L'Air Liquide S.A. (AI) Earnings Call Transcript & Summary

Hello, everyone. It is Aude Rodriguez, Head of Investor Relations. Thank you for joining us today. Our 2022 corporate sustainability report was published earlier today on our website, and we take this opportunity to provide you with another view of key progress made by the group on ESG topics in 2022. Joining me today are Fabienne Lecorvaisier, Ashutosh Misra, Jean-Marc de Royere and Claire Dessertine. The presentation is available for download on the Air Liquide website. We will be calling out the slide numbers so you can follow the progress of the presentation. Let us go now to Slide 2. Today, we are going to cover 2 key topics. We will start with another view by Fabienne of the key pillars of our sustainability strategy and illustrate how it is embedded in our governance and processes. Then Ashutosh will go over the details of deployment of our action plan and performance on the third pillar, advancing for the environment. Jean-Marc will cover the progress on the second pillar, advancing for health. And Claire will provide an update on the third pillar advancing for all. Over to you, Fabienne.

Thank you, Aude. Good morning or good afternoon to all. I'm very happy to welcome you to our yearly ESG call. to share with you an overview of our sustainability strategy and recent progress. Please turn to Slide 4. You may remember that in March 2021, we were the first to publish a very comprehensive set of ESG commitments along 3 pillars: abatement of CO2 emissions with commitments for reduction in absolute value, care for patients and trust as the base to engage with all our stakeholders and to build a best-in-class governance. In March 2022, and I am on Slide 5, we took it one step further with the announcement of our new strategic plan for 2025, ADVANCE, which places sustainable development at the heart of the group's strategy firmly setting Air Liquide on course for a comprehensive performance by combining financials and extra financials. We are now on Slide 6. As part of ADVANCE, we made the reduction of CO2 emissions, one of our key strategic pillars, which is further evidence of our long-term commitment to sustainable development. The chart on the left shows our absolute CO2 emission planned trajectory in the short, mid and long-term. This trajectory was validated by science-based targets, SBTi in May 2022 as aligned with climate science, and we were the first in the industrial gas sector to receive this validation. Our commitment to deliver on Q2 reduction is more than a stated ambition. In addition to the growth and return on capital employed objectives, we are resolutely committed to achieving an inflection point in absolute to emissions by ran in 2025 for Scope 1 and Scope 2. Ashutosh will also give you more details regarding our progress on Scope 3 in a moment. I am on Slide 7. 2022 was a very transformative year for us to align the entire organization towards delivering on our objectives. We now have rigorous governance in place for providing oversight and sustainability performance all the way up to the Board level, where the Environment and Society Committee regularly review strategy and progress on the key KPIs. Given the emergence of strong connection between the financial and extra financial performance, the sustainability department works closely with the group operations control department, and they both are under supervision of executive committee members. The global objective has been translated into local decarbonization plans, which are developed by the operational entities in close conjunction with our world business lines, taking into account geographical and customer specificities. The governance that you just saw is now coupled with processes, metrics and tools to manage our CO2 trajectory. A very significant development in 2022 was the rollout of the CO2 budget, modeled along the same lines of governance at financial budget. We executed a CO2 budget by geography followed quarterly, and we embedded this budget into the investment decision process. Simply stated, the CO2 budget, the threshold of CO2 emission that the total of new investment must remain under for a given group of countries. Accordingly, the investment decision process has been updated to include the CO2 impact of any new projects and to ensure that we remain on track with our trajectory. New reporting tools have been put in place to bring more accuracy and robustness to reporting. The group has been mobilized at every level to deliver on our ESG commitment. This ranges from the deployment of networks and training programs, to inclusion of ESG metrics in the remuneration plans of the managers. We now have an organization that is poised and committed to deliver. I'm now on Slide 9. Under our new strategic plan, we will invest EUR 16 billion through 2025. And given the criticality of energy transition, close to 50% of this investment will be directed towards energy transition project. This will include projects that help decarbonizing our assets as well as projects that allow us to bring decarbonized gases and technology to our customers to enable them to achieve that climate goes. In 2022, we have already engaged EUR 4 billion of investment decisions. Nevertheless, we will continue to be very selective in our investment decisions to ensure that business growth and decarbonization objectives are achieved simultaneously. With all these elements put in place, let's now review the results that this governance and processes have delivered in 2022, and this is on Slide 10. First, on the key environmental KPIs, we are happy to report that for 2 years in a row, our absolute CO2 emissions have remained stable versus 2020 on a comparable basis. This flattening of the CO2 curve is happening while we continue to develop the business with 16% growth over the same period. We are also on track with our CO2 intensity reduction target of minus 30%, versus 2015. And our second pillar, advancing for health, significant growth have been main on the 2 KPIs. In mature economies, 49% of our patients had personalized care plan in 2022. These personalized plans are based on outcome-driven models to help patients with chronic disease improve their quality of life. Similarly, in low and middle-income countries, close to 1.8 million people have now been facilitated with access to oxygen as a result of our efforts. Finally, on our third strategic pillar, advancing for all, which addresses social and societal elements, we continue to make progress. Our inclusion and diversity objective aims to increase the percentage of women in our managers and professional to 35%, by 2025, and the small increase in 2022 is indicative of the magnitude of the task but also of the result of the systematic efforts that are being developed. We are also committed to bringing a common basis of care coverage to all of our employees worldwide by 2025, ensuring common standards for health insurance life insurance and 14 weeks of paid maternity leave. Significant progress was made on these objective in 2022 with action plans deployed across all geographies. On Slide 11 now, you will note that leading extra financial agencies continue to recognize our progress on all ESG fronts in 2022, placing us in the top quartile of all assess companies. I will just point out some of the highlights. In 2022, we became a constituent of the DJSI Europe Index for the first time, driven by a significant improvement in our S&P Global CSA score. We maintained our CDP rating on climate and water, and for the sixth consecutive year, received a good sustainability metal from Ecovadis. Given that we are in the chemical sector, we are also very proud to be ranked #4 by Chemscore, out of 54 chemical companies which demonstrates our stewardship in the management of hazardous materials and transitioning towards environmentally friendly alternatives. I hope that this overview brings you confidence that our strategy, governance and processes are delivering robust results in line with our commitments. I will now hand over to Ashutosh to provide details on our environmental performance in 2022.

Thank you, Fabienne. Let us go to Slide 13. Advancing for the environment is one of the key pillars of our ESG strategy. This includes our focused actions not only for the climate but also in areas such as water and biodiversity. As a responsible company, we are committed to preservation of all aspects of the environment. Now we move to Slide 14, starting with CO2 emissions. As in previous years, we continue to report our absolute CO2 emissions across all scopes with increasing accuracy and precision using newly-deployed tools that provide granularity of emissions down to the facility level. In 2022, our emissions across the entire supply chain and operations amounted to 61.4 million tons of CO2 equivalent, with Scopes 1 and 2 accounting for 64% and Scope 3 accounting for 36% of the total. At the same time, with our technologies, efficiencies and product applications, we contributed to the avoidance of close to 77 million tons of CO2. Now let us examine some additional details on these emissions on Slide 15. The pie chart in the middle shows the breakdown of our emissions by Scopes 1 and 2 per major geographies. The profiles of these emissions vary due to the type of assets and products. For instance, in the Americas and Europe, where we have large hydrogen production capacity using SMRs as well as the coproduction of steam and electricity using Cogens, Scope 1 emissions are predominant. Conversely, in Asia and Africa, Scope 2 emissions associated with electricity usage from the major share of emissions footprint due to the heavy concentration of large production capacities of air gases such as oxygen, nitrogen and argon. Similarly, the emissions profile by business line, which you see on the right, are heterogeneous with the bulk of total emissions heavily concentrated with our customer base in large industries contrasted with a relatively minor CO2 footprint of our health care business. Now this illustration is significant for 2 reasons. First, it helps us identify the relevant decarbonization levers for each geography. For Scope 1 reduction, we are deploying carbon capture, feedstock change and electrolyzers. For Scope 2, we are increasing the share of renewable electricity in the energy mix. Second, it helps us focus on markets and customers where decarbonization challenges are most profound such as our customers and hard-to-abate sectors like steel, cement and petrochemicals. We now go to Slide 16 to illustrate the 3 key decarbonization levels we are deploying and the progress we have made on each. Our first level focuses on how we manage our assets to reduce emissions via efficiencies and technologies. In 2022, we made investment decisions to start electrification of our steam-driven ASUs in China. We also launched several energy efficiency projects globally and signed more than 50 new on-site contracts, which bring emission reductions by eliminating the need for product transportation. Our second level, which is procurement of massive volumes of renewable energies, also saw major developments with the signature of power purchase agreements. By sourcing renewable electricity directly from the producers of new capacities with our long-term PPAs, we foster investments from energy producers. The share of renewable electricity in our electricity mix increased to 17.5%, which is a 10% increase in volume of renewable energy versus last year. On the third level, which is carbon capture usage and storage, 3 of our large-scale CCS projects in close collaboration with our customers were selected for close to EUR 600 million of funding by the European Innovation Fund in the form of subsidies and grants. This is very promising as it shows not only the trust of our customers in our carbon capture solutions, but also the much needed incentivization by governments to make large-scale CCS as a viable decarbonization level for meeting net zero pathways. I'm now on Slide 17. The results of these efforts are very concrete, as you can see on slide. In the past 2 years, our absolute CO2 emissions have remained stable despite the significant growth in our business. The plateauing of emissions is a necessary step for us to reach our committed inflection point around 2025, and it follows the CO2 trajectory we had published in March of 2021. This trajectory was validated by science-based targets in May of last year, and it's a clear attestation that our decarbonization pathway is aligned with climate science and with the principles of the Paris Agreement. Over to Slide 18. Not only have we started to put brakes on our emissions today, we are also making relevant and selective investments in energy transition projects since our climate commitments require us not only to decarbonize our existing assets, but also to decarbonize the growth that we find. By 2025, 50% of our EUR 16 billion investments will be dedicated to energy transition. I would like to draw your attention to a few large-scale energy transition projects. First, for hard-to-abate sectors like cement and petrochemicals, several new projects were finalized, Kairos@C in partnership with BASF for transport and storage of CO2, CCS projects with Equiom and Lhoist for decarbonization of cement and lime production and Antwerp@C project to create a first of its kind export hub for CO2 storage. Second, we are committed to the decarbonization of hydrogen production. In 2022, 2 of our large-scale electrolyzer projects in France and in the Netherlands each with a capacity of 200 megawatts have been initiated, and these are enabled by a robust technology partnership and JV with Siemens Energy. Third, in 2022, we signed 4 major power purchase agreements, such as the 115 megawatts PPA with Vattenfall in the Netherlands, and the PPA jointly signed with Sasol in South Africa for a total capacity of 220 megawatts, which represents 1.1 terawatt hours of renewable electricity available for our operations when these projects are completed. Please turn to Slide 19. We recognize that decarbonizing our entire value chain is critical for achieving net zero targets by 2050. As we prepare our net zero targets, which are consistent with a 1.5-degree pathway and cover all scopes, including Scope 3 emissions, we are participating in the SBTi-led expert advisory group to develop a sector decarbonization approach for the chemical sector. This project aims to develop standardized methods and best practices for emissions accounting and target setting with a focus on critical Scope 3 categories for the chemical industry, which has many heterogeneous yet interconnected subsectors. We believe that the output of this project will inform and guide the structuring of our Scope 3 objectives using globally-harmonized accounting practices. Since 2020, we account for and report our Scope 3 emissions across the different categories with increasing accuracy and rigor and to progressively start taking objectives on relevant categories of such emissions. As shown on Slide 20, our focus on Scope 3 emissions gained increased momentum in 2022, and it focused on 3 areas: first, establishing methodologies and tools that enable comprehensive and transparent monitoring of scope 3 emissions; second, engaging with our upstream supplier base to embark them on their respective net zero journeys that would allow us to define a procure to neutrality road map; and third, enhancing our engagement with our customers downstream to reduce their emissions footprint by providing decarbonized products and solutions. Noteworthy is our first Scope 3 objective that we have undertaken in 2022 to address CO2 emissions downstream of our operations. Recognizing that our ability to decarbonize our customers' operations will require close partnerships and selectivity, we have set the objective to have 100% of our top 50 customers committed to 2050 carbon neutrality by 2035. We remain committed to setting objectives for additional Scope 3 categories as the standard methodology specific to the chemical sector become available from the SBTi's workgroup. We now move to Slide 21 to discuss progress on some of the other environmental objectives. As consumers of large volumes of water for our operations primarily for use in cooling processes, we have a responsibility to manage our water footprint for the entire ecosystem. In 2021, we had launched a set of water objectives associated with deploying a water management plan for our operations that are in high water users and located in areas of high water stress. In 2022, 78 sites were identified as falling into these categories, and action plans are being developed across these sites to optimize water consumption. Second, we also set an objective to ensure minimum quality standards of discharged water regardless of local jurisdictional requirements. In 2022, group technical standards for water quality have been drafted, which will be progressively deployed across all our operations. These objectives and our progress are well aligned with the stewardship we strive to maintain in management of this very critical natural resource. Over to the next slide. In 2022, we also accelerated our efforts on the subject of biodiversity. While several biodiversity elements such as climate change and natural resources are already covered in focused road maps, we recognize the need to address elements beyond that such as land degradation, pollution and, where applicable management, of biological resources. To this end, we have completed a comprehensive assessment of biodiversity-related risks in terms of both access to and impact of natural resources. We have also mapped our assets in key biodiversity areas and launched biodiversity awareness trainings across the organization to highlight the importance of this topic. In 2022, we have also launched our first set of biodiversity commitments. These include: first, to commit to Act4Nature in 2023 with a set of objectives; second, to implement a biodiversity KPI by 2025 that would allow us to have a quantifiable assessment of our biodiversity impact; and third, to integrate biodiversity assessment of all new projects in our investment process by 2024. We now move to Slide 23. 2022 was also the first full year of European taxonomy reporting that includes not only the turnover CapEx and OpEx associated with eligible activities, but also those attributed to aligned activities. Let us recall that the European taxonomy eligibility was defined in the 2020 regulation based on around 100 economic activities, which generate 93% of direct greenhouse gas emissions in the Europe -- in the EU. Therefore, eligibility should not be confused with greenness of an activity. The main portions of Air Liquide's activities such as air gases or health care do not directly emit greenhouse gases and consequently are not eligible to the European taxonomy. The pie chart on the right illustrates the portion of our taxonomy-eligible CapEx that is aligned. The 30% CapEx alignment is indicative of the selectivity and investments that we are exercising with a focus on energy transition projects, helping us prepare for such investments to deliver decarbonized products that meet the taxonomy alignment criteria in the future. I will now hand over to Jean-Marc De Royere to discuss the second pillar of our ESG strategy.

Thank you, Ashutosh. I'll give you an overview of how we are advancing for health. Healthcare systems are challenged in mature economies by demographics and rising costs, while developing economies are looking for long-term solutions to their own situation. We believe that addressing the social needs of individuals and communities will improve the sustainability of Healthcare systems, thus our social objectives for health care in both mature economies and low and middle-income countries. So let's continue on Slide 25. First, in mature economies, we wish to improve quality of life of people with a chronic condition. We address this by helping them comply with their treatment and by focusing on outcomes through what we call personalized care plans. 49% of the patients we serve were on such plans in 2022. At the same time, we've been working with the research groups and patient associations to set up schemes that improve compliance and quality of life. More than 80 such local schemes were active across our operations in 2022. One example you've got on the slide here is a partnership set up in Portugal with 2 local bodies to improve the lives of patients with sleep apnea. Over to the next slide. Second, in low and middle-income countries, we want to make access to medical oxygen easier. Availability of oxygen is a basic requirement for any Healthcare system. Enlarging its access will make a major difference to local communities. We've started with primary care facilities, the first level of Healthcare systems. With Access Oxygen, they have a safe and reliable means of diagnosing and treating patients. We serve these centers either through Air Liquide operations or through local entrepreneurs. In 2022, an estimated 1.8 million people in 3 countries had easier access to oxygen, thanks to over 200 primary care facilities with Access Oxygen solutions. I will now hand over to Claire Dessertine to discuss the third pillar of our ESG strategy. We will go to Slide 27.

Thank you, Jean-Marc. It's a pleasure to be here with you and present our commitments and progress behind advancing for all. Let us go to Slide 28. Taking action as a socially responsible employer and increasing positive impact means creating for all employees a safe, ethical and engaging environment. It also means contributing to a more inclusive society, supporting local ecosystems in all the countries where we operate. I am going to give you an update on each of our objectives. On the next slide, 29. At Air Liquide, we believe diversity is a source of dynamism, creativity and performance. An inclusive workplace with talents of different ages, nationalities and backgrounds is a key asset for the group's success. In that regard, globally, Air Liquide has set a target to have 35% of women in our management and professional population by 2025. In 2022, we have increased by 0.5%, up to 31.5%. Our target is ambitious and challenging, and we have strong action plans to reach our objective. Moving to Slide 30. With our presence in 73 countries of diverse cultures, we face many different situations in care coverage for employees. As part of the Air Liquide strategic plan for 2025, ADVANCE, the group renewed its commitment to offer common care coverage to all employees by 2025. In 2022, 40% employees are now benefiting from this common basis of care, including death and disability insurance, Healthcare and maternity leave. Each hub within Air Liquide is acting on this commitment by developing a 2023-2025 road map to achieve our objective. Let us go to Slide 31. For many years and all around the world, Air Liquide employees and the affiliate management sponsorship all through the foundation have been volunteering during or outside working hours to support their local communities. In 2022, Air Liquide launched its Citizen at Work program, which provides a framework to enable employees to volunteer in their local communities. This program will be gradually expanded across the group with the objective of 100% of employees to have access to local volunteering activities by 2025. By the end of 2022, 43% of group employees already have access to this program. I will now hand over to Fabienne for the next topic. Let us move to Slide 32.

Well, thank you, Claire. Thank you, Jean-Marc. And thank you, Ashutosh. Back to governance. Our governance is based on a continuous and open dialogue with our shareholders and is grounded in integrity, transparency and accountability. In 2022, Air Liquide established a new governance, as you know, separating the role of CEO and Chairman of the Board of Directors. On June 1, Francois Jackow was appointed CEO, and Benoit Potier maintained the role of Chairman of the Board of Direct. We are also committed to making a positive impact on society through actions taken by the Air Liquide Foundation. In 2022, the foundation, along with volunteer group employees worked hand in hand to support refugees from the conflict in Ukraine. As of December 2022, the foundation supported 41 charitable projects, benefiting to more than 60,000 refugees. In conclusion, and I am on Slide 43, I would like to strongly highlight the following 3 points. Our focused decarbonization efforts are supported by a solid governance and the commitment of all of our employees. And they are producing concrete results, as you can see in the flattening of our absolute CO2 emissions 2 years in a row. Second, we are confident in our ability to deliver our commitment of an inflection point in emissions around 2025. This will be made possible by the decarbonization of the growth we are signing, enabled also by signature of major power purchase agreement for renewable energy procurement and execution of large-scale carbon capture project. Third, we continue to enhance our stewardship and environmental topics by adding a new set of commitments on Scope 3 and biodiversity while working with leading associations and SBTi to drive harmonization of methodologies for the chemical sector. I will stop there. Thank you very much for your attention. We hope that you have found this presentation insightful, and we will now take your questions.

[Operator Instructions] The question comes from the line of Andrew Stott from UBS.

Thank you for the presentation, very interesting update. I'm going to ask a typical equity analyst question. When you consider all the changes you're putting through here to your sustainability, particularly interested in the biodiversity and diversity side of things, what are you doing within the organization, if anything, to change behaviors? So where I'm really going with this question is, are there any changes planned? Or have I missed changes already in your short-term and long-term incentive programs?

Thank you, Andrew. I think we already discussed during the presentation quite extensively the governance we have put in place to be able to our objective. Since the beginning and since we announced our first objective in March 2021, we have been acting through networks, and we have developed 2 very strong networks. First, the Climate Champions network. The Climate Champions are people who are in the clusters, a cluster being a group of 2 or 3 countries, who are responsible for the delivery of the CO2 trajectory and that our main counterparts in the operations. This is for decarbonization. Then for the other topic, we have a very strong network of Sustainability Ambassadors. These people are volunteers, and they are in charge of spreading the sustainability mindset through the organization. And in this network, we have now under control of Ashutosh, 600 people, am I right? Who are in all the countries, promoting small actions in day-to-day life, so that sustainability becomes part of the mindset and of the way of working at it. In terms of incentive programs, we have a sustainability component both in the short term and in the long-term pay. In the variable pay, we have a 10% component which is based on sustainability. And on the short term, we try to fix to the people, sustainability objectives, which are under their control. It's not global objective at a group level. It depends on the job of each and everyone. And we all have sustainability objectives, which are actionable in our day-to-day work. On the long-term incentive, conversely, it's a group objective. It is just the reduction of CO2 emission, along the objective that we have announced, and that is also accounting for 10%.

And the questions come from the line of John Buckland from Waverton Investment Management.

Anyway, I hope you can hear me. Could we go back to Slide 15? It's quite a complicated slide in a sense but it doesn't actually include Scope 3, which is an important element of your future plans. The question is, can you explain a little bit more for these different regions what actions you're going to take because -- in the different scopes? Because the size of them are quite different depending on the region.

Okay. So the objective of the chart on Slide 15 is to show you the importance of Scope 1 and Scope 2 depending in the various regions. So just to remind you what our business is, we have oxygen production. Oxygen production does not emit any CO2 but uses a lot of energy. So our Scope 2 emissions relate to the electricity we use to operate our air separation unit to produce oxygen. Then we produce hydrogen. And for most of the time, those days, hydrogen is produced by reforming natural gas. And then you have direct CO2 emissions. So this is our Scope 1 emissions. So if we take Americas, for example, in Americas, we have a strong position in hydrogen. And therefore, you have a large part of Scope 1. So to decarbonize this part, we need first to work on the efficiency of our hydrogen plant. Then to develop new technologies like electrolysis, for example, which does not emit CO2. Or if it is not possible, carbon capture. And we also are working on potential different feedstock, like biogas for some of our units. So it is how we decarbonize our hydrogen production. Then for Scope 2, which is much smaller in Americas, but very big in Asia where we are very, very strong in hydrogen production for Scope 2. The recipe is pretty important, just to progress on a renewable energy or low carbon energy sourcing to feed our air separation unit. We have a few air separation units which are not fed by electricity but by steam, and we are progressively converting this unit. You know that 3 days ago, we announced a project in China to electrify 2 ASUs, so to switch to electricity from steam and to be able, once again, to replace the current electricity we have by a low carbon energy. I don't know if you want to add something, Ashutosh. I was trying to simplify the vision.

So Fabienne, thanks. If I may add on Scope 3 question. So Scope 3 treatment is done globally by category. As you know, there are 15 categories of Scope 3 they are not divided geographically because when you are looking at upstream elements such as procurement, we are looking at our global procurement scope, which translates into an equivalent amount of CO2. Similarly, downstream, we are looking at overall consumption of our products by our customers. So that's why in this chart, it is focused on Scope 1 and 2, and Scope 3 is dealt with on a more global basis.

Does that answer to your question?

Yes, it does, and it does very much in a sense. But also when you talk about Scope 3, I think that I'm just trying to find what chart it is. It was a chart where you were talking about how many customers. Oh, there we are. Chart 20. By 2035, 100% of your top customers will be -- will commit to carbon neutral. I think that's what you're saying there. Where are we now in terms of your customer base? And how are you going to encourage help, cajole your top customers to make these commitments? Because I mean I don't know where -- how hard a topic that is.

Okay. So very simple, right now, we stand at 68% of our top 50 customers being committed to carbon neutrality 2050. You need to realize it's a pretty strong commitment. Our top 50 customers account for approximately 1/3 of our revenues. And the commitment to be at 100% in 2035 means that if at that time, one of our customers does not commit to carbon neutrality is not able or doesn't want, we will have to stop business with this customer, which is a pretty strong commitment. So how are we going to help them? We are already helping them by proposing them decarbonization solutions either by changing their process of production, like for example, for steel with DRI or by offering them carbon capture solutions. Thank you. Maybe next Question.

And the questions come from the line of Patrick Wollenberg from Trillium Asset Management.

I had a question related to Page 14. So looking at the carbon intensity of my global equity portfolio, your company is always on the top of the list. And my understanding was always -- and I'm not sure if this is a ratio that you've communicated or whether it's shared to me -- with me by the sell side, that for all your emissions, your avoided emissions would be a factor of 7 higher. But looking at Slide 14, that ratio seems much smaller than 7:1. So the question is really, does that ratio of 7:1 sounds familiar to you? And is that the same metric that we're talking about here? Or is that something else?

This metric is not familiar to me. We have been publishing our emissions, Scope 1, Scope 2, Scope 3 and avoided emissions since 2020. We always add more already emissions than emissions by Scope 1, Scope 2, Scope 3, but it's not such a multiple. In our industry, what we show here is pretty standard. Our competitors would show more or less the same. We avoid emissions by changing the process of production of our customers, but also by avoiding black carbon through the use of hydrogen in desulfuring. So this multiple of 7, I don't know where it's coming from. Maybe when you look only at Scope 1. But even with Scope 1 only, it does not work. So I'm sorry, I don't really know.

And the question comes from the line of Andreas Heine from Stifel.

I actually have 3 questions. The first is on the regional efforts. So there are -- due to this IRA, more subsidies now in the U.S. and probably in any other region at this stage. Does that influence your ambitions where you try to reduce CO2? So is in the coming years that your ambition is more to invest in that regard in the U.S.? That's the first question. The second, if it comes to the large industries, the LI business, there you have these long-term contracts with your customers. And actually, you run the plans for them. So if you have the interest to reduce the emissions and it basically is that your customer has to pay for it? Or is that something what is on your own account? So how do you handle this economically in that part? And in industrial merchant, where you have frequent price increases, is there already a component in that if you sell something which has a lower carbon footprint that you ask for a price premium for these advanced products, so to speak? These are my 3 questions.

Starting with the regional efforts, our main emitters as of today are the U.S., China and South Africa. South Africa since we have taken over the Sasol facilities in Secunda. So it's, of course, a focus with different issues as we've shown, mostly Scope 1 in the U.S., mostly Scope 2 in Asia, in China in particular, in South Africa. So on one side, we focus on changing our production mode. And on the other side, changing our energy sourcing. In large industry, so you know that in our long-term contract, we have a clause to pass-through the cost of carbon to our customers. So for the countries where you start to have a price of carbon, the customer can elect to pay the carbon taxes, carbon cost or to pay for decarbonization. What we hope is that more and more, given the level of the carbon price, our customers will choose to pay for the decarbonization. And this is how it's going to work. It's absolutely clear that if you don't have any cost of carbon or which is passed through to the customer or any very strong incentives like in IRA in the U.S., the customer is not going to decarbonize if it is ruining is the financial balance. So it's trading the cost of carbon, which is passed through to the customer and the costs we need to incur for decarbonization. In industrial merchant, we have launched a line of products, which is called Eco Origin, where we guarantee to the customer that it is carbon-free gases. This is mostly for cylinders. It's been launched in a number of countries. And of course, on this line, we try to valorize the green attribute, even if green is not a popular word, but the Eco Origin attribute of our products. To be very honest, it is only starting. For the small customers, I think the incentive is not as strong as for the large industry customer, where for the new project, we are now for nearly all of them discussing the carbonization from the beginning. For small customer is not that obvious, but I think our people in the field are really doing the job to make sure that the premium is understood by the customers and that the Eco Origin product are requested by more and more customers.

The questions come from the line of Catherine Rolland from Sycomore.

I just wanted to ask you a follow-up question regarding the Slide 20 and the target that you gave regarding your top 50 customers. You indicated that these customers account for roughly 1/3 of your total sales. But could you give us some color about the weight in the total emission of Scope 3 they do account for please?

Well, you've seen that the 2 main categories of Scope 3 for us are upstream energy -- the upstream of the energy and the products sold. For the moment, the products sold are year limited to CO2 and nitrous side. So I don't know exactly for how much that would count for the top 50 customers, but I think the objective is wider than our pure Scope 3. As it is reported today, Ashutosh explained to you, we are working together with SBTi in a working group to have a better and harmonize definition of the way we should account for our first group. So our ambition goes beyond country. It's really embarking all the value chain, suppliers, but also all of our customers on the decarbonization path. Ashutosh, you want to add something?

Yes. If I may just complement to Fabienne's answer that in Scope 3, there is another category which is category 10, which is the processing of sold product for which the methodology for the chemical sector has not yet been fully defined. So as we work with the SBTi workgroup to identify exactly what perimeters are to be used for this category, we will be then able to start taking more numerical objectives associated with specific customers. So we are not at that stage yet in the absence of harmonized methods.

Okay. But would it be fair to assume that the wake of the top 50 customers within your Scope 3 emissions would be in line with the proportion of sales they do account for above or below?

I wouldn't quantify it at this stage. But yes, along the lines. I mean these top 50 customers are the big customers that have particularly in LI and electronics, which do have a significant footprint. So I would imagine that, yes, they do account for a majority of the downstream Scope 3 under processing of sold products. So that is a fair assumption.

Okay. So they have a higher weight in your Scope 3 than in your total sales?

That is correct.

And the questions come from the line of John Buckland from Waverton.

Yes, that detail of what constitutes top 5 -- top 50 customers in revenue, top 50 customers in Scope 3, I mean some sort of breakdown that you could disclose sometime in the future would be very helpful because clearly there's a difference there. It is the Scope 3 and the customers, there's 2 elements to it isn't there? There's one is that Scope 3 is a big portion of your emissions, and it's very hard to reduce those emissions because they're not within your control. But at the same time, it is these customers which you have the greatest opportunity to help and to generate revenue from. So I wondered if you could talk about those sort of conflicting factors. But also on Slide 6, you've got this chart, which is for Scope 1 and 2. When and if it -- would it be possible for you to include a chart on Scope 3 similarly? It may be almost impossible to get to zero for Scope 3. I wonder if you could also include that in your discussion.

Well, I think as Ashutosh explained during his presentation, we are not in a position now to give a global objective on Scope 3, and one of the reasons for that is that there is no sectorial decarbonization approach for the chemical sectors. Let me give you an example. We report on 13 categories out of the 15 categories of the Scope 3 because we believe they are relevant for us. If you look at the reporting of our competitors, one report on 4, and the other one reports on 6. So that's just to let you understand how far we are before having a reliable, consistent method for Scope 3 calculation and being able to give objective. And that's why we are working in this SBTi initiative to try to make progress on that. So what we believe we can do and make sense is to give objectives on some categories on the Scope 3. So we have published this objective on customers. Internally, we have others. We have objectives on employee transportation. We have objectives on suppliers. We are not completely ready to publish a commitment. But internally, we already have set of objectives for our operations. What you need to understand as well is that at Air Liquide, a commitment is a commitment, meaning that if we tell you we are committed to that, we are going to deliver it whatever happens. So before taking those commitments, we need to make sure it makes sense for us and we have the action plans ready to be deployed. So we are absolutely not in a situation to give you a global objective on Scope 3. We don't think that would be honest or sufficiently documented. It will not be professional. So we do what we can do and work category by category. And when we have gone through that, I guess that at the point of time, we'll be able to give you a global view. But very clearly, we are not there yet.

How do you quantify the opportunity to help others?

The opportunity to help on but this opportunity, but this opportunity...

Your downstream.

Well, all the opportunities of energy transition are embedded in our advanced medium-term plan. And that's because we have this opportunity to codevelop solutions and to sell them to our customers, that we have committed to a 6% to 8% growth. So this is really embedded in our plan. It will also represent 50% of our CapEx. So this is really at the heart of our strategy. So it's quantified in the medium-term plan. And if at the point of time, we realized that it would be more than that, we will, of course, update the market. We only published our plan 1 year ago, so we don't think it's time to update it, but we may do that in the forthcoming years.

Yes. I mean it could be something that you could put on Slide 14, where you have the -- your own reduction is Scope 3, whatever, but you also could highlight the potential when avoided so that we can see the -- what actions in CO2, what you're doing directly and what you're helping the world to do?

This is what we show in our avoided emissions and avoided emissions for the future. It is pretty hard to predict at the moment, even if you see that by stabilizing our CO2 emission. It means what? It means that we have compensated by reduction project, the new emissions that are linked to the start-up of new units. So we have already been able to do that. Okay. Thank you very much. I think that was our last question. So thanks to you all for attending the call. I think you understand that the group is in movement, that we are deploying our action plan to deliver the objectives we have published already 2 years ago, and that we are well on track and that all the organization is mobilized around those objectives. So thank you very much. Have a good rest of your day.