Solvay SA (SOLB) Earnings Call Transcript & Summary

Good afternoon, and welcome to our second ESG webinar. My name is Jodi Allen, and I'm the Head of Investor Relations. And today, I'm connecting from the U.S. I'm joined virtually by our CEO, Ilham Kadri; and by our Chairman of the Board, Nicolas Boel. I'm also joined by our Chief People Officer, Herve Tiberghien; our Chief Sustainability Officer, Pascal Chalvon; and by Nathalie van Ypersele, our Chief Diversity, Equity and Inclusion Officer. Today's webinar will include a Q&A session immediately following the presentation. You will be able to ask your questions at any time by submitting them electronically through the Q&A button within the webinar. Today's call is also being recorded and will be made available for replay on the Investor Relations section of our website. We are recording the topics by chapter for ease of review following the broadcast. You may refer to the slides related to today's broadcast, which are also available on our website. With that, I'll turn the presentation over to Ilham.

Thank you, Jodi, and hello, everyone. I hope you are all doing well. With the world facing a new variant, we remain very focused on keeping our employees safe. We now have the processes in place to allow us to adapt very quickly to changing environments as teleworking has become our new way of working. Solvay has emerged stronger as a result of the crisis, and we will continue to manage these short-term challenges while maintaining our long-term focus on driving sustainable growth. Today, I'm very happy to be with you to present an update on the progress of our Solvay' One Planet program, which we first introduced in quarter 1 2020. Today, we are celebrating the first anniversary of our initial ESG webinar, and we commit to hosting annual updates. Our road map marks the start of a journey towards a more sustainable future. And I'm pleased with the strong progress we are making. My intention today is to update you on that progress to outline how we raise the bar and more importantly, to explain to you how we are mobilizing to deliver on the increased targets. Through the pandemic, we have seen that chemistry is essential. And Solvay is committed to delivering our technologies in a more efficient, safe, and financially sustainable way. Now our road map represents a holistic approach to sustainability, which originally included 10 ambitions to improve our impact on the climate, on our resources and better life for our employees and communities. I would like to emphasize the word holistic because without the planets and the people, there is no profit and vice versa. So for us, sustainability is profitability. With global warming set to reach or exceed 1.5 degree C by 2040 and extreme weather events becoming increasingly common, it's imperative that we take decisive action. Climate was our first area of focus. We acted decisively to set realistic yet ambitious targets with a clear plan of action to achieve them. What have we done so far? Remember, in February 2020, we joined the Paris Agreement. We committed to reduce the CO2 emissions of our industrial operations by 26% by 2030. Since early 2019, we achieved a 12% structural reduction. So this is excluding the impact resulting from the reduced activity during the peak of the pandemic. This means 4% reduction each year, which is twice the improvement required by the Paris Agreement and compares with minus 1% historically. So we are well on track. And rather than cause us to slow down, these achievements motivated us to raise the bar higher, much higher. In fact, a few weeks ago, we announced our goal to reach carbon neutrality before 2050. This is a major step in our journey towards net zero emissions. As a result, we also upgraded our greenhouse gas emissions targets from minus 26% to minus 30% by 2030. We know that there is no shortage of target in our industry and elsewhere. And the key question we all need to ask is whether the plans and resources to achieve them are in place. That's the question I invite you all to ask us. For Solvay, the answer is a resounding yes. Our road map will deliver the targets in 3 phases, spanning 3 decades. In the first phase, we have already launched 36 emission reduction projects, representing 2.4 megatons of CO2 annually. Imagine, this is equivalent to taking 1.3 million vehicles off the road each year, and we are working hard to increase that pool of projects globally. In addition to this, we also have projects to reduce our process emissions. All in all, we expect 3.7 million tons reduction in this first decade. In the second decade, our goal is to reach full neutrality in all our other businesses outside of soda ash. This involves new energy transition projects that include electrification for low to medium energy-intensive businesses. For emission-intensive businesses on site, we will execute on process innovations and obviously bring new energy technologies. In total, this should represent a reduction of almost 6 million tons of CO2. And finally, the last decade between 2040 and 2050, will focus on the remaining hard to abate soda ash sites, representing almost 2 million tons. This could include new technologies and energies, which we do not have available today in certain sites or countries. Finally, we expect to use offsets for a volume up to 10% or almost 1 million tons, primarily through nature-based offsetting programs adhering to high-quality sustainability standards and in partnerships with NGOs. On the financials and to achieve these goals, Solvay plans to invest up to EUR 1 billion to reach carbon neutrality by 2040 for all its businesses outside of soda ash. Additional investments of approximately EUR 1 billion have been identified for soda ash to pave its path towards full carbon neutrality before 2040. These investments will be partially supported by nonrecourse financing in Indian Solvay to also continue to invest in its growth platforms. We expect our investments which is, on average, up to 10% of our CapEx spend annually will be very accretive, generating returns well in excess of our cost of capital. Remember, in March 2019, we raised the internal carbon price up to EUR 50. Input in that as a cost for every investment projects we have undertaken, allowing us to accelerate our coal exit projects. I am thrilled to share that we have recently doubled it further to EUR 100 per metric tons of CO2. Therefore, ensuring that future investments are oriented towards 0 emission projects. Now the key to the success of our climate goals in the soda ash business. It's our commitment to phase out our use of coal. We have begun this process at 2 of our 7 sites in Europe. As announced earlier this year, our site in Rheinberg, Germany is set to become the world's first soda ash plants to be powered primarily by renewable energy. This can be done, thanks to sustainable biomass, which is derived from discarded wood chips. And once completed, it will cut the Group's total emission by 4% by 2025. More recently, late October, Solvay's Board of Directors approved the second soda ash site in Dombasle, France to exit coal by transitioning to primarily refuse-derived fuel, which is simply fuel made from municipal, industrial or commercial waste. This will cut another 2% of the Group's total emissions in 2024. This project is long-term profitable, improves the competitiveness of the plants and is built with a local partnership. By the way, both projects will generate returns above 15%. Now also part of the commitment, Solvay joined the science-based target initiative 1 year ago. We are still working on validating our targets well below 2 degrees C, while we continue to pursue efforts to limit warming to 1.5 degrees C. As you know, Scope 3 is by design, quite challenging for the chemical industry as it involves both our suppliers and customers. For Solvay Scope 3, represents 29 million tons and about 2/3 is related to our customers' use of our products, and the remaining or 1/3 relates to purchased goods and services from our suppliers. We cannot reach our Scope 3 targets alone. We are closely working with our partners through the whole value chain. We have to innovate or preferably, I'd like to say we have to sustain innovate. And if we don't work collaboratively with our partners, we won't achieve our goals in the time limit we have set ourselves. In fact, we expect to finalize and validate our Scope 3 targets by the autumn 2022. Let me tell you what we have already started to do on Scope 3. I would like to start with our suppliers. A sustainable supply chain is not a nice to have, it's a strategic imperative. And the vitality of our business depends on it. So what actions are we taking, we are mapping our wider supplier chain and identifying suppliers covering close to half of our CO2 footprint to work with them to reduce emissions. We also called on all 400 of our strategic suppliers to adopt the same commitment as we do, and that means also signing on to the science-based target initiatives. Such commitments will become a criteria of choice for strategic and future supplier relationships at Solvay. To that end, in April 2021, we launched our very first supplier engagement program using a collaborative digital platform with more than 250 executives participating from 130-plus companies. The result was overwhelming, 68 ideas addressing CO2, waste reduction, circularity and social impact. I'll focus today on one example due to the time, and it's related to our Sustainable Guar Initiative, which is a great example of collaborating positively on the social impact with our suppliers. You may be asking, first, what is guar? Guar is a plant growing in Arid India, Rajasthan. It's used in sustainable personal care products. We are the largest cost of guar, supplying FMCG companies. In fact, since 2015, we have worked with more than 7,000 farmers, of which 25% are women. I am proud, truly proud that the initiative has more than doubled guar yields and in fact, not only the yields, revenues to guar farmers in 2020 in a crisis year. This is another example of doing well and doing good. And we are now further enhancing our social impact by leveraging blockchain and building a digital platform with 2 partners, TechnoServe and BanQu, tracing the transaction from farm to shampoo. So far, 2,000 farmers started using the platform, including prices, volumes sold, enabling direct payments. The platform includes training on good sustainable farming practices, school attendance for children and programs dedicated to the empowerment of women farmers. And finally, women can finally access a financial identity with the transaction proofs and therefore, can open their own bank accounts. Finally, they become bankable. Such initiatives not only secure relationships, supplier customers, and customer relationships, but also have improved the standard of living through other activities such as vegetable gardening, animal husbandry, soil treatment, water conservation and of course, children's education. As you see, the innovation to deliver on sustainability is going to be one of those differentiators going forward. And indeed, procurement at Solvay started looking very different moving from buying to building together. Now I would like to move to customers. We believe that this is where Solvay can have the biggest impact, allowing our customers to accelerate their own decarbonization journey. I'm now inviting Pascal Chalvon, our Chief Sustainability Officer, to give you a great example on how we partnered and accelerated decarbonization and built scale in a country like the United States of America. Pascal?

Thank you, Ilham. Good afternoon, and good morning to you all. In fact, Solvay is placed among the top 10 companies in the United States for installed solar power. In Jasper County, South Carolina, we have more than 250,000 solar panels, covering an area equivalent to 500 soccer fields, offsetting 80,000 tons of CO2 emissions each year. The Jasper solar power plant provides green power for our U.S. factories in Georgia, Tennessee, South Carolina and Louisiana. In fact, since January 2021, we have transitioned 17 manufacturing sites out of 45 to 100% renewable electricity. And thanks to our commitment to address climate change, we are a proud member of Apple's Supplier Clean Energy Program. and have successfully transitioned its Apple-related operations to 100% green power globally. I also would like to take the opportunity to highlight another topic, circularity, which we believe will create economic growth, new jobs, restore the environment and benefit society. Most of us are today living in what we know as a linear model: extract, make, consume and throwaway model. We know that we have to rapidly progress towards a circular economy. This is an absolutely critical transition. And it could reduce greenhouse gas emissions by around 40%. We have recently expanded and deepened our partnership with the Ellen MacArthur Foundation. And in doing so, we committed to more than double our revenues from renewables and recycled sourced products by 2030. We also innovate to propose long-term solutions to close the loop in ecosystems with our customers and to promote secular design for lifespan extension. Let me give you a few examples. I will start with Natural vanillin, which is the most popular flavoring in the world. It is derived from [ genus ] orchids, which are limited in supply and are expensive. You may not know it, but we are the largest vanillin producer in the world. It is developed by the bioconversion of rice bran oil, which produces a [ circular ] alternative to vanillin, and it's called Rhovanil Natural. You may be using them in a tested chocolate of vanilla cake. It has been growing exponentially as the food industry seeks to use more and more natural ingredients. I'm also happy to share that our 3-party partnership between Veolia and Renault to establish a sustainable supply source for strategic batteries raw material, is well on track. In 2020, we successfully run the hydrometallurgical process to extract and purify raw materials like cobalt, lithium and nickel from Veolia's battery cells at end of life. It's called black mass. The nickel that is extracted must have the highest purity in order to be reused in batteries. And this is what Solvay is able to do. As we speak, the project is moving into the engineering phase in a demonstration plant. As you can see on this slide, we also have a technology to make tires last longer while lowering the rolling resistance. This helps to reduce fuel consumption and CO2 emissions. Solvay, Bridgestone and ARLANXEO teams worked and broke a kind of record by developing the TECHSYN platform in 24 months. So in short, you can see that we are active and we are acting. It's a long journey, and we are well on track. Back to you, Ilham.

Thank you very much. Thank you, Pascal, for sharing. In fact, this exciting news with solution, which hit the markets already and delight our customers and are also good for the planet. So to finish with this chapter, let me share with you that we have focused our resources, doubled down actually on research and innovation and increase our capital investments in 3 distinct areas, which we call our growth platforms. This include batteries, thermoplastic composites and green hydrogen. In fact, our sustainable technologies enable the transition to clean mobility. For example, by making batteries safe and perform better, even cheaper in the future, or by replacing metal with thermoplastic in the planes or by making fuel cells producing green hydrogen. Suffice it to say, we are bringing solutions to our customers that can address this exciting multibillion euros growth opportunity for Solvay, leveraging on our leadership positions in these markets, be it as a manufacturer of choice, originally being present on all 3 continents or through our innovations bring into more solutions, which are already being tested in the labs of our customers. I won't go today into any detail with you of these significant opportunities because we plan to host a separate event in January 2022 to allow us to spend the quality time to discuss in more depth our plans. Now looking forward, it's important, though it is essential to ensure that our foundations are solid. We manage our historical legacy responsibly. We're implementing 300 remediation actions throughout the world. Each site fits one diverse and innovative solutions. Let's look together at some examples. For example, we turn active quarries into a biodiversity heaven, plants a simple hedge where birds can nests and pollinators can forage, better manage water consumption and affluence, rehabilitate landfills after clean up. All sorts of initiatives can have a real tangible impact. Take the example of Cuchia, near our Torrelavega site in Spain, the former limestone query has been restored during the last 30 years in collaboration with the local NGO, we launched an important biodiversity project covering 100 hectares. You can today observe 169 species of birds and many other mammals and amphibians. A lot of insects like the dragonflies that you see on the image and close to 300 varieties of plants. We appreciate the honor bestowed by the Cefic for their ecosystem preservation award in October this year. Closer to our home here in Belgium, our first-ever site in [indiscernible] , is today vibrant with wild orchids and other calcium-loving plants that grow freely in the quarry. What did we do there? Well, we created 47 ponds, 1.6 hectares of lawns, now home to swallows and small reptiles. Life is back. I continue this worth tour with our site in Paulinia in Brazil. The biodiversity is very rich, close to 80 pieces of birds and more than 90 plants. It even serves as a refuge for wolves and pumas, believe it or not. This exceptional environment has been awarded the World Habitat Council, Gold Certification in 2021. And there are many more examples I can share. And I can also confirm that we fully intend to do more. As we look ahead, biodiversity is an important part of our journey and it's one that we will not endure. As you know, water is a scarce natural resource on earth. It's precious and it's critical to life. The focus on climate is great, but let's please not forget that humanity needs all industries to manage water. Water is a key resource for our operations and communities. We have taken numerous actions to reduce freshwater intake by 25% before 2030. We have already reduced by 5%, freshwater intake over the past 2 years, equivalent to almost 7,000 Olympic swimming pools per annum. Going forward, we have 3 big initiatives: first one, when we operate in a highly water stress areas, which can impact business and communities, and as of today, we focus on 31 sites, and accelerate our reduction of water intake using gray waters or improving our manufacturing processes like in Bulgaria, for example, where we decreased our water intake equivalent to saving 5 Olympic swimming pools every day all year long. Second, we also do more with less water inside our processes, thanks to innovation. Just in Brazil, we have reduced freshwater usage in our cooling towers with 5 million cubic meter, freshwater saved. This is another 5 Olympic swimming pools every day, all year long, saved. In fact, every drop of water counts. Finally, one of my favorites. We are focused on behaviors because it makes a difference. We launched a site water challenge across the group, engage in all our 23,000 associates. To date, we have already collected more than [ 13 ] new ideas for actions. And if they all come to fruition, this could lead to an additional reduction of 10 million cubic meter per year, another 4,000 Olympic swimming pools. This is huge. Now delivering on our road map also needs us to embark our thousands of employees working across every one of our 100-plus plants in transforming how we do business. So we have recently launched a company-wide program to prepare our facilities for the next decades. The Star Factory program, as we call it, it's based on a number of key pillars. Obviously, ESG is at the heart of this. Indeed, it's about deploying One Solvay and One Solvay Planet at the site level. We are in the process of defining clear KPIs and milestones for our plans to help them define their distant site road map. One size doesn't fit all. The Star Factory road map will also leverage digital and data science. We will invest in new tools and processes that will enable us to improve our performances and reduce costs. I'll give you a concrete example. In Tavaux, we have been able to unlock 20% of the additional capacity of PVDF simply by relying more on data science and cutting costs and inefficiencies. We will look for ways to more positively impact our people and the communities we serve, paying particular attention to diversity. This program was recently launched in 2 of our most critical sites for the materials businesses. In Tavaux, France and in Spinetta, Italy, these sites will be our 2 flagships. So it's fair to say that there is much more to come. I want to now address our site at Rosignano in Italy. Solvay has been producing soda ash in Rosignano for more than 100 years. This community is important to us, and we are proud to employ over 470 men and women at the facility today. Solvay has invested more than EUR 400 million over the past 20 years, including on the most important environmental matters: decrease in freshwater consumption, lowering energy usage, reducing greenhouse gas emissions, and increase in recycling. There have been some questions raised about our soda ash production process. So I thought it was important to take a moment to share more facts. As you may know, soda ash is mainly used to create glass. To produce soda ash, you need natural materials, limestone, salt brine and water. Solvay doesn't use or add heavy metals to manufacture soda ash. Limestone, like many types of rock or stone, naturally contains traces of heavy metals, like for building or coastal stones, the trapped metals remain in present in a solid state in the limestone and are not harmful for living organism. The facility uses limestone from nearby quarries. This natural local limestone is brought into the facility and following the production cycle, there remains powdery limestone mixed with gypsum, sand and clay. These are all inners, natural materials, not toxic or dangerous. Now there are 3 acceptable techniques to dispose off inert materials from soda ash operations. This is outlined in the EU commission's reference documents on best available techniques called BAT. These metals are dies or settling pumps. Pipes released offshore into the sea and an open channel release into the sea. Each of these techniques was considered and following discussions with local, regional and national authorities and supported by independent scientific bodies release to the sea through an open channel was determined to be the best and preferred solution for Rosignano on top of being safe. Given that under water current ensure that the limestone spread evenly on the seabed and the limestone that flows back on to the shore and the beach plays an important role in stabilizing the shore against erosion. In fact, erosion is a significant problem along the Tuscan Coast, and in fact, many municipalities use sand dredged from the sea bottom or from quarries to maintain their beaches and protect the coast. Say differently, the competence independent scientific and regulatory authorities confirm that the other options are suboptimal. And to be clear, this is not a question of costs. It is a question of the best technique for these locations ecosystem as preferred by the authorities. So both Solvay and the regulators monitor every step of the process as do independent academic institutions. It is important to note that all scientific research demonstrates that the water quality and environmental conditions near our operations in Rosignano are safe in compliance with European quality standards and consistent with the rest of the Tuscan Coast. These studies are independent, and we have made them available on our website for all to see. Another great example of how Solvay is leveraging our innovation engine to drive new sustainable solutions for our customers is the launch of our new non-flurosurfectant technologies Hylar 5000s and Tecnoflon LX, produced at our facility in New Jersey. As I outlined on our previous One Planet webinar, the development of these technologies followed an intensive period of research and development investments beginning in 2019. We challenge ourselves to develop a new polymerization technology that does not require the use of [ fluoro chemical process aids ] from the PFAS family of compounds. The applications that our customers use this technology for are critical to building the more sustainable society. Society, we are all working towards and include things like renewable energy installation, lithium-ion batteries components for compact engines in hybrid vehicles, medical devices components and smart devices. We, in fact, collaborated closely with our customers and applied our best and brightest to tackle this objective task, quadrupling the size of the research and development investments and dedicated 100 scientists to the efforts. Thanks to them, we got solutions. We completed qualifications with our customers and partners earlier this year. And as of July this year, we reached full-scale production at our West Deptford, New Jersey facility. So last year, we announced the plan, and today, we can proudly confirm that we have successfully eliminated the use of fluorosurfactant process aids in the United States of America. We recognize, however, that our work is not yet done. We continue to use a limited number of fluorosurfactants based process aids in our facility in Spinetta in Italy. At present, we are applying state-of-the-art technique that eliminate nearly 100% of fluorosurfactant emissions. Importantly, it remains our ambition to phase out the use of fluorosurfactant process aids in Spinetta, and we are collaborating with our customers to achieve this goal. We are investing in research and development, and collaborating with our customers there to achieve this goal, and our success in West Deptford gives us confidence that we can get there. This is just one of the ways that we are making ourselves, our customers and our customers' customers more sustainable. Humanity matters to us. And of course, I'm starting here with our people. I am inviting now Herve, our Chief People Officer, to join me as we turn to how we promote a better life for our people. Herve?

Thank you, Ilham, and good afternoon and good morning to you all. First, I would like to remind you that our growth strategy together with our purpose and values are the foundation of our transformation. The pandemic has brought many challenges and many opportunities to accelerate our transformation. So our organization has differently did than it did 2 years ago. Everyone goes home safely every day. We are committed to safeguard the health and safety of our employees and communities with robust programs, with zero accident mindset at every level of our operations and safety metrics in our [ pay ] plans and goals. Beyond health and safety, we nurture a culture that protects human rights and freedom from discrimination and harassment. We are following the highest ethical standards, supported by our new code of business integrity. The new code of conduct has been rolled out and 99% of our people received a training. It is a foundation of which we build our commitment to the right thing. In 2021, we have learned to live in a different world. No doubt, like many other, our definition of the work class has shifted to an hybrid mode. Some activities will be done from home while brainstorming sessions, team meeting, and informal exchanges, will take place at the office. 40% of our employees or 10,000 people have been working from home for more than 1 year. And actually, 70% of them are truly enjoying it. Bearing this in mind, bringing back the people, back the people to the office with a top-down approach is not the model anymore at Solvay. We leave it up to the individual teams to see how they prefer to organize themselves. We want to attract the best talent, we need to adapt. At Solvay, we are proud to providing the space to bring your whole self and to make a meaningful impact on the environment and society. And to this [ exact ] culture that allow us to attract the brightest minds. We care and we dare. This is the ambition of our human capital strategy. We care and we dare. This is being ambitious for ourselves, but also being mindful of our differences. This is our own way to motivate and engage our people. Here are a few examples of social actions that we have taken. With Solvay Cares, we opened up parental leave to 16 weeks for all Solvay's employees regardless of gender. This new global policy was really appreciated by new co-parents regardless of gender and orientation. At Solvay, we want to help women reach the top, and therefore, you need to help their spouses and partner to support them during critical periods in their lives, welcoming a new born or adopting a child, for instance. With the Solvay Solidarity Fund, we are supporting more than 2,000 families with medical needs, safeguard housing, child support, tuition for their education. Just want to remind you that to finance this fund, Ilham Kadri and the management team have cut 15% of their salary in 2020. I also want to thank our investors who forfeit 30% of their dividends and allow us to fund such initiatives. Another key action is bonding with our employees. During our third Solvay Citizen Day in October, a total of 121 sites and 15,000 participants volunteered to participate in biodiversity actions in collaboration with our communities, municipalities, local organizations, and NGOs. And now I hand the floor back to Ilham.

Thank you very much, Herve. This is exciting. And I would like to follow now with the subject, which is close to my heart, dignity. I truly believe that companies that put human dignity first are the ones that will thrive, prosper and last. All industries have been in a way failing when only targeting diversity figures. So at Solvay, we've decided to focus on building equity first and creating the right inclusive environment to attract and retain diverse talents. Think about it, if each of us, regardless of our background or identity, feels respected, welcomed, heard and valued, we will be more engaged, more innovative and as a consequence, will perform at our best. And as we embark on this journey, we're trying hard not to be limited by our ideas and experiences but to also be curious and avoid reinventing the wheel, learning from others, including from some customer, suppliers and investors who may have made more progress. Therefore, we decided to have tangible targets by 2025 and not wait for 2030. There is no better way to have a fully dedicated passionate leader to lead, inspire, and drive, our agenda flawlessly. I'll pass you now to Nathalie van Ypersele, our Chief Diversity, Equity and Inclusion Officer, who will give you more color about the Solvay One Dignity program. Nathalie?

Thank you, Ilham. Good afternoon and good morning to you all. Our program includes 9 concrete objectives: 3 for diversity, 3 for equity, and 3 for inclusion. And our objective is to accelerate diversity, equity, and inclusion, within our organization. Let me give you some examples. On diversity, we aim for example, to expand the talent pool from which we will select future leaders. It will be broader and will be more diverse. And so from a standing start of 26% of women in mid and senior management, we want to gender parity by 2030. Solvay's top 30 leaders comprise 11 nationalities and very diverse experience. And we work hard to be inclusive of different perspectives because it makes it stronger. We have already 7 employee resource groups, among which Factor X to empower women; MARC, men advocating for real change to contribute to more gender equity. Solvay young professionals, Brussels, to create bonds between generation in our headquarters; and Solvay African-American Employee Group. Regarding equity, we plan to ensure fair recruitment, which will include 50% of underrepresented groups in the short list for all middle and senior level positions. On pay equity, we are assessing whether there is gender pay gaps that needs to be addressed. It's challenging because it's different according to countries. So we are measuring and we are defining the road map. We're also implementing mentoring programs and support groups for employees around the world, and we start with underrepresented groups. And so 150 women are already participating in the first A-Effect ambition challenge, and 300 women will participate in the next challenge. Last but not least, on inclusion, it is really the heart of our ambition. We're launching first global survey to measure how inclusive our culture is. And we will -- this will be added to the D&I dashboard that will track our progress. We're also setting open a new speak up network for employees. So when they witness or they experience noninclusive behavior, they can share it.

Now I would like to introduce you to our Chairman of the Board, Nicolas Boel, to give you an update on how we are also looking to further raise the bar when it comes to governance in Solvay. Nicolas?

Thank you, Ilham. Good morning and good afternoon, ladies and gentlemen. I'm pleased to join you today to talk more about the Board's focus on ESG, and a critical role that sustainability plays for Solvay. As stewards of a group with nearly 160 years history, we are focused on doing what's right for the long term. Under Ilham's leadership, we have taken important steps forward to accelerate our progress and unleash our ability to create value with sustainability at the center of our strategy. Our Board is both passionate and actively engaged on this topic. Indeed, business performance reviews at the Board systematically integrate progress on One Planet, and every key decision has and will continue to integrate essential ESG dimensions. In fact, this has motivated us to create a new Board committee, the ESG Committee. This committee will oversee the group's ESG policies, progress and effectiveness to help us seize ESG opportunities to create value for the long term. I fully expect the ESG Committee to make a meaningful contribution to the Board's deliberation, helping us to further accelerate our progress. And of course, this comes at a great time, as it will support our carbon neutrality ambition, which, by the way, was a subject of the first ESG Committee meetings and its first recommendation. We're also taking the opportunity to reflect on, and integrate investors' feedback into our executive remuneration policy. We will share the outcomes of this with you ahead of our next Annual General Meeting. Though I am happy to share now that we intend to further emphasize operational ESG metrics and short-term incentives to go beyond the current 10% linked to Solvay One Planet. We also intend to ensure that long-term incentives preserve delivery against strategic commitments related to growth and greenhouse gas intensity, but while accentuating the focus on returns. And with that, I now hand you back to Ilham.

Thank you, Nicolas. I would like to add my enthusiastic support for the refinement that the Board is exploring, because I have a deep conviction that it will help us to mobilize the leadership even more strongly to create value. But having said that, I also know that aligning the workforce to shareholders is also an important driver of sustainable value creation. This is why I take the opportunity to announce today that we will be launching a global share ownership program, encouraging our employees to invest in Solvay shares. This is new to Solvay. This is historical at Solvay, and I'm truly appreciative of the Board's support as we mobilize all of the Solvay people to unleash the value. I would now like us to turn to profit and cash. After all, nothing is sustainable without strong financial underpinnings. And the results speak for themselves. We have dramatically improved our cash conversion from a historical mid-20s to well over 30% this year. And we did this by generating EUR 2.4 billion in cash since early 2019. We also divested businesses as we continue to upgrade our portfolio generating over EUR 1 billion. In overall terms, our pension obligations and net debt are EUR 2.3 billion lower now than they were in early 2019. This performance enabled us to maintain a strong credit rating and to sustain a strong dividend even during the challenges of 2020, both of which are important factors for a company to be sustainable. I will make one other important points and that is that we consider that sustainable value creation needs to comprise more than financial measures. That's why we have prided ourselves and always being early movers when it comes to publishing nonfinancial measures. We were early adopters when it came to TCFD a few years ago, and we were in the first wave of adopters of the World Economic Forum, the IBC, the [ International ] Business Council framework on measuring stakeholder capitalism for a consistent way to report sustainable value creation. You will find this in our annual reports. And indeed, I encourage you to take a look because in doing so, you will also see that all of our key nonfinancial information is also subjected to independent audit. Today, we consciously choose to share with you many facts and many examples of what we are doing, summarizing all of this. In fact, we acknowledge that what took us here will not bring us there. Solvay has a Board an ambitious sustainability, and diversity, equity and inclusion road maps with clear targets and commitments. Actions matters more than word, more than promises. And today, you've heard plenty about the actions we are taking and we will continue raising the bar. Solvay is stronger today than in 2019 in every respect, including ESG matters, and we are driving deep changes, including aligning compensation with the interest of investors even more. In short, we care, we dare, we act. We are showing that it's possible to do well and to do good, and what's more, the best is yet to come. Thank you very much. And now we will move to the Q&A session.

Thank you, Ilham. I'm Martial Tardy, I will be the moderator for today's Q&A session. And for this session, I'm pleased to welcome 2 additional management team members: Karim Hajjar, the CFO of Solvay; and Lynn De Proft, our Chief Procurement Officer. As a reminder, you may submit questions using the Q&A button within the webinar platform. They -- you have done that already. They are coming in, and we're grouping them by topic. So we will try and cover as much ground as possible. Now the first question is -- well, perhaps unsurprisingly about our financials. Given, we are now in December, can you update us on your order book and on recent trends. Perhaps for you, Ilham.

Yes. Of course, the fourth quarter order book remains overall solid, right, as anticipated and as we shared with you during our quarter 3 earnings calls. Looking at some of our main end markets, demand in automotive, electronics and consumers remain strong, while building and construction has been and is resilient. In fact, the demand for our specialty polymers remained very strong. Those are products going into EV batteries for electrical vehicles and hybrids. And up to now, actually, orders exceed even our supply capability, believe it or not. So we are clearly benefiting from the clean mobility trend. We also see continued good performance in our more commoditized businesses. Lastly, as you all know, we'll see impacts, obviously, from high energy prices, right, and persistent logistic challenges as anticipated. Obviously, our procurement team led by Lynn is doing miracles here and really leveraging the scale of Solvay while our sales force is really busy and at the deck increasing prices, as you can expect it from us. So all in all, I'm pleased to confirm our EBITDA guidance. Back to you, Martial.

Yes. Staying on the financial topic, we have for one more question. How much will your path to carbon neutrality cost you? Can you detail CapEx phasing?

Perhaps, I better take that. Three points I'll make. One, we plan to invest up to EUR 1 billion to achieve carbon neutrality by 2040 for all our businesses, except for soda ash. For soda ash, we expect to invest another EUR 1 billion to pave its way towards full carbon neutrality for the Group' 2050. And I've used the word to invest, and I've used that word advisedly because the economic returns are compelling, well in excess of the cost of our capital. We've given you examples where we are exiting coal and the internal rate to return is in excess of 15%, 15%. That's after tax. Now the other good news is that these investments will be partially supported by nonrecourse financing. So our road map, our energy road map will not prevent us from continuing to invest in our growth platforms, and it certainly won't derail us from maintaining the capital discipline that we're really proud of.

Continuing on that line. We do have a question now about our Scope 3 CO2 emissions. You mentioned that you are taking actions in your supply chain. Can you provide some other examples of what you are doing with suppliers in this area?

Yes, absolutely. A couple of examples come to mind, right? One comes from a partnership with the European transport supplier, the Italian [ Pialiacelli ]. And they are transporting for us our sodium bicarbonate in trucks powered by alternative fuels, if you may. And with that, we've been reducing our CO2 emissions by 15% for the same amount of kilometers traveled. Secondly, we're also working with our entire packaging supply chain to recondition about 10% of our intermediate bulk containers, so-called IBCs. So the IBCs are collected at our customers' plants, then reconditioned at the supplier side and deliver it back to us for reuse. And we have an exciting collaboration with our partner, Origin Materials, developing and now actually industrializing advanced carbon negative materials for applications in, for example, the automotive industry. So actually, our focus on Scope 3 is changing the way we engage with and procure from our suppliers. And I also would like to remind you that actually, Solvay was one of the founding members of Together For Sustainability, TFS. So we have been always for the last 10 years on the forefront of assessing and improving the sustainability performance in the chemical and industry. And to date, we have assessed more than 1,900 suppliers and 88% of our core suppliers and our ambition is certainly to go to 100%. And finally, we're taking the lead within TFS to develop really a broad guideline for the chemical industry for Scope 3 emission reductions and calculations and sharing. So back to you, Martial.

Thank you. Still on Scope 3, you have talked about suppliers. And are you also working on circularity with your customers is the next question for Pascal...

Yes. Yes, of course, and also with the customers of our customers, which are very often brand owners. Actually, we are innovating by proposing solutions to close the loop in ecosystems to propose products with renewable materials and to promote circular design for lifespan extension. So I shared a few examples in my prepared remarks. related to our natural vanillin. You remember and batteries recycling at the end of life. Ilham also spoke about the guar sustainable value chain with Veolia and Renault. Let me now share just a couple of examples, new examples. First, in the beauty and hair care market, our customers are increasingly demanding bio-based solutions. They do not want synthetic polymers in shampoos anymore, right? We have solutions for this market. Our biodegradable and naturally derived solutions, Mackadet, for example, supports these needs. Sales have significantly grown, you know since the launch of the product a few years ago. Investments are being prepared in the U.S. In fact, we are relocating our production to be closer to our markets and customers, and it's also good for the carbon footprint, by the way. Other example is very important related to our polymers, right? We are researching more recyclable opportunities. We recently announced a proof of concept developed by our research team, offering solutions for the PVDC packaging circularity, it shows there is a possibility to reuse, reblend it with virgin materials, if you want. Without closing, of course, or degrading the high-performance properties, right? So our teams are really working collaborating with our customers to find more and more opportunity like this.

Thank you. It looks like we have a question coming in about governance and compensation. Your Chairman -- well, our Chairman, Nicolas Boel, shared an intention to better align compensation to ESG criteria. May I ask you to describe your current compensation structure? Ilham?

Well, maybe because Herve is with us, maybe Herve, you can explain to the audience the structure of the compensation structure linked to Solvay One Planet as well.

Sure. The first thing I would say that our compensation policy was aligned with the growth strategy we disclosed in November 2019. The second point is that the main Solvay One Planet key performance indicators are already included in the short-term and the long-term incentive with a higher weight for the top management. So the leadership compensation structure is as follows: first, you have the base salary aligned with the market; two, a short-term incentive with basically 3 main metrics: one is a group financial performance for 60%, which include underlying EBITDA, growth and free cash flow; second is Solvay One Planet goals, our sustainability goal for 10%; third is our individual objective for 30%. Our long-term incentives are paid in stock options and performance share, and our performance driver are EBITDA growth metrics, ROCE, return, and green gas emission reduction. So as our Chairman stated, we're also working on reviewing with the compensation committee and the Board of Directors how we can going further in aligning our ESG mindset, behavior, and project with our executive compensation.

Thank you.

Thank you. Shall we move on? We have another people question. One relating more to diversity, equity, and inclusion. What is your greater challenge to gender parity in such a male-dominated world as the chemical industry? Nathalie, that will be for you.

Thank you, Martial. I would say that our biggest challenge is to really increase our diverse pool of talent. And so to do that, I think we really have to focus on 3 things. First, is for me, and it's key, it's really to create an inclusive culture. -- where every employee can come with their whole selves to work and really thrive in this environment. And as often used to say, we measure what we treasure. And so concretely, what we're launching now this week is an inclusive survey to really measure how inclusive is Solvay. We are also planning special trainings for leaders to be aware of my bias and their bias so that when we promote and when we hire, we can do it differently. And I think also the team of Lynn had just followed 1 yesterday and she was just telling me that it was great. So the second -- so that's really the first element. It's really an inclusive culture. The second one is really going back to the equity element. And there, we really need to accelerate the career opportunities of our current diverse talents. And I would say thirdly is really to disproportionally attract diverse talents to join Solvay.

Thank you. Moving on. Questions are coming in about 1 specific issues, namely PFAS. We have a few questions on that topic, starting with an update on the status of ongoing litigation associated with PFAS in the United States and Europe? and especially participant is asking about the lawsuit in New Jersey?

Yes. I can take it, Martial. Well, as you know, we've been working actively with the regulators to understand -- address concerns in the area near our West Deptford, New Jersey plants for years now. Obviously, we remain committed to addressing the relevant remediation related to our past use while we continue to cooperate with authorities on this topic. Litigation takes time, as you know, to reach an outcome. And whilst we continue to defend ourselves, we want to speculate on proceedings and the long proceedings, how much it will take. So -- but I'll also remind you that many U.S. cases relate to firefighting foams and Solvay never manufactured or sold them. Obviously, we've been cited so far claims have been dismissed in 18 out of 19 cases in this respect. So we continue defending ourselves. We stay close in New Jersey. We are engaged with the authorities, working hand in hand. And I'm pleased that we have been in full production at our New Jersey site with our new non-fluorinated process aid since July of this year. I mean, you remember, I promise personally that we are going to double down. We quadruped our research, put hundreds of people since 2019 to really reinvent this type of molecule and Solvay has already eliminated the use of fluorosurfactant process aids in the United States of America.

Okay. We're still on this topic. There's another question. Can you update us on any environmental litigation that Solvay might be exposed to outside of the United States? And more specifically, how about the specialty polymer plant in Italy. I believe the person is -- this participant is referring to Spinetta.

Spinetta. Thank you for the question. Well, Spinetta Marengo plant is focused on producing specialty polymers and high added value polymers, while we stop using all fluorosurfactant process aids in New Jersey as of July this year, as I mentioned, the product we make in Spinetta are being reformulated, using what I call next generation of fluorosurfactants-based process aids called [ C6O4 ]. This molecule is neither biopersistent nor bioaccumulative and is registered with reach, the European Union regulation obviously, and has been approved by the European Food Safety Authority. We are, by the way, in discussion with the authorities in order to approve a road map, just like we did in New Jersey departments, and exit all fluorosurfactants polymers through innovation and in close cooperation, obviously, with our customers. And in addition to that, we apply -- Solvay applies state-of-the-art techniques that eliminates nearly a 100% of any fluorosurfactants, any emission from our manufacturing plants in Spinetta, which have been approved by the relevant public authorities. And we have carried out all the remediation and safety measures planned in addition to our own voluntary effort. The remediation actions have already been completed, and the public authorities have certified the achievements of the remediation objectives. And as you know by now, following our presentation, remediation is part of the operations of each of our sites like you can expect from a responsible chemical company. And in this one, we have been remediating since years. Recently, by the way, a verdict was finally reached in our favor in Spinetta, which could result in a gain of over EUR 90 million. We have been defending ourselves because it was past pollution prior to our acquisition of the site. And we have been -- we are pleased with the positive outcome. Again, legally is the floor, and we are showing case here that innovations allow us to move ahead with newer molecules, and we are doing it in Spinetta. Back to you, Martial.

Yes. The next one would be for Karim. We're switching back to carbon neutrality and more specifically to a financial aspect of it. Specifically, when you move to investing in new processes for sites that are hard to abate. Do you believe the returns can be as high as the ones you will get from converting the Rheinberg or Dombasle sites to biomass?

I think that's a really important question. I really believe that we can and will deliver returns in excess of the cost of capital. Now can it be as high as compelling as the 2 sites that we've announced, I talked about internal rates of return of 15%. I wouldn't say that. I think it's way too soon to speculate or let us extrapolate. Now why is that? A, we're in early stage on some of the technologies -- And actually, some of the processes, some of the technologies don't exist today to achieve the progress on some of the more challenging sites. So time will tell, but I'm absolutely convinced, if anything, if the past is anything to judge by is that science, chemistry will be there, and we will scale up the solutions, not just in Solvay or in chemicals, but to many industries because we all need to decarbonize. But I'd say our confidence levels are high. How far will it get to? Probably another 15% would be very, very compelling though.

Still about energy. We have now the question about our energy use. Can all of Solvay's energy be converted to renewables or will Solvay need to invest in green or blue hydrogen as well?

I may take it, right? I mean, as we mentioned, we are decarbonizing through 3 phases, 3 decades, more or less. We have 36 projects, as you have seen, worth 1.3 million cars off the road, right. And we're using a mix of clean energies, be it solar, wind, biomass. And biomass is, I should say, in Rheinberg' wood chips. And if you go to [indiscernible] waste and residential waste is refused waste, right? So residential, commercial, et cetera. We are part of the hydrogen value chain, right? And the green one is an opportunity for Solvay. As you know, our 3 growth platforms, you have batteries, thermoplastic composites, and green hydrogen. We will enable the fuel cells and electrolysis to happen through our membranes Aquivion. So it's a good business for Solvay. And obviously, we are going to also start engaging in blue and green hydrogen for our own sites, right, including probably in the production of our hydrogen peroxide, right, because we are a pure user of hydrogen. So all of this is in the works. Too early to give you a plan. But I propose we address these questions in our forthcoming webinar, so be patient until January, where we're going to share with you our growth platforms, and we will deep-dive into batteries, hydrogen and thermoplastics.

Okay. I think we have time for one more question. This is about our portfolio. Given the strategy to review the portfolio of Solvay, hypothetically, if soda ash is indeed exited. Could there be requirements to continue funding or partially fund their decarbonization projects.

Yes. I'll take it. Well, I would like to remind you that the objective of the carve-out is, in fact, to reinforce the internal financial and operational transparency, the accountability and increase Solvay's strategic flexibility. And this remains our focus at the moment. We told you in Q1 this year that the process could last anywhere between 12 to 15 months. It's too early to speculate on any element that could be part of future potential transaction. In the meantime, you've seen us continuing to invest in the decarbonization of each businesses, including soda ash, and look at Rheinberg and Dombasle, those are great examples that you can exit coal profitably, right? I mean IRR above 15% is a big deal. We are in with the public authorities, it's private-public partnerships, creating ecosystems, which are good for the planet, but also for the pocket. So moving ahead, obviously, we will continue to accelerate. We have a decent plan. We know what we know, where we can act, and there are some unknown, as Karim said in the last decade, just because they are harder to abate. But I would expect personally that each business, right, each business can afford and can deliver by itself through its own free cash flow generation on its own decarbonization.

Thank you very much. I'm afraid it's quarter past the hour, and we have reached the end of today's webinar. We would like to thank you all for your participation and for your questions. We've tried to address the vast majority of them, of the ones that we have received in the time that was available to us today. Of course, my colleagues from the Investor Relations team stands at your full disposal to respond to any further inquiries that you may have. Thank you for joining us today. Please stay safe and healthy. Goodbye.