Christopher Guérin

You need to keep increasing your profit, but you need to decrease your carbon footprint as well. We have been able to generate 1.2 billion Euro free cashflow additional versus the last five years before.

Hanna Moukanas

I am pleased to be here today with Christopher Guérin, CEO of Nexans. Welcome, Christopher.

Christopher

Thank you, Hanna.

Hanna

Please tell us a few words about yourself and about Nexans. How was the company when you joined, and how has it evolved since?

Christopher 

Yes, Hanna. I am the CEO of Nexans since 2018. I am 51, worked for Nexans for 20 years already. When you think about the history of Nexans, I will say that there were two main sequences. The first sequence was the birth of the company under the name Nexans; and it was a spinoff of Alcatel. And the first ten years were golden years. Everything was going great: strong image, strong leadership. And I would say that from 2009 to 2018, we have been lost in translation. We lost ground, and we lost leadership. We need to think like private equity will do. We have five years to transform the company strongly and fast.

Hanna

Ever since you have been a CEO, you have been a firm believer that there is a strong correlation between financial performance, environmental performance, and social performance. Can you tell us a little bit more about these three concepts?

Christopher

First of all, I can tell you that we are in a kind of permacrisis world now. The crises are piling up, and when you listen to management behavior, we talk about volume versus value, growth versus profit, profit or growth versus environmental factors, and infinite resources versus constrained resources. So, we say yes, we have to find a way where we think globally on the economic transformation of the company, but as well environmental, and the engagement, the social aspect. This is the E3 model that we have decided to develop ourselves in Nexans. I have decided to describe that in my book, called Finding Our Way Again, to make sure that all my managers in the company really understand the new way of Nexans, which could be duplicated in many sectors.

Hanna

In your book, you analyzed the performance of your sites, and you found out that the ones with the best financial performance were most often those with the best environmental performance and those who exhibited the best engagement of the people.

Christopher

Indeed. So, we classify our businesses from a financial standpoint by profit driver, cash burner and value burner. And yes, we study first the profit drivers, the ones that are doing great money for a long time. And that is right, they were good financially, but they were good environmentally. And what we saw as well on the social aspect is that their diversity and inclusion ratio were 5 - 10 points above the group average. The safety was much below the group result, and the absenteeism ratio was very, very low.

Hanna

Tell us how you steered the company towards decarbonization, and what were the critical factors of success?

Christopher

I will say that to achieve our minus 30% CO2 emission within three years, and we stopped to incentivize people on growth. We told our managers, we say, the only thing that matters is your financial results, the EBITDA return capital and free cashflow. But in parallel of that, you are receiving a carbon quota. So, you need to keep increasing your profit, but you need to decrease your carbon footprint as well. The fact that you have these double constraints, which are not steered by more volume and more growth, helps you to manage the two in parallel. But what will help us the most is that it is all about complexity reduction.

We have decided to remove 13,000 customers upon 17,000 and remain only with 4,000 platinum customers to densify our efforts and capital allocations and management power through those customers that matter most for Nexans. We freed up all the capacity towards those customers, and we did the same for the product, where we reduced our product base by 30%. With this massive complexity reduction of unleashed cash, big time, we have been able to generate 1.2 billion Euro free cashflow additional versus the last five years before but open the door for a new logic of austerity that can bring over financial performance and open doors for decarbonization.

Hanna

So, Christopher, in the EQ framework, how do you measure the KPIs around the three dimensions, the three Es?

Christopher

The most important was to bridge the three Es, because if you stand on the economic on one side, and on the environmental and you do not bridge the two together, you have not changed anything. So, as we have decided to consider that we have platinum customers, gold, silver, and lead, and we want to focus on platinum customers, what we aim to is to calculate of course the financial performance of those customers on return on capital employed, but we make sure that those customers that looks platinum on the financial standpoint are as well platinum in an environmental standpoint.

So, we calculate for each individual customer the return on carbon input that we measure for each individual customer, in terms of what kind of raw material they use, what type of product families that we need to produce for them, what is the distance of shipment between us and them. Also, we measure in parallel the resource of competence engaged. It is making sure that we have the right level of resources to serve better that business in the E3 logic.

Hanna

So, Christopher, tell us how did Oliver Wyman help you in your decarbonization journey?

Christopher

We did great work with the Oliver Wyman team, and I thank you because indeed we wanted to go in depth into our data of the environmental indicators because we have 70 units in the world, 45 countries. So, we frame with the Oliver Wyman team the problem first. We have done the first set of diagnosis; Scope 1, Scope 2, Scope 3, and it is really a lot of work there. And as we have a sum of data, your team helped us on the data mining because that was a huge set of data that we needed to crunch and to analyze in all sense to make something a bit more visible.

Once we have all this great framework, we have been able to cluster our unit from the ones contributing well from the financial perspective but not the carbon footprint perspective. And we say, hey, let us go structurally on those, and we have launched pilots to decarbonize their business with a very robust playbook and twenty-five levers that we can implement unit by unit. And we started with you in Australia, Turkey, and Morrocco.

Hanna

Looking forward, what are Nexans' next steps towards sustainability?

Christopher

As all nations are going in the same direction at the same time with the same, I would say power, we will not have enough natural resources. And this is what we do with you, and we do with our customers. We try to educate all our external stakeholders that the only chance to keep growing in the world of scarcity is recycling. So, I believe as the mega risks of the world are now more important than the megatrends, that we need to think of companies as an ecosystem. We need to partner together, to be stronger together on at least what we aim to do is to set up an ecosystem in some countries all about recycling, telling our customers that your waste of today is your growth of tomorrow. And at least this is the only way we see the possibility to keep growing within the world of scarcity.

Hanna

Thank you very much for sharing with us today the Nexans story.

Christopher

Thank you, Hanna.

Hanna

And thanks all for watching us today.

This transcript has been edited for clarity.