Legrand SA (LR) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm very pleased to welcome you to this Legrand Capital Market ESG event, which is digital and live. If you remember, as you know, 6 months ago, we had the opportunity to present you during a dedicated CMD, the whole equity story of Legrand and the strategic road map and the midterm targets. And as you know, ESG and CSR is a key part of the Legrand equity story for close to 20 years now. And so we wanted to take this opportunity today to do a 360-degree exercise around Legrand CSR and ESG strategy while also presenting you the fifth CSR road map. So as you will see, we'll go through the whole presentation as well as a review of the track record of Legrand, and we will end the meeting with a Q&A session of 0.5 an hour. So now I'm handing it over to Benoît Coquart, CEO of Legrand.

Thank you, Ronan. Hello, everybody. I'm happy and pleased to be with you today, even if only digitally. Let me say maybe a few words before giving the mic to Virginie to remind you a number of core elements of the Legrand CSR strategy. So number one, you know that CSR has been part of our integrated performance for quite a while. We started this journey close to 20 years ago, as Ronan said, and it's already the fifth CSR road map that we're going to launch today. This CSR approach is governed by a very strict process with strong involvement from our Board. As you can see on this slide, not less than 10 meetings, either from the Board or from Board committees, were dedicated to CSR topics in 2021. It's part of our process, and it has been part of our process for quite some time, and it's also strongly embedded into our incentivization scheme. For example, more than 1,300 people at Legrand are directly incentivized on CSR result. And when it comes to my remuneration, the CEO remuneration, it's 17.5% of my total target remuneration, which is connected to CSR achievement. Last, we try to be as professional as far as CSR reporting is concerned as for financial reporting. So not only our CSR reporting is audited, but on top of that it is published at the same time as our financial performance. When it comes to ESG, the G is, of course, a very important part. I'll not elaborate too much on that because we'll have the pleasure to have a video from Angeles Garcia-Poveda, our Chairwoman of the Board, who will give you more insights about the way the Legrand Board works. Just a few concept. As you know, we have a separation of duty between Chairwoman and CEO. We have a Board made of a lot of independent Board members. As you can see, 75% of our Board members are independent. We have a strong involvement of our Board members. There's one number which I love: the fact that we have an attendance rate of 98% to Board meeting and committee meetings, which is quite high and amongst the best practices. And last, we have a Board made of a lot of different expertise, highly complementary, with half of the Board, for example, composed of former or current CEO of listed companies. Very important thing to have in mind when it comes to Legrand CSR, we really want to have a CSR road map that has some impact. We are looking at impacting not only Legrand but also our environment and our stakeholders. And we have put on this slide a couple of achievements of the past road maps, which I believe are quite interesting, impacting both employees, clients and other stakeholders. So for example, we've been able to cut by almost 50% the number of work accidents in 3 years' time, which is quite a lot. We have helped our customers to save more than 13 million tons of CO2, helping them to achieve their own CSR commitments. As far as our own Scope 1 and Scope 2 emissions, we've been able to cut them by 28% in 3 years [ at count of ] scope. And we've done also a number of things for suppliers, and we have trained more than 21,000 employees on complaints. So many achievements, which are easy to quantify and which have helped Legrand to be a better company. As far as the next road map is concerned, the 2022-2024 road map, we have decided to have a highly focused road map, focusing on really items that matter that can have an impact around 4 priorities: promote diversity and inclusion, not only gender, but also other type of inclusion; reduce our carbon footprint, Scope 1, 2, 3 and help our customers to do so with Scope 4 commitments; develop a circular economy with strong objectives as far as single-use plastic and use of recycled materials are concerned; and last, be a responsible business for customers, employees and all stakeholders. The way this CMD is going to be structured, Virginie Gatin, our Executive Vice President for CSR, will present the key outcomes of Legrand historical CSR commitments with a few numbers, then the mid- and long-term commitments and especially the 2030 Legrand commitments. We'll spend with Virginie a lot of time going through the new CSR road map, the 2022-2024 road map. And then Franck Lemery, our CFO, will tell us how we manage our integrated performance. Now I'm handing over the mic to Virginie.

Thank you very much, Benoît. I'm delighted to be with you today to present the new CSR road map. But first, let's go through a bit of history of what CSR has meant for Legrand up until now. It's always important to look back, I think, when you look forward to better understand what you've achieved and really use that as your ground for the next step. There has been a historical commitment on CSR, almost 20 years now. But we wanted to look back at a bit of a closer gap, which is the past 10 years to see what we've achieved, and one key element we've really seen is our focus on environmental topics. As you can see, great results on this. So whether it's on direct energy consumption reduction, whether it's on CO2 emission reductions, Scope 1 and 2, water consumption, we've really strongly reduced those whilst at the same time, having a very dynamic business at plus 65% in that same time line. So really important to see that we managed to completely decouple our environmental impacts from our great financial results. Another area which is really key for us is transparency, transparency for our clients where we want them to understand what they are purchasing from us and really get that information on what is the environmental content or environmental profile of the products that they purchase, which is why we've put so much emphasis and energy on providing to our clients the environmental sustainability profile -- the, sorry, product sustainability profile of our products, where we've really increased the share of our products covered by this, which gives our clients a vision of [ were we ] are on the various topics of environmental impact, the impact across the whole life cycle analysis of the product. And this is really a key commitment that we will continue pushing in the next road map as well. There's not just environmental impact, of course. We've had very strong commitment on health and safety, which is key for us, the well-being of our employees. And there, again, you see great achievements with very strong decrease on accident frequency rates over the past decade, same goes for accident severity rate. And it's important to see that this happens at the same time as an increases in the number of employees because it really shows that the way we integrate new employees, they are really on-boarded on the health and safety topic, but also new acquisitions. So this is a really strong focus for Legrand, and we want there again to continue because we feel this is super important. The third topic we wanted to cover is the social one. Diversity is a bit more recent in our focus, but really important for us. And we've had great achievements with plus 18% of women managers since 2018, and this is a 2021 achievement. So really good. And beyond diversity, there are other topics which are really key for the success of the company: our employees' well-being as well as their development and especially developing their skills and employability. So we've also really focused on providing them with the right programs and the right tools. One important one is Serenity On program, which was launched at the end of 2017, which in countries where there's not always the right social coverage for our employees, we wanted to be there to provide that social coverage. So for our employees, but also for the families, extend also to parental leave, for example. So we want to be there and to provide that for our employees wherever the minimum social coverage is not available. We've also put a lot of focus on training with the launch in 2019 of the Learning With Legrand learning platform, which is an online platform, providing a lot of training. So beyond the in-person training that's been around for a long time, we've really increased this, which was, of course, great during the COVID period because it enabled us to continue training our people in those crucial times where the connection is super important with our employees. All of this great past, it's been great to see that it really comes out in the numbers. We carried out last year an engagement survey for all our employees. And a really great achievement was that 80% engagement rate, which shows that despite over a year of COVID, despite uncertain times for everyone, there is really the strong engagement from our employees. And of course, we believe that all that CSR engagement across the past 2 decades definitely contributes to this. Also nice to point out that the third highest-ranking result on that engagement survey is on diversity and inclusion. Now moving on to the mid/long term. It's important to have that slightly longer-term vision before you set a CSR road map. At Legrand, our CSR road map is really focused on action: what do we want to do here and now and what do we ask all our entities, our countries to do. But in order to know where we want to get to, it's important to have that slightly longer-term understanding of where does the group want to go. So there are 3 key pillars to that midterm ambition. One is definitely the climate. I think we've been talking about it for quite a while, but it's really important for us to have that clear vision of where do we want to get on climate. I'll get back to this in a minute. The second one is diversity and inclusion. I've already mentioned it. It's something we've accelerated in the past few years, and it's something we'll be continuing to focus on in the next years because it's really central, and we feel it's really a part of what makes our company so successful and it's really something that we strongly believe in. So we have a target to have 1/3 of our key positions held by women by 2030 and [ perhaps ] to have a gender-balanced workforce by 2030. And the third pillar already mentioned by Benoît is for our clients. We really believe we have a strong role to play in providing our clients with eco-responsible products. And this is why we have this 80% commitment of sales made to our customers with eco-responsible products because we really believe in the buildings of today and tomorrow, we have a role to play in providing energy-efficiency products, but also transparency by giving the key information our clients need to understand what is in our products and what is the environmental impact of our products. So moving to carbon because it is a very strong commitment of ours, and it's one we will be continuing to focus on in the next decade and beyond. Our ultimate goal as a company is to be carbon-neutral by 2050. This requires to very, very strongly reduce our CO2 emissions by that date, probably up to 90%, and to neutralize the remaining emissions. Of course, 2050 sounds very far away, which is why we have a 2030 SBTi-validated goal for 2030. I'll get back to this in a second. And we want to move to action, of course, straight away, which is why we have one pillar of our new strategy on CO2 emission reduction. I'll cover it in a second as well. And 2022 is the first step in that carbon-neutrality journey, where we will be offsetting Scope 1 and 2 emissions and a few of our Scope 3. In our Scope 3, we have our employee commute and our business travel. We'll be offsetting this from 2022 to 2030 to be -- in a way, to show our commitment to carbon neutrality in the long term. So just going back to SBTi because this is really, for us, a key element of where we want to be and who we want to be as a company. So for those of you who don't know it, SBTi stands for a Science Based Targets initiative. It's an initiative put together following the COP21 in Paris in 2015, where the CDP, ex Carbon Disclosure Project, WWF, WRI got together. I'm sorry, I have one name missing. But anyway, there's a fourth one in there. And they got together and said, Okay. COP21 is for governments, it's for countries. But of course, we need companies to move in that same element to reduce our CO2 emissions. So what would the COP21 agreement mean for companies? So they translate it in a science way what the COP21 meant for companies. And companies can go to SBTi, say, Okay. This is my plan, my reduction plan. And SBTi checks if that's in line with the COP21 agreement. So that's what we've done in line with a 1.5-degree global warming for 2030, which means that we're targeting to reduce by 50% our Scope 1 and 2 emissions and by 15%, one five percent, our Scope 3 emissions. As you can see on the graph, if we did nothing, we would be in that upwards blue line because, of course, as a company, we're going to continue growing in the next decade. So you can see the scale of the efforts that we are going to provide over the next few years to remain in that downward-going brown line to really reduce our CO2 emissions, including acquisitions, and of course, the increased activity we will have over the next decade. So now moving to our new CSR road map. So what are we going to do concretely over the next 3 years to reach those longer-term engagements? First, I think it's important to go back to how we did it. First, we carried out a materiality survey. So asking a lot of people, as you can see, over 5,000 people, okay, what are the crucial or the most important CSR topics for Legrand. We asked internal stakeholders, external stakeholders. We carried out a lot of work to really identify key topics so that we would be sure in our new road map to really focus on the right topics because materiality is crucial for successful CSR road map. You need to make sure you put the action, you put the resources on the right topics that will deliver for the world but will also deliver for your business. So before we get started into what are the 4 pillars, let's start with a video recapping this new CSR road map. [Presentation]

So as you've already heard, we have 4 pillars for this new CSR road map and 15 priorities. There's one more pillar than the previous road map. The reason, we'll go through it in a minute, but it's important to put forward a circular economy. Also important to note that we are contributing to 10 of the UN SDGs in this new road map. And this is important because this is a great first way to contribute to society, but also a great way to have this dialogue whether with authorities, governments, institutions and so on, where you have this shared language around what are you doing on sustainability. So first, going over our first pillar, which is promoting diversity and inclusion. We have 4 priorities in this pillar. I'll take you through them, but importantly, it's to explain why this is a pillar and why we've put so much focus on it. As I said previously, diversity and inclusion is a strength for our company, and we very strongly believe this. We also believe that we want to take it one step further beyond just gender diversity. Gender diversity remains an important pillar for us, but we want to go beyond this. And also, we want to extend this to our value chain in involving our suppliers in this work. So our first priority is to reach 30% of women in management positions by 2024. This is on the path to our 2030 target. This will be done -- just wanted to explain how very concrete this is for our entities and our countries and so on. So this is really translated into when you recruit someone, we want 50% of female recruits. So we really want people to think, okay, what can I do more every time I have a recruitment? Can I really participate in this objective? A second one is -- the second pillar -- or second priority, sorry, is diversity and inclusion labeling. And for this, we really wanted to back this intention with internationally recognized label, which is the GEEIS label. And this means that we will be audited. And our target is to have 80% of our workforce covered by this label by 2024. Of course, we will pursue this beyond 2024. And the idea is really promoting gender diversity. The pillar common to everyone is gender diversity. But then we ask our countries to choose a second topic amongst the list that you can see here and really decide, okay, what makes the most sense for me locally. And this is really once again to open that diversity approach beyond just gender diversity. The third pillar is employability of early in careers. And what we want to do is help young people or people entering into a new career because there's no age for that to develop their skills and employability. And the way we feel as a company, we can really contribute to this is by opening up the company, getting in those talents, helping people understand what we do, how we do it and really be an attractive company to these people whilst developing their skills. So we're opening 4,000 opportunities to early in careers every year over the next road map, so over the next 3 years. And this goes from internship to apprenticeship to recruitment, short-term and long-term contracts. So this is really a way of opening our company. And the fourth priority is extending this commitment to our suppliers by developing 200 additional business to suppliers that work in the inclusion and diversity field. And this is quite wide-ranging. It's really promoting employability of people who are today far away [ from ] employment, whether it's minority-owned businesses, whether it's businesses working with disabled people and so on. But this is -- we really want to contribute as a company to opening this diversity and inclusion beyond just Legrand. The second pillar is our carbon footprint. I've already talked about it, but it's important to understand towards that 2030 pathway, where do we want to be today. So the first pillar is for our clients, what do we want to do? We want to continue participating in avoiding CO2 emissions for our clients. Benoît mentioned it. It's our Scope 4. It's providing products and services to our clients that enable them to not consume energy. So to save energy and this leads to, of course, avoided CO2 emissions. So this is through our energy-efficient offerings, product services. And this means we'll be really pushing to develop more and sell more of those energy-efficient products in the coming 3 years. And of course, this is in line with our target -- 2030 target to have 80% of eco-responsible products. The second priority is reducing our Scope 1 and 2 emissions, so the emissions more directly in our control. We want on a yearly basis to reduce our emissions by 10%. This will be done through 3 key areas: energy efficiency, so continuously improving the energy efficiency of our factories; using more and more renewable energy, whether it's on-site or through our purchasing; but we'll also be working on transportation for example, our own vehicles, how can we reduce the CO2 emissions of our vehicles. And then the Scope 3. As you saw in previous slides, our Scope 3 is -- represent 95% of the CO2 emissions of the company. So it's a big share. And out of that 95%, almost 70% comes from our suppliers. So 70% of our whole carbon footprint is our suppliers. And in order to tackle this, our focus for this new road map is really engage-partner with our suppliers to really get into this situation where they commit with us to reduce their CO2 emissions. So our aim is to work with our 250 top suppliers. What I mean by top suppliers is we've identified the suppliers that contribute the most to our carbon footprint. And either through a direct commitment with Legrand or through their own SBTi commitment, we give ourselves and them 2.5 years now to commit to reducing by 30% by 2030 their CO2 emissions in order, of course, to have less impact on the environment, but also to contribute to the reduction of our own CO2 emissions. So this is a great work started by our purchasing department, which will be continued throughout this road map and it will, of course, continue beyond. The third pillar of our road map is circular economy. Circular economy is not new for us. We've been working on eco-design for a while. But having it as a pillar is important for us because we really believe circularity is the way forward in order to have a really positive impact on the world. It's, on the one hand, of course, to contribute to reducing our CO2 emissions, but it's also a way of changing the way we produce, changing the way we collect, changing the way we recycle. It's really creating this circularity that is key to reducing environmental impacts today and in the future. So this is really important for us. It's important for our clients, and this is really a big focus. We will be continuing in this -- on this road map, but of course, beyond. One key element to circularity is recycled materials, using more and more recycled materials. So our first priority is to increase the share of recycled materials we use in our products. 15% plastic, 40% metals. You might think, okay, 15% plastic doesn't sound very much. What you need to understand is the type of plastics that we use in our products. This is not PET. This is not a plastic bottle that you can easily collect and recycle. We're talking about very specific plastics. And the circularity does not exist yet. The collection, the sorting, the reusing is not something the loops don't understand and don't exist yet. So we really want to be a forefront actor on this to recreate those virtuous loops, not just in France, not just in Europe, but really on all our geographies. And we really believe we can play a role in getting that circular economy going. So our first step is 2022-2024 road map, but of course, we'll aim to continue in the future. Our second priority is phasing out single-use plastic in packaging. Plastic is a huge issue. We all know it. The material itself is not the biggest issue because the material as it is, is not a high-CO2 material. The issue with plastic is the amount that we use, and not Legrand but the whole humanity, and also the fact that we're not good at collecting, sorting and recycling it. So we want, with the recycling of materials, we want to participate in that circularity. In the phasing out of single-use plastic, we want to participate in reducing the need for plastic in packaging. So in this road map, we'll be focusing on 2 types of plastic we use in our packaging: flow pack and expanded polystyrene in our packaging. And for this, of course, we'll be working on redesigning our packaging; if we can do without, we'll do without; shifting to paper packaging and any other innovations that our R&D come up with. The third pillar is transparency is what I've already mentioned, the product sustainability profiles of our products. It's something we want to really continue pushing because it's something our clients need. It's something that you need to evaluate the impact of a building. So we'll continue to extend the coverage of our product sustainability profiles over this road map to reach 72% by 2024. I think it's important to note that these are really detailed information we're providing to our clients. It's a lot of work across the whole life cycle analysis, and we're handing to our clients a lot of information on different elements that they really need and require. To recap a little bit all that I've been saying on circular economy, I'd like to show you a video recapping all this. [Presentation]

And now moving to our fourth pillar, to be a responsible business. We take this as the base of everything that we do, and it's really important for us to keep this focus on important topics like compliance, like continuing to develop the employability and the skills of our employees through training; and of course, as I mentioned early on, health and safety to continue decreasing the accident frequency rate. As you can see, we've shifted the focus from [ FR1 to FR2 ] because we feel this is really important to cover all accidents with and without stoppage to really be active on the topic of health and safety. 2 topics, which I wanted to focus on a little bit more, customer satisfaction because it's a new topic for us. We want to reach 90% of sales made with satisfied clients. So we'll be developing more and more across our geographies all this customer satisfaction work, which, of course, we've already started, but it's something we want to expand and to do more of. I've already mentioned it, but it's very important for us. We also want to extend the coverage of our Serenity On program. The achievements for 2021 was slightly over 90% of our employees. We want to reach 100% of our employees in this new road map, but we also want to extend the coverage to go to topics that are important for our employees like well-being. So it's really something we'll be focusing on as well in this new road map. So recapping all these 4 pillars, 15 priorities and a very strong commitment from the company to focus on all of those and really make sure we deliver with, as you know, with Legrand strong KPIs that we'll be giving updates on how we're doing every year. I'm now handing over to Franck Lemery, our CFO, who will be talking about how we're managing our integrated performance.

Thank you, Virginie. And hello, everyone. I'm very pleased to be with you today, digitally, but very pleased to be with you today. So speaking about managing our integrated performance, the key message is very straightforward. We are applying the same disciplined challenging processes for all items of our performance. It may be operational performance, financial performance, CSR performance, it's always the same processes. Let's start [ without ] governance because there is no performance without the right governance. Legrand governance is recognized by many as exemplary. And to understand why I invite you to listen to Angeles Garcia-Poveda, the independent Chairwoman of our Board.

Dear investors, I'm very happy to shed some light on the G part of things, as in governance. Legrand has an exemplary governance on many levels. As you know, in 2018, we decided to split the roles between Chair and CEO. And later in 2020, I was appointed as an independent Chair in line with best governance practices. We also shortened our mandates from 4 to 3 years to allow for more flexibility. Our Board is composed of 12 directors, 9 of which are independent, 75%, including 2 employees and 2 other employee representatives attend our meetings. The Board is organized with 4 different committees steering key topics: Nominations and Governance, Remunerations, Commitments in CSR and Audit. Our governance brings a number of strengths. The first one is Board composition. On top of the very high independency rates already mentioned earlier, we do have a strong and complementary mix of skills around the table, 5 nationalities, 42% of women and no less than 6 former or current listed company CEOs. New members are carefully selected following best practices. We partner with international search firms in the process and keep a very careful eye on independence, diversity and avoiding overboarding situations to ensure future commitment. Our directors are indeed committed as shown by our 99% average attendance rate. On top of our Board meetings and committee meetings, we hold annual strategic seminars and also annual working sessions focused on learning on specific topics, such as technology or climate change. We also keep an eye on continuous improvement. We conduct yearly Board assessments. Once every 3 years, the Board assessment is conducted externally. Last one was in 2021, including an individual contribution assessment and a concrete action plan based on areas for improvement. All these trends are recognized externally. Since 2021, Legrand is part of the ESG CAC index. We are also honored to be part of a number of rankings that evaluate governance. We are very often named as a governance-based practice in a number of publications and have received over the last decade around 20 awards on topics such as general shareholder assembly organization, quality and transparency of documentation, corporate website and more. The ultimate recognition comes from our shareholders. Our last approval rates of our resolutions in the 2021 General Shareholder Assembly was on average 98%. At Legrand, Board and management entertain a sustained and continuous dialogue. We have had in 2021 no less than 34 management team interventions during Board meetings on topics such as M&A, investor relations, strategy, HR, IT and more. And last, but certainly not least, we have a very open relationship with Benoît Coquart, the CEO, with a healthy balance between support and challenge, a very high degree of trust and open regular communication. I am personally committed to ensuring that Legrand remains best in class in terms of governance. And on behalf of Legrand's Board, I thank you for your trust.

Now I propose to deep dive a little bit in our processes to see how to spur our CSR performance. So the first lever is really to beat the drum. It's about regular milestone to challenge our performance. Those milestone can be at the group level, such as a dedicated CO2 steer co, which is chaired by Benoît and which aims at monitoring our achievement of our action plan towards -- for our CO2 trajectory. Another example could be leveraging traditional financial meetings like country budget review, where we will also extensively review all CSR KPIs. The second item is about managing, very operationally, some risks directly linked to CSR. The first example is an audit that we conducted on over 100 top sites to see what is their exposure and how to address this exposure to severe climate events. So it was about tackling climate urgency. The second example would be business compliance, the way we deploy our group compliance program. We are expecting from each and every entity, first, a clear commitment from the local management; second, vast trainings of their teams; and third, strict application of very clear procedures. Just to name one, the whistle blowing which is very, very important. The third way to promote CSR within our processes is to include criteria beneficial to CSR into our decision-making. Once again, 2 examples. First, in our major investment cases, we are including a carbon price into the airway. Second example that you know quite well is about our financing, which is more and more green and which is including as since 2019 CSR criteria. It was the case in 2019 for our credit facility. It was the case in 2021 for our first sustainability-linked bond. And then the last item to -- the last lever of processes to spur the performance of CSR is about providing best practices -- very practical best practices for our team to achieve their goals. We are looking to ISO methodology, for example. We are looking to best-in-class industry also, for example, to fuel constantly a repository of best practices that our team can then leverage. So to make a long story short, those practices are accordingly available on shelves for our team to help them to achieve their CSR target. After governance and after processes, the third pillar to manage efficiently our integrated performance is, of course, compensation. This is the one closing the loop. And as you can see, CSR is included both in our long-term incentive plan, where CSR represent 1/3 of the criteria. And it is also included in our short-term bonuses schemes, where they generally represent around 20% of the bonus. So that's it for my presentation, and I'm now giving back the mic to Benoît for the conclusion.

Thank you. Thank you very much, Franck. Well, I'm going to be extremely short so that we have enough time for Q&A. I hope that you could see that our road map, number one is clear, quantified and ambitious. And as usual, with Legrand, it is associated with KPI, that we'll be able to measure and to report on, on a yearly basis. Number two, it is really focusing on actions that matter and have significant impact: impact on the company itself, impact on our employees, impact on the environment, impact on our suppliers and impact on our stakeholders. Number three, it will mobilize the entire company, and it will have some impact on the way we recruit people. It will have some impact on our processes. It will have some impact on our incentivization scheme and a lot of other topics. And last, of course, needless to be mentioned, this is part of integrated performance. And the CapEx or the additional expenses we need to incur in the years to come to achieve this road map are fully integrated into the midterm guidance we issued last September. So thank you very much, and we'll now open to Q&A.

So thank you, Benoît. Thank you, everyone. So we will start the Q&A a bit in advance compared with the initial schedule. So let's see how many of you are connected to be ready to ask questions. And Guillaume, if you are online, I suggest that we start now.

[Operator Instructions] We already have one question coming from Alasdair Leslie from Societe Generale.

So just on Scope 4 on the avoided emissions for customers and the 12 million ton saving target there, I think that compares with around 8 million over the last 3 years, so it implies something like a 40% increase for the next plan. And in that plan, how much of that increase comes from growth in energy-efficient products versus expanding the kind of mapping of your portfolio? And what portion of the portfolio have you analyzed already? And within that, are the 21% of sales that relate to energy-efficiency offerings already fully included in your calculations?

Yes. Thank you for this question. As you know, we are doing 21% of our sales with energy efficiency-related products, products such as thermostat for residential buildings, for example, lighting controls for commercial buildings, PDUs for data centers. And it was 19% in 2020, sorry, moving from 19% in 2020 to 21% in 2021. And clearly, all of our Scope 4 reduction emissions come from the growth in these energy efficiency-related products. So what we want is to sell more PDUs than the [ style ] lighting controls to a larger number of customers. And it represents the entirety of the Scope 4 saving that we will help our customers doing. Now of course, if we can find, for example, additional acquisitions that are contributing to the 21% of sales, it will be added to the savings we're going to help our customers doing. But it's -- it has nothing to do with, for example, considering that one product is not helping and would suddenly have some positive impact. It's purely the growth of our energy efficiency-related products.

Great. Could I ask a second question?

Yes. Sure. Yes, go ahead.

Yes, sure.

Just on taxonomy and the eligible revenues there. I presume those might be released with the sustainability reports in the next few weeks. But do you still expect the majority of Legrand's revenues to be eligible? We've seen other industrials report figures that, I guess, could be argued to understate the contribution of their products that kind of make to climate change mitigation.

Well, it's an interesting question, indeed. No, we don't expect any more the majority of products to be eligible because the rules of the game have evolved a lot compared to where they used to be 6 months ago. And I have to admit that even a few weeks back, the rules were not 100% specific yet. So only a portion of the 21% will be eligible. From what we could do as a computation today, it will be closer to 8% than to 21%. The gap between the 8% of our sales being eligible and the 21% of our sales made with energy efficiency-related product is coming from the fact that a lot of activities are just not considered within the taxonomy. I can take one example. The taxonomy does not take into account products for data centers. So whether your product are not helping data centers to make energy savings, it doesn't matter. They are not considered at all in the taxonomy. So most of the gap between the 8% and the 21% comes from the fact that product for data center, power factor, correction product and a number of others are just not taken into account to do the taxonomy. So we're going to publish an 8% number now. The job which has to be done is to explain to the European Commission that it is too restrictive as a vision and that when you have products or systems that help cutting the energy bill in data center by as much as 10%, 15%, 20% or 25%, that should be taken into account in taxonomy. But it is a job which is just starting. As far as the percentage of CapEx and OpEx are concerned, there will be a consistence within these numbers. So it will probably be to 12% of CapEx and 8% of OpEx. I have to add that, as usual, we haven't played a tactical game in the definition of the product eligible to the taxonomy. And we have tried to stick as per the book. And as a result, we don't expect a significant gap between taxonomy-eligible and taxonomy-line products. So that's the number we have today.

[Operator Instructions] So we have another question from Eric Lemarié, CIC Market Solutions.

A question for Benoît Coquart. It's a naive question. I can observe, I can see that there is a separation between the CEO and the Chairman position, but I can see that you are a key part, are still a member of the Board. Is it an issue, do you think, for Legrand to have within the Board the CEO? Because I suspect from time to time, you disuse of the CEO performance. It's -- do you have any comment from investors relative to this situation?

No, I think it's a customary situation. And if you look at most of the companies that have separated the duties between Chairmanship and CEO, most of the time, probably 95% of the time, the CEO is also a Board member. So it's a common practice. Now of course, every time it comes to my performance and my compensation, I'm not part of the discussion. So when you have the Remuneration Committee meeting, for example, specifically on my remuneration, I'm not participating, of course, to this committee meeting. And when the Board has to decide on the qualitative part of my bonus, for example, or the next year remuneration, I'm exiting the room, and the discussion is held without me. And I have to add actually that when it comes to the Chairwoman remuneration, Angeles Garcia-Poveda is doing the same and exiting the home. So it's a customary situation to have the CEO being part of the Board. And it actually, I think it's pretty good for the open dialogue between the directors and the management, provided, of course, that there's no conflict of interest. And whenever there is a topic specifically on the CEO, you can exit the room and let the Board members discuss without me.

[Operator Instructions] So we have another question from Jean-Baptiste Rouphael, ODDO BHF.

Can you hear me?

Yes. Very well.

Okay. So you have an objective to have 80% of sales made with eco-responsible products. It seems to me that before, you already have an objective to have 80% of sales with sustainable products. Is it a new objective or is it just a change in wording? And second question, the previous objective according to some people lacked details in the definition of sustainable products. So can you please be more specific in what you mean by eco-responsible products?

Sure. Well, it's mostly a change in definition in wording. The definition has remained broadly the same. It is made of 2 types of things. The 21% of sales I was mentioning to the products specifically designed to help our customers doing energy savings. And on top of that, the product that do have product environmental profile. So on one hand, it is 21%. On the other hand, this is 70%. And when you add the 2 together and when you cut the overlap, it leads to this number and to this target of having 80%. So in terms of definition, it remains the same. It is made of the 2 components. I don't know if my colleagues want to add something. Don't be shy. It is an interesting opportunity for you to ask any questions related to CSR that you may have in mind. So really things are unclear, don't hesitate to ask us to be more precise.

We have other questions. The next one comes from Andreas Willi from JPMorgan.

I've got 2 questions, please. The first one on the EU green taxonomy disclosure and how that process goes and whether you think it correctly reflects your contribution or is this something that you feel is not a particularly good indicator when we compare companies in terms of their contribution to climate change? And the second question I have, when you look at M&A opportunities, particularly larger ones, if they come themselves with a much weaker performance on some of the key metrics you are targeting for sustainability and obviously would therefore make it harder for your targets to be achieved or kind of maybe you could talk a little bit how you assess that. Would you more likely shy away from such a target? Or would you adjust kind of a specific incentive for guidance for a business if they basically get set backed because of an acquisition they make? Or you see that on the other hand, there's an opportunity to basically accelerate that company's sustainability agenda in that sense when it joins Legrand?

Okay. So as far as the first question is concerned, when I gave you the numbers, it's 8%, the taxonomy-eligible sales, it's 8%; CapEx, it's 12%; and OpEx, it's 8%. Does it reflect adequately the percentage of our business having an impact on -- or being energy-efficient? The answer is clearly no because we have a gap between the 21% of green products as per our definition and 8% as far as taxonomy is concerned. And the gap, once again, is coming from the fact that the taxonomy is only looking at a few sectors of activity, and a lot of our activity is not taken into account in the taxonomy. So I think there's a lot of work to be done by the European Commission in order for the taxonomy to be more reliable and more consistent. Well, I think that Legrand is not the only company to say that. Many companies are complaining about the fact that large part of the economy is not taken into account or considered by the taxonomy. The good thing is that the feeling I have is that the European Commission will have no choice but to progressively enhance the environmental taxonomy before even mentioning the next step, which is to move from eligible to align. So no, the answer to your question is no. I think there's a lot of work still to be done. As far as the second question is concerned, well, you know the Legrand model. We have a model which is more based on bolt-on acquisitions. The average size of the company we have acquired is probably a sales of about EUR 40 million. So the first comment that we would like to make is that before one of those companies have a significant negative or positive impact on the CSR metrics, well, they would have to be either very, very, very bad or very, very, very good. And it is, again, because of the model of the Legrand in the M&A. Number two, from my experience, you know that we are mostly buying leaders in their field of activity. From my experience, even if a lot of those small- to medium-sized companies do not have a level of maturity of Legrand as far as CSR is concerned, they are usually well managed. When you're a leader, you are usually well managed in terms of people, product, customer relationship, but also impact on your stakeholders. So we haven't bought in recent times a company that would have a very, very bad record as far as CSR is concerned. Last comment, we have included a number of CSR topics in our due diligence process. Of course, if we were to find that the company would never be able to be at the level we want it to be in terms of recyclability, CO2 emissions or other metrics, it would be part of the decision. And it could very much be a reason why we wouldn't do the deal, amongst other reasons. But again, for the type of companies we are looking at, it's -- we'll probably not see any of those having a significant [indiscernible] not negative impact on our CSR achievements.

Sorry, just one additional word as I spoke about the processes of Legrand. Of course, purchase -- buying a company is also an opportunity, as you said, for this company to onboard the Legrand processes and accordingly to improve its environmental footprint, it's HR practices, then thanks to Legrand processes, and we have a very clear docking process within Legrand, where for each priorities of the CSR road map, there is a timetable for which each new acquisition should reach the Legrand KPI and the Legrand targets. It's [indiscernible] of our process.

And if we want to add one thing, you've seen the slide shown by Virginie. I think this is an improvement to be made to the SBTi methodology to account differently for the acquisition. The way that the process is done today, when you are adding 3% to your perimeter because you are buying companies representing 3% of your sales, EUR 200 million, it comes as an addition to your CO2 emissions regardless of what you are doing. So even if you start decreasing the CO2 emissions of those acquired companies, it comes as an addition, and you have to decrease even more in order to reach your 2030 commitment. I think this is -- well, it has been embedded, of course, into our journey. And we commit not only to decrease our CO2 emissions, but also to decrease more because of the acquisitions we'll continue to do. But I think there is something that probably needs to be changed in methodology because whenever there is a small company joining Legrand, I mean it's good for the world because usually, most of the small- and medium-sized companies, they don't have the sort of same commitment as Legrand. And by integrating the Legrand perimeter, all of a sudden, they get committed to reducing their Scope 1, 2 and 3 emissions. But it is not to account in this way yet in the SBTi methodology.

So we have another question coming from Edward Mason, [indiscernible] Investment Management.

Thank you for today's presentation and for all you do on sustainability. My question is about your net-zero ambition. Your goal is to reach net zero by 2050. Just wondering if you feel that this kind of remains ambitious enough. The IEA net-zero scenario last year said that advanced economies need to reach net zero by 2045 for a 1.5-degree scenario. And we're seeing an increasing number of companies commit to net zero by 2030 or 2040. So just wondering if you have any reflection on...

Well, I don't know many companies that are committing to be net zero by 2030 on Scope 1, 2 and 3, which seems to be a super, super ambitious target. I know that, indeed, you have some initiatives to move the 2050 target to 2045 or even 2040. I think this is the so-called Amazon pledge, if I'm correct. Now what we've been focusing on at Legrand is not wondering whether 2045 was better than 2050, but it is to make sure that the next 5 to 8 years was putting us on the right trajectory. And of course, it's mandatory to take long-term commitments, and we are doing so. But it shouldn't be done at the expense of shorter-term commitments. And I think that what the society, the communities, governments and customers need to see now is not the sort of moving target 2050, 2045. It's to see the numerous actions that companies are putting in place and implementing in order to effectively reduce the Scope 1, 2 and 3 emissions. So in other words, we are focusing on delivering what we should deliver by 2030, which we believe is ambitious enough. Meanwhile, if we see an opportunity to be net zero by 2045 instead of 2050, we'll see. But I think that the focus should really be on short-term actions and delivering and executing our plan.

Next question comes from Gael de-Bray from Deutsche Bank.

My questions are actually on your energy efficiency solutions. So firstly, could you elaborate on the typical payback periods for your various energy efficiency solutions, the lighting controls, thermostats and so on? Could you also give us an indication on the average annual organic growth rate you've typically seen in the past for your energy efficiency solutions? And I'm also interested to hear if you've seen or you expect to see some kind of front loading or acceleration in demand for these solutions in the current context with obviously some tensions in the energy market and a pretty significant increase in energy prices?

Well, as far as the first question is concerned, it really depend on the solution. It can go from 1 year to 3 or 4 years. Well, I can take an example of one solution, which has a pretty short payback, connected thermostat. A couple of numbers, the average hitting expense of the average French household. But I think there's no reason why it should be different elsewhere. I mean the [ Eastern ] and Western Europe is EUR 1,300. According to the French governance model ADAM, smart thermostat can allow up to, I mean, on average, a 15% reduction in the energy bill. And the average price of a thermostat could be EUR 250 or EUR 270. So you see that for thermostat specifically, the payback could be as short as 1 year. And of course, it's even shorter in countries which are suffering from the hike in energy bill. But for some other solutions, it can be a bit longer, to 2, 3 years. But most of the time, it's not 7 years because if it is 7 years, you don't have the incentive for the end user to buy. As far as the average growth rate is concerned, well, as you know, what we call the fastest-expanding segments, which do include not only energy efficiency-related products, but also data centers and connected products and which represented last year 33% of our sales should grow faster and they grew faster over the last 2 years compared to our traditional infrastructure products. Well, it's difficult to shoot a number, and it's dependent upon many factors. And -- but both organically and inorganically, they should indeed grow faster. And you know that we have set as a midterm target that those faster-expanding segments should reach progressively 50% of our total sales. As far as any potential acceleration, well, the surge in energy price is coming from -- it's a few months old. But of course, I'm not commenting, as you know, on recent trading. Midterm, of course, if energy prices were to remain at a high level, yes, of course, it should make the payback of those solutions even shorter and more interesting for end users, whether house owners or investors in commercial building, on the data center also. So it should definitely hurt a little bit of P&L but help business-wise. But it is more a midterm support, if I may say, than something very short term. Also more, as our products are embedded into the world, they are part of the infrastructure. So they are not a product that you can buy out of a shelf, put on a table and where you would get instantly energy savings. The good thing is that I can see that all across a number of geographies, especially in Europe, those solutions are progressively integrated into a stimulus plan because they are the right answer to the surge in energy price.

Okay. But do you see a clear acceleration in demand then? Do you think we need to see some more fundamental changes to the system, much more -- much greater incentives that what we have at the moment? And do you see that really coming in?

Well, it's difficult to say as far as incentive schemes are concerned because it goes through a complex process. But yes, of course, a number of at least of European governments are considering putting on the table additional incentives to do energy savings. And it is obviously connected to the energy crisis that the world is entering today. So yes, I believe that it should be part of some incentive schemes that could possibly be implemented in the quarters to come. But again, it's not in our hands. It depends on what the governance will do, but it is part of the solution together with, of course, reducing our consumption, together with more efficient heating systems, more isolated (sic) [ insulated ] buildings. So there are a whole set of solutions that could be implemented in order to help people to save energy.

Our next question comes from Jonathan Day from HSBC.

So I was wondering if you could talk a little bit more about your progress in terms of supplier engagement, how suppliers are reacting, how many perhaps of the -- or how much of the supply base has signed up to or got validated Science Based Targets. And how receptive they are to just dealing with not just the aspects of energy efficiency, but also diversity inclusion in all of the pillars that you're looking to support?

Sure. Maybe Virginie, if you want to take the lead on that one?

Yes. So as you've seen in the presentation, this is a new priority in the CSR road map we've just launched. So we're at the beginning of the work with our suppliers. So our objective is to have engaged 250 suppliers by 2024. So as you can imagine, we're gradually going to be building the number of suppliers that we engage. At the moment, we are starting the discussions with them to see where they're at today on the various topics. Our clear focus, of course, is carbon because this is where we've set a priority but also where we feel we have to go. But of course, there's been, for the past few years, also work on other topics, like social topics as well. But the discussions we're opening now are definitely very targeted on carbon. And seeing where they're at today, do they already have plans in place because some could have plans in place which are just not SBTi-validated for any number of reasons. So it's something that we're checking with them that we'll be checking the next few years. Just to give you maybe a clear guidance of how we're going to be doing it, we are not going to engage all 250 suppliers this year. And this is something that we will build over the next 3 years because it's a very heavy work. As I said, we'll consider that we've succeeded if we've engaged those 250 suppliers and if they've committed to reducing by at least 30% their CO2 emissions by 2030. So this double element, which takes time, which takes -- requires us to partner with them. So this is going to be ongoing over the next 3 years. So I don't have a clear answer to give you today. We'll probably have a much clearer vision to give you next year when we have kind of that first year behind us and we know a little bit where we're at. We are, of course, using many different sizes of suppliers. So we can be quite small for some of them, which is usually quite good news because if we're small, it means that the supplier is big. And it usually means that they either have a lot of other clients that require them to move on this topic so we're not alone in asking or they're big enough to have kind of stakeholder pressure to commit to SBTi anyway. And then we have smaller-sized supplier maybe more localized where the big discussions will be because, as I said, we're not saying either you go down that road with us or you're out. We're really on that -- in that journey with them to partner with them and to get there together. So it will take some time. We have very different profiles of suppliers, different sizes, different geographies. So yes, this is why we've put it over the next 3 years. It's not something that will be done in 2 months, but it's something that we've already started and will be ongoing until 2024.

Now if I may add -- well, of course, one may think that it's a little bit more complicated in the current supply chain situation than it used to be 3 or 4 years back. But we made a clear and deliberate statement internally that we were prepared to drop an important supplier and to move from one supplier to another. If we were not able to engage him in helping us in this Scope 3 journey. I mean it's as important for us to have a supplier playing the game as to other suppliers, providing a good level of service, providing affordable price, available material and so on and so forth. So it's going to be completely integrated into our analysis of the supplier, and we are prepared to move from one supplier to another if we don't get the support we want.

And perhaps to complement, it's interesting to look at our track record because this is not the first time that we are engaging with our suppliers to improve on CSR stakes. In the previous road map that Virginie described earlier, you could see that we were trying to improve some suppliers, which were considered as risky in terms of CSR. And so we audited the part of our portfolio, part of the suppliers with questionnaires. And we found out that roughly 100 supplier were risky in terms of CSR. What does it mean risky? It means it could be HR practices. It could be the impact of a technology on environment. And we work with them and out of the 100, so we had to give up a few, but roughly, it's, what, it's 5, 5 or 6. Currently, 10 are still working on their progress, and all the rest have improved. So it shows that finally, they care about CSR, and they are ready to onboard our programs.

Next question comes from Eric Lemarié, again from CIC Market Solutions.

I got a follow-up question on recycled plastic and recycled metals for your products. Do you think it could give you some sort of pricing power? Or in other words, do you see the final customers of Legrand can accept to pay more for a more sustainable product?

Well, yes, I think you can. And I think it can be part of the innovation we are bringing to the customer and that are -- that we can embed into the pricing. Yes, indeed, such as the seller has innovation, quality, quality of service and so on and so forth. I think it's a bit early. I can hardly tell you that we have evidence of that, but I think that progressively, the level of awareness of our customers will increase. Also more, as it's going to be pushed and supported by the channel even. When you are a distributor today, when you are a contractor today, you are also taking progressively a number of commitments to sell more products that have a smaller CO2 content or that are easier to recycle. So the channel will progressively, increasingly push those products towards the end customers, again, end customers being either the end user or the investor in a commercial building or in a data center. So it is not yet the case, but we are strongly convinced it can indeed come. Now how will it impact the pricing of Legrand in the years to come? It's difficult to embed into a precise valuation, but it's going to be part of the innovation story that Legrand has been selling to the market for decades.

Good. Thank you.

Good. Well, thank you very much for attending this CMD dedicated to ESG. I hope that you feel how motivated and energized we are to make it -- to implement it and to deliver the results we committed to deliver, and I hope to see you soon in person to discuss the CSR road map of Legrand. Thank you very much.