Nexans S.A. (NEX.PA) Earnings Call Transcript & Summary

Welcome to our webinar on Responsible Sourcing in the Cable value chain. The energy transition and the electrification of the world require more and more cables, and this will last for decades. In parallel, ESG requirements for companies are no longer an option in order to protect employees, to protect the environment and to protect the society. As a consequence, all the industry players along the cable value chain are adopting responsible sourcing practices. So today, we will discuss 3 things. One, what is responsible sourcing; two what are the supply chain challenges and the commitments on human rights that the leaders are taking in the industry; and three, what is the role of standards. To do that, we have the pleasure to welcome a distinguished set of industry leaders. I will start with you, Isabelle Hoepfner-Léger, you are General Corporate Secretary at Rexel, a leading distributor of electrical material and a large client of Nexans; Daniel Hojniak, you are Chief ESG specialists at KGHM, and you will bring us your perspective as a copper producer; Mike Smith, you are a Value Chain Director at Copper Mark, and you will discuss about the standard in the industry; and David Grall, your VP Sustainability and Corporate Transformation, and you will bring us a perspective of a leading cables producer.

My first question is actually for you, David, as an industrial company, what does Nexans do in terms of responsible sourcing? What is your definition of responsible sourcing and what are your challenges?

Thank you, Marc, and hi, everyone. Thank you so much to our experts. Responsible sourcing at Nexans is not just a process. It is one of the cornerstones of our commitment towards sustainability and as a leader in the cable manufacturing. It is important for us that our commitment reflects the way we are building up a sustainable future, a resilient future. For us, it's embedding the ESG principle into the way we are doing the business. And every purchase, every meter of cable we are selling to the end customer reflect the respect of the human right, the reduction of environmental footprint and adherence to ethical business. This is what we have called at Nexans, the E3 philosophy and the way we are operating. But let's go back to the key priorities. First, the key priorities are anchored in the OECD Due Diligence as well as the Global Compact UN commitment that we took. And this is to align our ambition first in order to talk about culture, purpose, while remain compliance with the regulation. The supplier, they have to be engaged as the same level as Nexans is regarding the commitment we took for the sustainability. One of the examples is to have fair labor having the same scoring standardization with EcoVadis, a long-term partnership that we have with KGHM, with you, Daniel. And when it comes to the clients, say, how we work together in order to align the value chain expectation down to the end and this is a current example with the cable loop offer that we have deployed recently in order to recycle the post end-of-life cable in order to reinject in the recyclability ecosystem. So last but not least, with the client is the traceability from A to Z. So that's our key priority and how we define responsible sourcing, Marc.

Thank you, David. Isabelle, Rexel from a distributor standpoint, what are your expectation and challenges on responsible sourcing?

Well, our expectations are mostly to meet our clients' needs. I mean we love our client, we want to please them. And more and more of them, especially the big ones have their own commitments and they also participate to public tenders where cable is obviously everywhere, and they will expect from us that we provide them the best possible products. We are about EUR 20 billion company. We're in 17 countries. Cables represent between 15% and 20% of our sales, depending on the countries. So it's a very important product category. And in terms of sustainability, it brings the bell a lot because everybody knows about copper scarcity. Everybody knows about the issues from extraction of copper, everybody reads the press and so what happened. So there are also a lot of questions from our customers on this topic. And the main challenge that we have to meet our customers and clients' expectation is that they follow us when we recommence some choices on products and in order to do so, even if we are deeply committed to sustainability ourselves, we need transparency and data from the suppliers because we are proposing some products with some transparency and some carbon emission and some trustability behind that. We, of course, have to make sure that they are accurate. This is also a good way to select the suppliers and to build long-lasting relationship and also to involve third parties that would help us to testify that the whole value chain is healthy.

Thank you, Isabelle. So responsible sourcing is about environment, circularity, safety, social rights. Let's discuss now about the supply chain and safety challenges. So David, again, a question for you. What are your main challenges in ensuring responsible sourcing in supply chain?

Yes. I'm sure we all acknowledge that we are living in a world of changing regulation. There's carpet bombing regulation, and we can spend like the hours to list this regulation as well as rising client and supplier expectation, the environmental and social risk as well while in the meantime, working on sustainability and competitiveness from A to Z, that is important. This is why in Nexans, we have developed this famous E3 model, E3 philosophy in order to combine in the meantime, the environmental performance, social performance while remain competitive on the economic pillar. When it comes to the challenges, I will name it in the 4 different categories. First of all, the social and environmental category. You said it, Isabelle. The social is important because we have to face this in an industry where forced labor, human rights, child labor, we have to pay attention is to focus. That's why we are working with a long-term partner, and this is important for us. Environmental, our industry is IGHG intensive in terms of emission. So that's important from us that we are monitoring the entire value chain surrounding that. Regulatory and client expectation, that's key. I will not spend the hour to list, but we call to CSRD, CS3D, TNFD, [ OD ] we have an environmental context regarding regulatory context that is really important. And this is where you mentioned clients expect transparency and traceability. There's nothing worse than having a lack of traceability from the extraction to the transformation down to the end customer, and this is key, and that's why we are working. And again, with the cable loop offer that we may have, this is important to avoid like reinjection on virgin copper or recycled copper and the way we are dealing with that ensuring supplier compliance. Daniel, we know there's a long-term relationship between our two company. And we want that the CSR adherence on the charter. We want to mirror the standard from the supplier to the end customer. That is key for us. Last but not least, we can talk about the supply chain disruption. It's obvious that there is a geopolitical context that is at risk today. We have to face potentially scarcity. And this is key for us to keep that. But despite these challenges, responsible sourcing is one of the key levers in order to be sure that we are building up all together through the value chain, a sustainable future.

Quite a lot, thank you, David. Daniel, at KGHM, how are your practices evolving to respond to all these expectations?

Yes. Thank you, Marc, David. I noted four main themes from your speech. So regulatory and client expectations, environmental and social risks, supplier compliance and disruption. So I will start with this last one. So there is no doubt that geopolitical and climate risks heavily affect the world's copper supply. And what is more, it's projected that the demand for copper will raise in the upcoming years. So copper is essential for decarbonization. We need it for renewable energy systems. We need it for electric cars, which, by the way, require almost 4x more copper than combustion cars. And it's estimated that -- well, International Energy Agency expects shortages of copper in the next 10 years. So it's definitely not the time to panic because it's also estimated that the resources of copper in the world should be enough for at least 200 years. But there is a clear bottleneck between the demand for copper and the supply. So how we, as a copper producer respond to these challenges. When it comes to the primary copper, so mined copper, we obviously ensure stable volumes of supply, but keeping in mind the environmental impacts, for instance, our carbon footprint of our operations and the water footprint of our operations and obviously, conditions for our employees, especially those working underground. For instance, right now, we have started -- well, we are investing billions of euros in the construction of 3 new mining shafts. And one of these three shafts will be dedicated for ventilation, so to increase the fresh air rates and to increase the amount of cold air, cool air underground, but well, I think that some of our viewers right now might be wondering, but wait a second, what about circularity? Perhaps we should focus predominantly on the recycled copper. And this is where things get slightly more complex because of this market uncertainty, supply volatility of copper scrap is a serious issue. So while we, as a copper producer, we don't have the full control over this aspect. So we do what we can to diversify our suppliers. We do what we can to source these copper scraps locally. But it's not easy because the whole industry is interested in these copper scraps, and there's simply not enough on the market. And now International Copper Association estimates that the average lifetime of copper in the product is 25, 30 years, while 2/3, so almost 70% of all copper produced since 1990 is still in use. So what that means is that in the upcoming years, these copper scraps are not magically going to appear on the market because this copper is still in use. And it means that there is no simple solution, but we need to balance our approach and focus both on increasing, if possible, the amount of this recycled copper as well as try to reduce the emissions associated with the extraction of the mined copper. All right. So we also mentioned regulations and client expectations. Regulations, which, for example, require us to disclose on environmental risks and social risks. Well, as well as the expectations of our clients who require from us compliance with schemes such as the Copper Mark or EcoVadis. So I think that one word which links all these themes together is transparency. So the same transparency that is one of the key reasons behind the introduction of the ESG reporting and transparency also pretty well links with traceability that Isabelle and you David touched upon. And when it comes to this traceability from the producer's perspective, it's not that difficult for the mined copper because these are our own operations. We have full control over our processes. But again, it gets quite tricky when it comes to recycled copper because it's simply very difficult to learn the whole history of the particular copper scrap, but perhaps that's the area where schemes such as the Copper Mark could help us just to -- so that we are able to demonstrate that the scrap material was procured in a sustainable manner. Thank you.

Thank you, Daniel. So lots of challenges. You need to work on the environment protection. You need to work on social protection. You need to deal with scarcity and foster secularity. And my takeaway from this discussion is that it requires a lot of transparency and collaboration across the value chain. Let's talk now about the role of regulators and standards. Mike for Copper Mark. Can you tell us a bit more what is your -- the role of your organization across this value chain?

Absolutely with pleasure, and thank you very much for having us on the panel for this, really fascinating and interesting discussion. So the Copper Mark is the leading global responsible production standard for the copper industry. The organization was set up only 5 years ago, but already covers 40% of all mined copper comes from sites, which have received the Copper Mark and 30% of refined copper comes from sites which have received the Copper Mark. So we've already seen significant take-up, which is really, really good news. We cover mine sites. We cover smelter refineries and also semis fabrication as well. So we cover the value chain up to that transformation point. And in addition to copper, we also cover nickel, zinc and molybdenum as well. And the Copper Mark is for our main standard based around 33 key criteria. And these cover numerous different environmental, social and governance risks. Companies need to ensure that they have taken action around those criteria and they fully meet those criteria before they are awarded the Copper Mark. Those 33 criteria are based on an embedded in international agreements like the OECD Due Diligence guidelines, like the ILO International Labor Organization conventions, UN protocols on climate change. So they are based on these internationally agreed agreements and guidelines. Another really important aspect, I think, around standards like the Copper Mark is the third-party assurance framework that backs up and supports all of the criteria. Really, any standard is only as strong as the assurance process that you have behind it in order to assure that the aspects have been implemented. We have independently verified third-party assurance and all of the reports are published and transparent on the website as well, which I think transparency is also another key principle. So we have strong incredible standards. But one other important aspect around the Copper Mark is we try to make sure that they're practical as well because, again, you have to have a standard that's able to be able to be implemented in practice in order to drive real change across the industry. Otherwise, you don't get anywhere. And the final point that I would like to make around our approach as the Copper Mark is that we're not focused on any specific points within the copper value chain. We take a full value chain approach. So in addition to the Copper Mark 33 criteria, we also have a chain of custody standard as well, which enables joined up responsible production through those different points in the copper value chain as well. And we work with downstream industry too with 60 partners who are downstream OEMs and midstream companies who commit to support the Copper Mark and responsible production throughout the industry. So really, that's our approach in a nutshell. And as I say, we've had some significant uptake in success in recent years. And yes, looking forward to continuing to work with some of the companies around the panel in the future.

Thank you, Mike. Daniel a question for you. How do you use Copper Mark standards in practice?

So first of all, we decided to implement Copper Mark certification in phases to our operations. So we started with our smelters, producing copper cathodes. And then we moved on with this process with our wire rod plants. And obviously, we come up with quite a few challenges on this path. So first of all, we had to involve quite a few teams in this process, so environmental teams, safety teams, HR teams, production, teams, compliance teams, et cetera. So you can imagine the amount of resources, even the human resources that were involved in this process. And please take into account that we have a really big organization. We are talking about more than 35,000 people. So that was a significant administrative task. But obviously, when we achieved certification, it meant some concrete benefits for us. So first of all, well, as Mike just a minute ago, said this is one unified standard, which combines best international practices. And it's a globally recognized tool and so recognized and required by our key clients. So what we did is we merged the requirements of the Copper Mark with our internal policies which obviously had a positive impact on our daily operations. For instance, we developed and implemented due diligence procedure for copper supply chain. And also thanks to achieving Copper Mark, we -- well, we automatically received or demonstrated compliance with the mandatory responsible sourcing criteria of London Metal Exchange, so LME which meant some time that we saved and filling out all these formal issues. And ultimately, it's again, that's something that Mike mentioned. It's a third-party verified scheme, which is the key thing here because it simply means that somebody else reviewed our operations, our policies. So it definitely builds trust. It builds transparency, and that's -- these are the things that we really care about. Thank you.

Thank you. So standards like Copper Mark are really essential, right, to establish trust, transparency and harmonize best practices.

And the trustability as well, like we mentioned.

Of course. So maybe let's speak about collective engagement, right, in order to build a truly responsible and circular value chain across all the players around the table and in the industry. So maybe a question for you, Marc -- Mike, sorry. How could we strengthen this collaboration to accelerate responsible sourcing in the value chain?

Well, I think the key point here, really, in my view, is there's more to do to really join up the approach that we have across the full value chain. So I think we've made a really good start in terms of the responsible sourcing and responsible production practices at each point within the value chain. But I think there's more to be done in terms of joining up those different points. We've spoken several times around traceability within the value chain. And sometimes traceability and transparency tend to be used in conjunction with each other. I think the truth is that full traceability from mine to end user is actually very difficult to achieve within the copper industry because the nature of many of the value chains is that copper is mined and then it's mixed, then it's melted, so it becomes a liquid and then it's turned into a solid, then it's melted again and then scrap is added. So it goes through several transformations, which means that if you're looking at traceability on a molecule-by-molecule basis, it's very difficult to achieve in practice. So -- but that doesn't mean that there aren't ways to collaborate and work to improve transparency within the system and also to ensure that responsible production is joined up at every point. So from my perspective, I think that as well as looking at the ultimate goal of traceability, we should be thinking around things like chain of custody standards mass balance models, which are more able to be implemented in the short term to help to achieve some of that assurance around the full value chain approach with a view in the future once those are in place to move on to full kind of traceability. And I think the discussions like this are absolutely crucial because oftentimes, you'll end up talking to a company in the downstream and a mining company in the upstream, and they're having slightly different conversations around the priorities and issues. But more of this kind of discussion where you're bringing together actors from the upstream, middle of the value chain and downstream, I think are really, really important. So these are some of the things that we're looking at and working on within the Copper Mark. We want to put forward a chain of custody and particularly looking at some specific pilots around that. We want to develop more platforms and opportunities to have these sorts of integrated discussions. So yes, that's what I would say some of the key challenges and opportunities as well for the future.

Daniel, for you, what are the ways to increase collaboration, transparency and build this circular and resilient value chain?

Yes. So first of all, right now, today, we are representing manufacturers. We represent the distributors and copper producers. Obviously, with you, Mike, looking at our hard work from the above. But it means that we are simply present in each other value chains. So we are on the same team because both we and our clients are interested in products with positive ESG credentials. So low carbon, high recycled content, positive social impact. So by having shared ESG goals and working towards them, we simply meet the expectations of the clients and the society. Well, one example of such goal could be managing together the production copper scrap, so pre-consumer recycled content, actually something that you, David, today touched upon. I think this is a great idea. And schemes such as the Copper Mark could help us to unify our approach. And together with ESG reporting, increase our transparency and transparency is -- well, transparency highlights the responsibility of the companies we represent for the society and for the planet. Thank you.

Thank you. David, what are your views?

In fact I like what has been shared just by Daniel and Mike regarding the value chain. The image I have in mind is the value chain looks like a strike arrow like this. Why we were talking about -- how can we put circularity. So making like the value chain like linear to circular. And I like this idea because at Nexans sense and not only at Nexans, the entire value chain. What we try to do to reinforce the collaboration, it's how we can build a resilient, transparent ecosystem, And I like this word ecosystem because this is an ecosystem. Honestly, if I talk about the 2 metallurgy facilities that has been rewarded by Copper Mark in Montreal and Lance at Nexans, doesn't be possible If we did not have the long-term partnership with KGHM, for example, as a supplier. That's something that is not just Nexans own operation that is dealing with that. That's why when we are talking about resilient, transparent think Isabelle and Rexel, they are happy to know where the copper is coming from, how we are refining it and that is labelized in our facility in metallurgy. So that's one of the key principle but the way we are driving it at Nexans is regarding understanding the full pain point of the value chain, not only the way we have to deal with because own operations, most of the time, the easiest way to deal, but the entire value chain is not easy. We talk about extraction activity. It's a complex activity. But as well, the distributor activity is not something because we are talking about logistics. We're talking about long distance even if they are local for local. It's key. And when you combine all of that, it's key to understand the value change pain point to co-create. If I don't understand what Isabelle clients and clients request or need I am not able to work with KGHM, Daniel. And so it impacts my own operation. That's the first thing we are driving it. Second is the communication and transparency. You said it, but it's seems obvious, and it is but we have to reinforce it and prove it. The way we have done it at Nexans is we are building up surrounding the E3 philosophy model like the platform with the data insight. And you know, Daniel, that we are scoring the main customer through the E3, so the 3 dimension. We are scoring our site as well for the 3 dimension. And that's something that is key and data sharing is something that definitely bring and evidence the transparency. So this is the second point. And the last one is how we can work together on the circularity. Together on the circularity because we cannot work along on the circularity. We need end copper or second end copper if we want to reinject if we want to refine the Virgin copper, we need to masterize and we need to monitor the entire value chain for the circularity. And to do this, it requires the strong collaboration. And I will take just one example. We have invested or we are currently investing in Lance, so north of France, in the new metallurgy facility called NCCCR, that will bring up to 30% of recycled content in the metallurgy. That's something that cannot be performed alone with Nexans own operation. We have partnered with an industrial partner called Continuus Properzi. But then we will need to deal with Daniel and KGHM through this long partnership and deal with Isabelle and Rexel as well to the end product and the low carbon offer or recycled content offer that we may want to deploy. So that's the way I see it. And if I can summarize that, I think we promote the knowledge sharing. And one of the evidence is what has been deployed and organized by the purchasing team at Nexans back in June, the Supplier Day because it was the place to exchange the main idea, all supplier and customer because we are all customer or a supplier at one point of time, how we can deal all together and share this knowledge. That's the way at Nexans, we can see the collaboration and how we can reinforce it.

Thank you, David. Isabelle for you, what are the right way to foster collaboration and build this resilient value chain?

I will bring the last brick of the value chain, which is the whole movement up to the end customer. and use some of your words, alignment is key. We absolutely need environment, but we also need -- or and, we also need very concrete actions. We enter after us a kind of bottleneck where we have big customers. We also have smaller customers. And our role is also to persuade, to sell, to motivate, to educate all the people about the value of what we all together have created in terms of sustainable sourcing and sustainability. So these very concrete actions, we try to develop them. I mean, internally, we have a cable group with people. We have a very strong partnership with Nexans in Canada, where we deal with the cable offcuts. And this cable group internally has done kind of learning expeditions in different countries to see in which place we can do something, which action we can push, and we need to start small. We need to start local. We need to be very humble because this is the way distribution is and our end customers are. And then you really need to assess what works well and what you can scale works less well and that you have to drop. Because at the end of the day, this is exactly how you will bring the end customer into the whole value chain because, again, without these concrete actions and movements, it will still remain us and we Rexel pushing for some products that they need for some of them, not all of them, and we need to expand the territory of people really wanting to have additional products to make sure the whole value chain makes sense for the years to come. So this is alignment and very concrete actions.

And this is how we turn commitment altogether into action. That's exactly what you said.

And Isabelle, on top of collaboration and partnership, what would be for you the next steps both on the short term but also on the long term?

Talking about what we control, meaning ourselves. So leaving aside geopolitics and the world the way it is, short term is to keep the boat on track. I mean we have a strategy. Sustainability is really a deep strategy for us, as for all of you. We're not going right one day left the other day, we just keep straight. We keep pushing it. What we realize is that internally, our employees just year after year consider that they like being and working for a more environmental responsible company. So we keep that direction. We keep that direction. We keep the discussion with our suppliers. We keep pushing our clients into the loop. We have our sustainable selection. We'd like to have more copper and more cables in it if we have more reliable data to push and do so. So short term, really keeping what we are doing and not being distracted, but what can happen around us because all the investment that we've put into that, all the strong and deep beliefs that we have, all the economical business case that we build around that will stay longer than what currently happens so that's short term. Long term, I already mentioned it a little bit. We have to bring our customers into the loop too. And that's not an easy topic. You talked about unified standard, I would dream of it. I would dream of -- instead of talking about -- we're talking about the digital passports, the EPDs that have one language that we can commonly speak to provide our customers with. We provide a lot of services into calculating carbon emissions. We have a sustainable selection where we push the product. We have an ecoscoring of products. We train and bring on customers into understanding what it means to have less emissive carbon or better source products. But having one unified standard would help the whole profession, I mean, to move towards the same direction massively because the long term is really there, making sure our customers thinks the same way that we think.

Thank you, Isabelle. I think it's time for conclusion. Thanks a lot for your insight. It was very rich. I believe we have a much better understanding of what is responsible sourcing. We've discussed about the stakes on circularity, magic scarcity, protecting the environment, managing social rights. And all of this requires a true collaboration in transparency. I think that's a little bit the keyword of the discussion and great to have all these players along the value chain or the circular value chain show that it's really super important. I think we have time for a couple of questions from the audience. So I will look at my iPad with some questions prompted. So maybe a first question for you, Mike, the Copper Mark. What do you see for Copper Mark? What role do you see for Copper Mark in accelerating circularity and secondary sourcing of copper?

Thanks very much. In terms of accelerating the drive and demand for circularity, I think as we've heard today, there's already a very, very strong demand and driver to increase the amount of recycled content or scrap that's used within the copper value chain. And that is just increasing, I think, all the time, and the demand is increasing, driven by a need, a, in order to demonstrate the circular economy and to drive circularity but also as a means to reduce the carbon footprint of copper products as well. So I think the drivers are well established. Where a standard and assurance framework like the Copper Mark can come in, I think, is looking a little bit deeper into some of those recycled content supply chains and considering that within some of those supply chains, there may be ESG risks themselves in the collecting in the sorting and in the processing from an environmental perspective, from a governance perspective and also from the social and labor standards as well. So I think for us, a standard body like the Copper Mark, first of all, it's about the responsible sourcing requirements and that is a requirement within the Copper Mark in order to do due diligence on suppliers of recycled content, but then potentially looking deeper as well around some of those risks within the value chain -- within the supply chain for recycled content and being able to provide assurance that the recycled content that companies are purchasing are responsibly produced as well. Second aspect is around the methodology, I think, for calculating recycled content. Currently, there are different methodologies for calculating what is classed as recycled content or not within a copper product. So I think that there's a role in terms of trying to standardize that and then also put in place the assurance frameworks, to assure that those are being implemented accurately. So I think those are the two big areas that a standard body like the Copper Mark should be looking at in terms of recycled content and ways in which we can support the industry to achieve that.

Daniel, a question for you. Mining is energy intensive, right? What are KGHM main lever to reduce its carbon footprint while keeping its competitiveness?

All right. So it's a tricky question because as I think David you mentioned decarbonization in general for heavy industry is a big challenge. And now this question focuses on 2 aspects. So the decarbonization and competitiveness. All right. So let me start from the beginning. So I would say that we identified 2 key areas. So the first one is efficiency. So we try to improve the efficiency of our processes. For instance, we implemented ISO 50001 standard for energy management in our operations. Another example I could give is the digital twin technology that we implemented in our smelters. So basically, this allows us to simulate the results of our planned actions in a digital environment before the actual execution. So that was effectiveness, efficiency. And now when it comes to the actual decarbonization, I feel that I need to give you a little bit of background. So we, as KGHM, we are one of the biggest energy consumers in Poland because basically, we are such a big company, and we are in the heavy industry. So for us, again, it's a challenge because we need to rely on the national energy mix, which in Poland heavily relies on coal. Luckily, this is changing. I'm not going to say at a really high pace, but it's changing positively. But this is the reason why one of our key actions is to build our own clean energy sources. So this is happening right now. So we are developing and building mainly solar farms, and we are also interested in wind projects. Apart from this, we engaged in power purchase agreements to build -- to buy clean energy from external providers. So this is one thing. Apart from this, we are investigating electric vehicles and our operations also underground. And quite recently, we tested hydrogen trains. So we use trains for many different reasons in our operations, for instance, for the transport of copper ores and copper concentrates between mines and smelters. And this -- the results of this test were very positive. So we were really happy about it. We also investigate carbon capture and storage technologies. This is a technology that changes very rapidly, but we are keeping our fingers on the pulse. And the second part of the question was about the competitiveness. So obviously, all these actions are related to very high capital costs. So we are aware of it, but we are looking at these issues in the long term. So in the long term, this would mean that we would have our own independent energy sources. We will reduce our reliance on the national grid national energy system. And we will simply cut the costs related to the emissions. So while at the very beginning, this will be expensive, and it's expensive, we are hoping that in the long term, this will have a positive effect on our financial results.

David, question for you. How do you follow up with suppliers that have not signed the CSR charter, and are not compliant, sorry, with Nexans standards.

Interesting question. I would say that from the huge amount of supplier we are working with, we have set up like a methodology that looks like a funnel. One of the entry point is, of course, if they sign directly the CSR charter and they mirror what Nexans is doing is committed to. It's easy. But then if for any reason, we try to investigate with additional questionnaire, like I said before, during the webinar, we were scoring our main supplier through the E3 scoring and E3 performance. And that's something that is guiding us regarding the performance and that is matching our CSR scorecard. So the additional questionnaire may help us to work on that. If for any reason and mainly for the public and large company, we are still -- and the question remain unanswered. We are trying to matching what is publicly available, what is publicly disclosed and where they are labelized through EcoVadis score. But of course, Copper Mark score definitely, where if public company, they are Copper Mark labelized like you said, Mike, 33 main points, standardized across the entire questionnaire. So that's a trigger. That's a trigger that they are mirroring our CSR commitment. And this funnel is going down to potential specific audit that we are requesting on an external provider because definitely, there is something we are not dealing with. It's the compliance and regulatory staff. So when we are committed towards CSR and ESG as a whole, it's important for us that we are working with partner and I use the word of partner rather than a supplier that are matching our expectation. I can take like one example. If we are committed to decarbonize and work surrounding ESG, but one of the main supplier is not and not at the same speed or not at the same volume or the same expectation, like we said during like almost an hour that is value chain and ecosystem, it will impact and will be detrimental to one of the others. So that's why this funnel methodology in order to be sure that we are working with the well advanced or most advanced supplier is key for us. And the purchasing team, they are doing a great job through the CSR responsibility in order to be sure that our main supplier, what we call the platinum supplier, they are respecting our standards that are very high. So that's the way we are dealing with it.

Okay. Isabelle, what about Rexel? Do you have a supplier scoring system in place? And how do you deal with that? Do you monitor improvements over time or maybe some alerts sometimes with your suppliers?

We don't have the scoring system. What we have -- well, as you can imagine, we have I don't know how many lines of products, I would say millions, probably not that much, but maybe. So we have a huge amount of suppliers to. What we do is we classify them, and it's the most important one into different categories. And there is one category that we call the shapers because they shape the sustainable future with us. Nexans is part of them, where we have a dedicated partnership on different topics, communications, presentations, products that we push more than the others. So we tend to focus on the few suppliers that are really dedicated like us. We also have our CSR charter. We are also EcoVadis Gold. So we follow, I would say, most of the rules that you have all described here. This is why the whole value chain is, I will say, consistent and we're talking about alignment and transparency quite openly. So this is where we work. And when we have specific products on which we may have doubts, then we will also perform dedicated audits with the third company to make sure that everything is in line with what we request.

If I may add, Marc, on this question specifically, one of the key challenges we are all facing is not only our facing supplier but the subcontractors that we are working with. And this is where -- and I'm sure we are all knowing what we are talking about. Subcontracting is something we have to monitor and focus on. It's not because we are delegating the task, the activities that were delegating the responsibility. And the world we are living in, the context general context from a regulatory perspective is global. If something is going wrong in one of the subcontractors of Nexans or KGHM. I feel responsible. Nexans feel responsible. And that's why we have to deal with that and perform the appropriate due diligence. So when we are talking about funnel of methodology, it's not something the forefront supplier, but as well the ecosystem that is providing. And that's why it's key to work in a partnership mode just rather than supply model.

I think we have time for a couple of more questions. Maybe for you, Daniel. Human rights and community engagements, which are obviously very critical in the mining sector. So could you share a little bit a little bit more, sorry, how you ensure what is called FPIC or free, prior and informed consent and address local community concerns?

All right. So thank you, Marc. You only asked me tricky questions but that's fine. All right. That's fine. So basically, I assume that the question mainly relates to our activities in the U.S.A. and Canada and our relations with indigenous or native communities. So basically, we have a dedicated team to stay in constant touch to listen and ensure that the native communities feel heard and respected. So well, actually, I have a good example because quite recently, we signed an agreement with one group of indigenous communities in Canada. And it took years of consultation. It took years of consultation, talks, relationship building, participation and cultural events. And right now, it will be our responsibility to work together with these communities and to achieve this balance between economic prosperity and protection of lands and waters and obviously, the rights of the people who live there.

Thank you. Mike, a question for you. Beyond compliance, how do you encourage companies to continuously improve, for example, on human rights or climate action?

So one of the aspects of the Copper Mark standards and one of the inherent values that we have as an organization is constant improvement over time. And so the Copper Mark as a standard and a set of standards doesn't stand still at any point. In fact, I mentioned that we were established 5 years ago. We were already on the third version of the Copper Mark main guidance, and that's because we're always looking at and trying to understand what are the market expectations? How are they changing? What are the regulatory expectations, how are they changing and trying to ensure that the Copper Mark is in line with all of those requirements. Also for a site that implements the Copper Mark, it doesn't just stand still. It doesn't get awarded the Copper Mark and then we go away and they've got the Copper Mark forever. It's on a 3-year cycle of assurance. So every 3 years, a site that has the Copper Mark will have to be reassured against those standards. So it ensures that, that continual evolution is happening over time, and that's embedded within the Copper Mark standard and processes.

Okay. Thank you. Isabelle, maybe another question for you. As a distributor in direct contact with customers and user. How do you consider your role or added value in the circular economy? Are you an adviser, prescriptor educator, facilitator...

Collector.

All of that. We usually describe ourselves as an influencer. And this is where we are. We are very proud of being that. We are all of that. We have to train our own teams. We have to train our clients. We have to explain we have to partner with the suppliers to make sure we have the right product, the right data, all of that. We are not experts of the products we sell. We do not manufacture them. We're not experts in the copper mining extraction or certifications. We sell millions of products. But on each of these products, our expertise is to make sure we can provide additional services to our clients especially and sustainable services are a big part of our services now, energetic evaluation, CO2 emission assessment. And in order to sell these services to raise the awareness of our clients, we'll rely again on what you tell us, but that's more our part. We're not manufacturers. So we are just influencers and also teachers, everything you said.

Thank you. Maybe a question for all of you actually coming from the audience. Do you think that AI can help to manage all these challenges?

AI helps us when we try to go through the millions of data that we get on the products to filter them to analyze them and to put them in our system that we have built internally to provide these famous services I mentioned about CO2 emissions. So yes, we have been using AI for years already on data.

I think I have -- yes, I think I have the same insight as Isabelle. So basically, where I see the biggest benefits from the AI is to help us to handle this great amounts of data. So right now, this is again the biggest bottleneck. This is why we all get sometimes a little bit irritated where we receive huge amounts of data regarding, well, any aspect of our operations. So that's probably the key place where this could be utilized and then compare it against other companies or processes.

Yes. if I may add, I concur and I agree with what has been said. And at Nexans, we love to say that we are not using the data at the level we have to use it. I would quote our CEO that's saying that we have a methodology that's called SHIFT, and without SHIFT, our manager, they are using less than 20%, like a small portion of the data available in our system, and we all have a big system. AI will increase the way we will be able to use this data and the capabilities in order to find alternative and routes that we are not seeing as a human analyst. And definitely, there's -- in our Capital Market Day that happened back in November '24. It is one of the cornerstones. The SHIFT AI modes and to continue to reduce complexity that we have at Nexans and using data is something that is key, and we will continue to use for sure, definitely.

I think that one additional area where I think AI could be useful is regulation. So David, you mentioned at the very beginning that we are being bombarded every month with new regulations. So perhaps AI could help us to handle this and summarize and translate these regulations in the language that is easy to digest for human beings. That could be a good use.

Okay. Maybe a last one for everybody. If you still have some energy.

Always.

How are you fighting players who use unofficial supply chain channels of copper, whatever it means. Difficult one.

From the Copper Mark perspective, so within the Copper Mark, it requires due diligence to be done on all suppliers to a site no matter who they are or what routes that comes from. So companies at sites who are receiving materials from suppliers have to look at the different risks within those supply chains and then take appropriate action according to the level of risk that they identify. So I suppose if you talk about some of these channels, then as and where those become more and more opaque and less obvious, it requires a higher level of due diligence and a deeper level of investigation into those supply chains, which is embedded within the standard. I think that's probably the best approach to take.

From our perspective at Nexans. I think our answer is in Mike's answer, meaning that our 2 main metallurgy are certified and Copper Mark labelized. So and it's important to mention that the proved evidence documentation we have to provide in order to be certified and to conduct ethic business. And remember that what we have discussed at the beginning of the webinar, like we all have business conduct and ethic codes. If we want to comply to all of that. We have to evidence and prove through the documentation, the way we are behaving, the way we are conducting the business, demonstrate that unofficial source of copper supply is something that we cannot deal with. Otherwise, it doesn't make any sense of what happened in this conversation for the last hour. That's the answer for Nexans.

Thank you. Well, I think it's time to conclude. Thanks again for your insight. It was a great discussion. It's great to have all the players along the value chain to share this insight and to collaborate and bring transparency and bring the value chain to the next level. Thank you very much.