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Sunday, December 4, 2022

How Schneider Electric’s CEO Made It One of the Most Sustainable Companies in the World

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Schneider Electric saw $34 billion in revenue last year, but CEO Jean-Pascal Tricoire hasn’t got an office. The 59-year-old Frenchman is so focused on learning directly from customers and colleagues that the idea of tying himself to one room is anathema. It’s a strategy that pays dividends; under Tricoire’s leadership as CEO since 2006 and COO since 2003, Schneider has tripled in size, most recently acquiring U.K. software company Aveva in September, in an $11 billion deal. (Schneider already owned 60% of shares.)
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Tricoire engineered Schneider’s transformation from a traditional electrical products merchant to a supplier of digital systems and solutions. Today, the 186-year-old multinational is at the forefront of digital automation and energy management, handling offices, homes, data centers, infrastructure and factories. Consistently ranked among the world’s most sustainable companies, Schneider is one of only 60 whose carbon neutrality objective has been certified by Science Based Targets initiative. Tricoire says 70% of Schneider’s turnover is green impact revenue, which participates in carbon reduction.

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Tricoire got his head start by going where others wouldn’t, leading Schneider’s expansion in China in the 1990s when many peers thought it was a dead-end posting. Instead, he learnt fluent Mandarin and immersed himself in the culture. “The first time I went to Pudong I got two punctures,” he tells TIME of driving around Shanghai’s ultra-modern eastern business district.

Known for his love of adventure sports like whitewater rafting, Tricoire encourages staff to venture far from their comfort zones to better understand needs on the ground. (His previous postings include Italy and South Africa.) “Cities of emerging countries are pretty much the same,” he says. “But you need to go into the depths of [impoverished Chinese provinces] Guizhou, Yunnan or Ningxia if you want to understand what’s really happening.”

Tricoire spoke to TIME about how the current energy crisis can be leveraged to push sustainable practices and how he gets the best from his people.

This interview has been condensed and edited for clarity.

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You have said that Schneider’s deal to acquire Aveva was to “accelerate the path to deliver to our customers one data hub.” What does that look like in practice?

We’re speaking about the digitization of our markets, which are buildings, cities, data centers, industry, infrastructures, or what’s called the Internet of Things. Over the past 15 years … we’ve built a portfolio of software. At the moment energy is at the top of the agenda for everybody: for sustainability, number one, but now urgency for energy transition, getting out of gas. We want to bring [hardware and software] closer together so that we can offer to our customers a complete solution for industry and energy.

It seems like current geopolitical tensions present both challenges and opportunities for a company like yours, given the increased focus on energy and sustainability. Is this an acquisition that would have gone ahead as rapidly were it not for the war in Ukraine?

I see no connection. But clearly, energy is front and center for our customers nowadays. In parts of Europe, it’s due to potential shortages. And everywhere in the world, it’s due to the cost of energy, which is much higher anyway. Energy is the first factor to your emissions and your carbon footprint. So, I truly see this moment as a pivotal point where the midterm objective of being carbon neutral is meeting the short-term necessity to be transitioning the energy pattern and exit the vulnerability or exposure to fossil fuels.

Schneider Electric was ranked as the world’s most sustainable company out of 8,000 assessed by Corporate Knights last year. [In 2022, it ranked number four.] What was your motivation and how exactly was that achieved?

[After I] became CEO of the company… we took a very contrarian position: we said, ‘we’re going to help our customers make the most of their energy’—rather than the usual approach, which was ‘how can you get access to a lot of energy.’ For that, we took two elements: digitization as a major disrupter, because when everything is connected you know what is really happening—I can switch off power if I don’t need the machines. We are targeting 30% to 50% energy savings thanks to digitization. The other point is to decarbonize; it has to be more electric, because electricity is the only passport to decarbonization. We were a small company at that time, but we sold everything which was not participating in that vision, and over time we developed a portfolio which is mixing digitization and electrification for sustainability. We also started to deploy that inside the company. So every three years [we launch] a new plan to save energy, save on emissions, save on resources, be more circular, and so on.

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It’s an approach that counters some antiquated views in the business community that sustainability is a hitch in growth. Instead, you’re using sustainability as a driver of growth and a way to attract customers.

In 2019, investors really started to pay attention to sustainability with the development of ESG [Environmental, Social and Governance] investment. When investors told us, ‘you’re accountable not only for the financial, but for the non-financial,’ our customers started to move really fast. Today, you have more than 3,000 companies which have taken objectives to be net-zero. Then you had COVID, which pushed the adoption of digitization probably four to five years faster. So can I operate my factory remotely? Can I design an installation remotely in 3D? Can I remote operate a hospital intensive care unit? And then finally you have this energy crisis: Ukraine is just a part of the reason; it’s also the underinvestment that has taken place in many places.

Your time in charge of Schneider corresponded to a pivot toward Asia. You’re speaking to me from Hong Kong, where you moved in 2011. Do you still see Asia and China as where the growth opportunities are?

It’s not Asia particularly; it was internationalizing the company. Twenty years ago, the company was mostly European [and] transatlantic. But when we speak about cities, digitization, industry, infrastructure, the core of the action is happening in emerging countries. At that time, emerging countries were 15% of our turnover; today, they are 45%. Asia is 60% of the world population and already 50% of world GDP. Of course, it’s a place where cities are being built and where there is a lot of manufacturing. So clearly, it’s really important to be well represented [here] for our industry.

China is still grappling with its zero-COVID policy. I understand that your local factories were temporarily shut down and you even had 1,000 employees sleeping on the floor inside for six weeks. How are you planning to instill resilience into your supply chains?

We believe that the world is global, and we remain global. But because I spend a lot of my personal life outside of Europe, I’m also convinced the [world] is going even more local. And as more countries access to prosperity, their cultural differences, their morals, their way of doing, will re-emerge, or will reinforce themselves. Therefore, we have put in place a model at Schneider that we call multi-hub, which is structured by regions, where those regions are pretty autonomous in the full value chain. So for China it’s entirely managed locally. It’s very autonomous. It operated during COVID like it normally operates, with local decisions at local pace.

Surely, 1,000 employees sleeping on a factory floor can’t be considered normal? Chinese officials are saying that zero-COVID may continue for five years. As a CEO, I imagine these disruptions are something you need to evaluate and mitigate?

Our dispositive in China is for China. So, it operates like any Chinese company. Our North American dispositive is for North America, to a very large extent. For instance, our priorities in Europe facing a big energy crisis are different from our [priorities] in North America or in China or in India.

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As a leader, do you make decisions by conviction or after consultation?

Both, depending upon the situation. Most of my strategy [comes] not with consultants, but with customers. By meeting a lot of customers, we get the best insights. It all starts with people. At Schneider, we say great people make a great company. I don’t think a company is a family; it’s a sports team—you need very different people and you don’t want to put somebody who is good in attack as a goalie. The most important thing is team spirit.

What’s the best way to manage and motivate staff?

It’s really important to have a strong direction and strong consistency. If people know where you want to go, they will bring the best of themselves, because they don’t want to be micromanaged. Everybody wants to make an impact. But if you define in a strong manner your values, then people will have the right behavior. And then you empower them.

Regarding recruitment, how do you weigh up qualifications versus experience. If someone has top grades from an Ivy League school and another a modest degree but more experience, who gets the interview?

You can have people with the right grades and the interest and passion and experience, but frankly what I’m looking for most is diversity of experience. One thing which is always important to understand is how people have recovered from their failures. It’s always very suspicious when somebody has never failed—it’s actually dangerous and may mean they’ve not tried enough.

As a company that has been pushing digitalization for a long time, how do you feel about working from home practices that have been catalyzed by the pandemic? Are you in favor or do you value that human connection in a corporate setting?

It’s flexible. Because we put that multi-hub system in place 10 years ago, every decision that Schneider makes has been on video for a long time. So we were already all very nomadic. When COVID hit, we were already in a three-plus-two [days in office situation] with a flexible definition in most places. In Asia, for instance, in the big cities in China like Hong Kong, people tend to like to be in the office, because apartments are rather small. In North America, people tend to like to work from home, especially if your commute is long. So we adapt to people, and we adapt to reality.

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You’re known as a CEO that likes to get out of the office, travel, and meet people. Would you encourage other business leaders to do that?

Of course. You can have meetings, you have to review figures, and do all the other things—but when you meet your customers, or when you meet your teams in front of your customers, that is when you have an idea about what is really happening. And not only customers—your investors, your ecosystem, people around the company. For a long time, it’s always a mix of digital and in person. But if you want to feel what’s happening somewhere, you have to go in person and get those moments. Over the past few years, due to the special quarantine conditions [in Hong Kong], I spend a lot of my time in nomadic conditions for months in a row. It’s a different way of traveling, because you stay one full week in one place, whereas before it was maybe one or two days. And that was really good because it gives you the possibility to immerse yourself, to see beyond your company, more people, and to get a deeper appreciation of what is happening.

from TIME
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