‘Good morning, everyone. On this glorious day of 2025, as ABC Group’s CEO, I will present to you how our company plans to achieve a superior level of profitability by the end of the decade.
Designing the path to 2030 you have in front of you has required considerable efforts from this executive team over the last two years, the full support of the Board, and deep engagement with our stakeholders. Fundamentally, we have had to rethink how we do business since operating in a geopolitical, political, and economic environment dramatically different from the one experienced in the last thirty to forty years.
Starting on the left, the first three bars are what I would call ‘business as usual’ levers. Our markets are expected to grow at 4% per annum, driving operational leverage. We are also implementing more intelligent pricing strategies through enhanced customer segmentation. Furthermore, we are implementing the final phase of our 2025 reshoring program launched in 2023.
The following bar – the orange one with a negative impact on profitability – is one you have not seen before but one that has become very real.
Like you, we have been shocked by the weather and social events of the last few years. We all have vivid memories of the horrendous summer of 2024, with its droughts, floods, and fires, with direct implications for food and energy security, leading to widening inequalities and violent demonstrations worldwide.
It has been widely reported that the G7 intends to take coordinated action as a matter of urgency. We currently expect negative externalities to be directly incorporated into the cost of doing business through new regulations by the end of the decade, starting with greenhouse gas emissions and water usage. The latest proposals under consideration are converging towards implications that have become quantifiable for a business like ours.
We have thus been working relentlessly with our executive board members, consultants, and financial advisors to estimate the impact of externalities on our operating profit margin by 2030. And that’s what you can see on that chart. It’s a shocking figure.
It includes the anticipated regulatory costs related to our own air emissions and water consumption; the accelerated phasing out of some of our products under the new regulatory regime; reduced sales to end-markets and customers who are significant greenhouse gas emitters – that is, contributors to our scope 3 emissions – or water consumers; and higher prices paid to our suppliers.
Note that it could have been much worse – and we expect it to be worse for most of our competitors. As you know, ABC has been working hard to position itself as the most sustainable operator in our industry – and you have been able to track our progress through our sustainability KPIs over the years. Without this work, that orange bar weighing on our future profitability would have been significantly larger, with negative implications for our company’s prospects.
Besides, our long-standing familiarity with sustainability issues has helped craft solid countermeasures in record time – and that’s what you see on the right side of that chart.
First, we will implement a battery of projects that will allow us to accelerate the reduction of our greenhouse gases emission. They include a complete switch to renewable energy, partially due to self-reliance on solar power. We have developed a similar portfolio of projects to reduce our water consumption.
We have a new suite of products in our innovation pipeline adapted to the expected regulatory environment. We will sequence their launch over the coming quarters to offset some of the losses on sunset products captured in that orange bar.
As you can see, circularity initiatives are the biggest source of upside potential. We have reviewed our entire product portfolio from a materials technology and manufacturing point of view to push the boundaries of the portion of our output that can be reused or recycled. It was an eye-opener for us. We have engaged with suppliers and customers along our value chain and even some of our competitors to develop tangible projects. I am pleased to say that we have the full buy-in from our stakeholders along the value chain: we see sustainability as a common objective. Over time, we expect to identify additional measures to contribute to a circular economy. We may be just scratching the surface today.
We are also working on improving employee productivity on the back of the relaunch of our corporate purpose last year. We are introducing various initiatives to create a less biased environment. It will help us make better decisions, attract the best talent, and significantly reduce our employee turnover, with tangible savings from an HR and business productivity point of view. We have evidence of a positive trend already. In addition, productivity will be turbocharged by introducing the Living Wage across all countries by 2028, with a net positive contribution to our margins by 2030.
Finally, market surveys indicate that our leadership positioning in sustainability will allow us to charge higher prices for all our products and services.
Each of the sustainability-linked projects we plan to launch over the following years has a positive net present value based on a reasonable set of assumptions. To implement them, we expect our capex to increase by 125bps in proportion to revenues over the next five years. They would then return to normative levels.
These are extraordinary investments for our company – for any company. The task ahead is [inaudible] herculean. But the prize is well worth it: a company with a higher level of profitability and a de-risked growth outlook that positively contributes to society while creating value for its shareholders.
We are genuinely excited about the future of ABC.
We are proud of our company.’