Aug 31, 2023
31 August 2023. The transformation needed to make the economy more sustainable is creating a multi-decade commercial opportunity for select companies. Schneider Electric, a French multinational that specialises in energy management and digital automation, has based its corporate strategy on capturing it – according to the latest Sustainability with Substance podcast.
Schneider Electric offers products and services for homes, buildings, datacentres, infrastructure and industries, all of which support the company’s mission to enable customers “to make the most of our energy and resources”. They range from everyday electrical items like circuit breakers and switches, to a one-stop platform for managing smart offices and digital workplaces.
According to Amit Bhalla, who leads the Investor Relations team at Schneider Electric, the company’s varied offering is linked by a clear view on the sustainability trends shaping the global economy. The objective is to develop “a portfolio and an end-market focus which is truly reflective of the direction of travel of where the world is going”.
Decarbonisation – the shift towards a low-emissions economy – is one of the themes Schneider Electric is aiming to capture to drive growth. Bhalla says: “Electricity is the best vector towards decarbonisation, and that is at the heart of what we are doing.” In addition, “automation and digitisation are the vectors for more efficiency. You put these together and you end up with a more sustainable world.”
Bhalla says the commercial rationale for putting sustainability at the core of corporate strategy is simply that what is “good for the planet is good for customers and for our company”. He adds that, as well as directly driving revenue growth, Schneider Electric’s focus on sustainability helps it attract talent and build relationships with business partners: “I think [sustainability] is one of the key factors why people join the company and choose to work with it.”
Ninety One portfolio manager Stephanie Niven, who initially analysed Schneider Electric at the start of her career, says the company is notable for the consistency of its strategy, which has been focused on sustainability-linked commercial drivers since she first researched it “nearly two decades ago. It has been great to see that consistency matched by relatively prudent capital allocation”.
As an investor, Niven seeks to identify companies where sustainability is driving long-term business potential. When analysing a business, she says she evaluates sustainability from multiple angles: “We have a Capitals Framework that thinks through how businesses not only consider their customers but their employees, supply chain, peers and community relations. All of those components are very important when we think about value creation and a sustainable future.”
Bhalla says Schneider aims to have a positive influence across its “entire ecosystem”, meaning in its operations and supply chain, and via its products and services. While Schneider is working to run its offices and factories more efficiently, he says this impact is “a small proportion of what we can do for suppliers and customers”.
To make its supply chain more sustainable, Schneider Electric has established a Zero Carbon Project, working with over 1,000 of its top suppliers with the goal of reducing supplier-operations emissions by 50% by 2025. Meanwhile, the company is aiming to help its customers save 800 million tons of CO2 by 2025 vs. a 2018 baseline. “As of the last quarter, we are roughly at 460 million tonnes,” says Bhalla. “We are looking at [saving] about 100 million tons of carbon per year.”
When analysing companies, Niven also focuses on how corporate cultures influence business performance. A key feature of Schneider Electric’s culture is its decentralised structure, says Bhalla. “Our global management is spread across the world. There is not one centre of power where all decisions are taken.”
Niven sees Schneider Electric’s culture as a “core part of its competitive advantage. It really seems to help with innovation, and an engaged workforce that allows [the company] to respond to customer needs on a localised level”.