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Interview with Antoine Frérot

What are your takeaways from 2019?

Antoine Frérot, Chairman and Chief Executive Officer of Veolia
Antoine Frérot, Chairman and Chief Executive Officer of Veolia

A.F.  Our aim was to end our 2016-2019 efficiency and growth plan on a high note, which we did. This is evident in our robust, profitable growth, results that outpaced our commitments, and a host of commercial successes. In 2019, our revenue was up 4.3% at constant exchange rates to €27.2 billion, EBITDA was over €4 billion, cost savings came to €248 million, and the €760 million current net income Group share was up 13.5% at constant exchange rates.
A significant share of revenue was derived from new businesses, such as the circular economy, energy efficiency and treatment of difficult pollution. This confirms our ability to project ourselves forward into emerging markets, thereby renewing our businesses and forming vigorous new sources of growth. Take, for example, the contract signed with Toyota Tsusho in Japan to recycle lithium batteries from electric vehicles, the smart energy network management contract with the city of Braunschweig in Germany, and the extension of our hazardous waste treatment business in South Africa.

And what are your conclusions on the entire 2016-2019 efficiency and growth plan?

A.F. Over the plan’s four years, our revenue progressed an average of 3.6% annually, EBITDA by 4.6% and current net income by 9.6%. Our cost savings exceeded €1 billion. This steady and sustained progress in our growth and profitability is testament to the strength of our operational performance,the sound use of our capital, and the quality of our strategy and its implementation. Throughout the plan, Veolia furthered its leadership and methodically gained positions in the most promising growth markets.

 

Veolia’s new strategic program is called Impact 2023. Why is that and what is the aim?

A.F. In the final analysis, what remains of a company’s projects and initiatives is the concrete impact on clients, shareholders, employees and other stakeholders such as the environment, society at large and future generations. For this reason, as the program’s name indicates, we ultimately want to “have more impact”. With this aim in mind, for each of our businesses our priority will be to seek maximum impact, whether environmental, social or economic. Through this program, our Group is aiming to become the benchmark company for ecological transformation. Few companies can lay claim to having this ambition and few companies are in a position to have such an impact on the world, but Veolia is one of them. This is an honor, a duty and a strength for our Group. Being the benchmark company means you are the yardstick against which all others compare and assess themselves, the company that develops future solutions and standards for environmental industries, the company that paves the way and “inspires” others. The success of a company is measured by its achievements but also by the way it inspires other economic players and society.

 

What part does innovation play in this new program?

A.F. By innovating, we prepare and intensify our future impact. This is one of the reasons why our new strategic program places so much emphasis on innovation, for which we have selected six priority areas: health and combating new pollutants, adaptation to climate change, new loops in the circular economy, the food chain, new energy services, and digital offers that transform data into a competitive advantage.
Already, 2019 saw a wealth of innovations, such as the development of new seawater desalination technology – the “barrel” – that is more reliable, more compact and consumes less energy; the creation of a joint company with EDF called Graphitech for dismantling graphite reactors; and improvements to waste sorting robots using artificial intelligence, to name but a few. These innovations complete our value chain and are a powerful source of differentiation, putting us one step ahead of our competitors and increasing our positive impact on the environment and society.

What are the guiding principles behind Impact 2023 and its underlying financial commitments?

A.F. This strategic program, which will act as a compass for our Group for the coming four years, comes at a particularly positive time for our businesses – never before have environmental expectations been greater and the environment such a high priority.
In fact, our planet and society today are at a historic crossroads. That is why our Group has decided to focus its resources and activities on the main environmental issues facing the world, while seeking maximum impact. We will be guided by four main principles of action to derive the maximum potential from this era and our markets. First, accelerate our most promising growth and differentiating businesses by taking them into all our geographic regions. For example, the treatment and recovery of hazardous waste, the circular economy (especially plastics), energy efficiency and industrial ecology. Next, optimize and strengthen our traditional businesses, which continue to create value and some of which are a source of new opportunities, such as water and the management of heating networks transitioning to low-carbon operation. Third, slow or reduce our most mature businesses or those that have become commonplace and where we have difficulty standing out.
Lastly, continue to think up new solutions through a targeted innovation policy, and progress our younger businesses. Of course, this ambitious strategic program will require rigorous implementation if it is to become reality: rigorous cost management, rigorous debt control, and rigorous investment decisions to gain a position in the most promising businesses. In financial terms, we are committed to seeing this program generate EBITDA of between €4.7 billion and €4.9 billion, €1 billion-worth of cumulated cost savings and €1 billion in current net income Group share, while containing our debt to ensure it does not exceed three times EBITDA.
For 2020, our main aims are to pursue sustained growth in revenue, achieve €250 million in cost savings and generate EBITDA of around €4.1 billion.

"WITH IMPACT 2023, FOR EACH OF OUR BUSINESSES OUR PRIORITY WILL BE TO SEEK MAXIMUM IMPACT, WHETHER ENVIRONMENTAL, SOCIAL OR ECONOMIC."

Our new Impact 2023 strategic plan has a high ambition: to make Veolia the benchmark company for ecological transformation.

On what grounds does Veolia base its confidence in its ability to achieve these goals?
A.F. First and foremost, this confidence is based on our Group’s achievements. What has it accomplished in the past few years? First, it successfully completed its wide-ranging 2012-2015 transformation plan, then its demanding 2016-2019 profitable growth plan, exceeding the targets it had set itself in both instances.
There is therefore no reason to think it should be any different for this new program. But more than that, the intensive preparatory work by Veolia’s employees enabled us to get a head start on Impact 2023’s rollout. For example, the sale of our district heating business in the United States was finalized at the end of 2019 for more than €1 billion and is part of €3 billion-worth of planned divestments to free up capital to invest in more profitable businesses.
Another positive is the very high level of employee engagement with regard to this new program. The internal survey we conducted last September of 80,000 Veolia employees revealed that 84% feel engaged.
This figure is far higher than that for many other comparable companies and is a source of legitimate pride and even greater confidence for our Group.

How does this plan fit with Veolia’s purpose?
A.F. Our purpose describes what drives our company, the basis for its existence and its future, and the sense of where it is heading. It emphasizes the fact that its prosperity is based on its usefulness – and so its “impact” – for all stakeholders. It defines for which of the major issues facing the world we want to provide solutions. Our strategic program is totally consistent with our purpose because it focuses on impact rather than size and concentrates on the concrete response to the major environmental challenges facing the planet, industries and cities.
As it seeks to maximize our environmental, social, economic and financial impact, this program gives equal attention and the same degree of commitment to each of the stakeholders who have decided to work alongside us. Our industrial and economic decisions as a company and our choices as its employees have a varied level and depth of impact that far exceeds our immediate context.
To take account of this, we are going to use a system of 18 key performance indicators to measure our multifaceted performance for our 5 main stakeholders: employees, clients, shareholders, the planet and society. These KPIs will also serve as the basis for the Group’s senior executives’ variable performance-based remuneration.
That will be a powerful driver for attaining our goals, maximizing our positive impact on the environment and society ‒ while improving our profitability ‒ and for stepping up the world’s ecological transformation.

"OUR PURPOSE DESCRIBES WHAT DRIVES OUR COMPANY, THE BASIS FOR ITS EXISTENCE AND ITS FUTURE, AND THE SENSE OF WHERE IT IS HEADING."

Under the impetus of its Chairman and CEO the Veolia Group is one of the first French companies to have defined its purpose. He says "a business is prosperous because it is useful and not the other way round".