having a 50% reduction across all 3 scopes. And so for us, we did -- we started right out of the gate to really focus on really prioritizing those suppliers that we needed to partner with to help them address those targets. Now the great thing about Ecolab's strategy is not only are we able to partner with them and share our best practices, but we can enable them through the use of our solutions to also help them in their Scope 1 and Scope 2 operational emissions around carbon and water that enables us to really provide the unique value that many companies can't.

Yes. So the good news is that by working with our suppliers, not only we help them improve their own operations, we improve our ESG profile in Scope 3 and we drive more business by helping them get there. So it's a really good kind of win-win-win type of a approach here.

Thank you. What are the investment requirements for decarbonization? And what are your investment criteria for positioning these?

So if I can take this one, it's a great question because we look at those investments like any other investment. So we have roughly 6% of CapEx in our company. This is the value that has been true for a very long time at Ecolab. And we look at those investments with the same lens on returns as any productivity or innovation investment that we have out there. And the example that Emilio showed before, on renewable power, for instance, has improved our cost for power. It's been a very good story. So when we talk about getting to net zero water and carbon for our plants as well, it's always done in a way that productivity of our plants needs to improve as well at the same time. So as mentioned before, we don't look at those so-called green premium that are impacting P&L in a negative way. For us, like it is for our customers, those investments on decarbonization and reducing water consumption as well as good ways to improve productivity at the same time.

Thank you. Here's another one for Laurie. What is Ecolab's approach to building diverse and inclusive teams?

Thanks for the question. Our focus on building diverse and inclusive team, I want to just start by saying it's not new. This has been something that is really reflecting in our long-standing values and working together with diverse perspectives. It shows up in a lot of ways. It shows up in the way we hire, the way we develop, the way we promote people, create a respectful and inclusive workplace and certainly the way we do business with customers and suppliers. And more importantly, we've been also using our corporate cloud to create equity in our communities. If I could highlight a few key practices, I would say, maybe 4 things. We set aggressive goals for our progress, and we review those key metrics and practices, including our representation metrics with Christophe and our entire senior leadership team on a monthly basis. It's a standing agenda item. Secondly, we integrate DEI practices in training and diagnostics through all our people processes in the company. Third, we integrate our DEI practices within our ERGs who have really become the quintessential brand ambassadors for the company and helping drive key talent outcomes. And finally, we provide all our associates with regular opportunities to connect, listen and learn about our differences to build [ empty ] and to create understanding and ally ship across the company.

Yes, I'd like to add just a few comments on that, Laurie, okay, and maybe uncovering a small secret here. I was not the believer in target because I thought that our whole team would buy into it for all the right reasons that having a diverse and inclusive team to drive better performance, so you don't need to have targets to do what's right ultimately. Well, the ugly truth is that I was wrong. In order to accelerate that process, we need a target in order to make sure that everyone was getting to the right critical mass, everyone was getting on that momentum as well, and it worked out really well. And probably, there will be a point where we won't need targets anymore because everyone in the company saw -- we see that as just doing the right thing, the right way and building even better teams.

Yes, I love that.

Thank you. Different question here on environmental. You seem to be on track and even ahead of the schedule in achieving your social and environmental goals. Will you raise the bar if those targets are achieved earlier than planned?

That's a great question. Well, we are very much into delivering what's been promised. So we won't put the bar at a place that's an unachievable place. We go to net zero, so it's the ultimate goal that we have. The only question is the timing. Here, as you've seen earlier today, so we are ahead of most of those targets in terms of prorating time that we have in here. So ultimately, I think that what we had planned for 2050 is probably, at some point, going to happen closer to 2030 and that would be ahead of an accomplishment. But ultimately, it's about really delivering what we've been promising and we want to stick to that role as well.

Do you think the concept of carbon credits will ever be developed and applied to water where companies and ag producers will be charged for water and those who reuse, recycle will get water credits that have value?

Yes, I do. The market has evolved tremendously. And we see this as an opportunity really that an Ecolab really pioneered this concept of looking at the full value of water, which really is at the heart of this question because water is undervalued. And we need to think water as a precious resource, not as a disposable commodity. And so being able to leverage reuse, recycle technologies to really maximize and really optimize water use at an operational level or in ag practices with like precision irrigation is possible by looking at water as a precious resource. Now the smart water navigator, what it does is actually monetizes for users the full value of water based on other externalities that today aren't in your monthly water bill, that really provides you that internal price on water, just like you would have as an internal price on carbon. So Mike, I do see this evolving and growing water as an asset class.

Thanks, Emilio. Another question. Can you consider introducing ESG KPIs as additional drivers for variable long-term executive compensation?

Well, I've heard this question a few times over the years, obviously. In one way, I wouldn't be the one most in favor because as you've seen before, so we're way ahead of our progressing here. So that would be an easy way to get good compensation. We might consider that at some point. But what's most important is what we've been sharing all along today is that ultimately, so what we do is driving ESG impact for our customers. The more our customers save the more our customers recycle. The more we grow, the more our margin improves as well. So there is a direct link between our business performance and the ESG impact that we have. So that's why we have not complicated our viable compensation systems so far. But I'm open to that discussion going forward, but it's really driven by simplicity. We know that consistent need to be simple, especially for a sales-driven organization. And second, because while our sales are directly related to the environmental impact that we create. But I will not exclude that for the future.

Thank you. Another one on Scope 3. Do you have any specific targets on Scope 3 emissions? And are you planning to commit to SBTi initiatives or have you committed already?

Yes. We have a science-based target that was approved by the science-based target initiative in 2020 on the road to net zero by 2050 and then halfway there by 2030. That does include our Scope 3 emissions. I referenced this metric that we're measuring, which is targeting the suppliers that make up 70% of our emissions. That is really critical. We have annual milestones that our team tracks related to how we're going to achieve that. Ultimately, those -- that is a -- that is everyone's big challenge because, as you know, depending on the industry you're in, you could have anywhere between 70 to 90-plus percent of your emissions as an enterprise from your Scope 3. But of course, the data isn't readily available. And so part of the challenge is being able to partner with your suppliers to really align on the right targets that need to be achieved to help companies along the value chain really get to net zero by 2050.

Thanks, Emilio. Another one, can you talk more about your renewable energy initiative and how you plan to convert the remaining 20% of your electricity to renewable sources?

Yes. So we have -- as you heard earlier, with Europe, we will, in 2023, be at 80% of the enterprise sourcing their electricity from renewable sources. The remaining 20%, there's a number of different strategies that we have related to looking at those markets in Latin America and Asia in order to achieve the last mile. And in many cases, it may require a combination of different things beyond virtual power purchase agreements, which is what we've done in North America and Europe. So such things as on-premise renewables that could be solar for warehouses and manufacturing facilities or office buildings to other forms of on-premise renewables. Then we also have contracts, certified renewable energy contracts that we can also lean in on with different service providers in those regions. So there's a number of ways that we can actually get at that last mile, that last 20% to achieve our 100% goal by 2030. The good news is that we've got 6 to 7 years head start, which is a good thing to be in a position to have.

Thanks, Emilio. Another question. Did COVID or the soaring inflation caused customers to decrease their interest in ESG solutions?

Well, we thought that would happen did not when COVID hit 2 years ago that the whole sustainability focus, the whole ESG focus, so we take a back seat. And none of that happened, as we know. COVID has been a great and scary example, obviously, of nature provoking change where we've seen that nature will change dramatically, and we had to adjust the way we live, the way we approach things, the way we work, all the things that we've collectively so gone through over the past 2 years. And we've really seen so customers ultimately saw get even more ahead and focused on ESG commitments, which is a very good news for us. On the inflation side, which is something that happened, obviously, we saw last year, starting in the second half, it really depends on that view of looking at sustainable operations as a cost or as an improvement of performance. And for us as a company, we've always performed quite well during recessionary times during inflationary times as well because at the end of the day, we help customers operate at a lower total cost by using less natural resources. So they get both at the same time, better environmental impact, better cost as well, which is exactly what you're looking for during inflationary time and during recessionary time as well at the same time. So all good for us, too. So I think that we're coming towards the end of our call here. I see that there's many more questions as well so coming in, which is showing the interest that you all have in our story, on our journey, what we're learning, what we're seeing, where we're going obviously, here. So please feel free [indiscernible] to reach out to us with whatever questions or discussion topic that you'd like to have. This is what we do for a living. So really happy to do that at any time. For us, ESG, as I said at the beginning, is really core to all we do. It was not called that way in 1923. Obviously, it was not called that way 20 years ago, but at the end of the day, it's always the same. It's helping customers produce better outcomes at a lower total operating cost by reducing the usage of natural resources and environmental impact. That's been true for 99 years, and it's even more true today than it's ever been. So the fact that we're committing to this net zero down the road that customers are committing as well so to net zero down the road, those are all growth opportunities. So for us that requires more innovation, more digital technology that's driving higher margins as well for us. And when we think in terms of how we deliver that, well, it's great teams that are delivering that in 3 million customer locations around the world. We only do that if the team health is really strong, which is what Laurie has been covering with you today, which is why the E&I is so essential because we are a people company serving people to protect people at the end of the day. And on the G side, Well, it's about doing things the right way as well and it's respecting strengthening our value, especially in difficult and unpredictable times that we've been living over the past few years and probably in the years to come as well. So E and S and G is a great framework for us to guide our success, our future together with our team and our customers. So thanks a lot, so for attending the seminar today. And with that, I'll give it back to Mike.

Thanks, Christophe. This 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 the conversation and our continued progress ahead. So thanks 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 teleconference. You may disconnect your lines at this time, and have a wonderful day.