Sustainability Champions – Sorouch Kheradmand, VP & Global Head of Sustainability at Schneider Electric

Welcome to the fifth instalment of our Sustainability Champions Series, where we speak to leading sustainability executives across a range of industrial and manufacturing businesses.

Our goal is to understand what sustainability targets these organisations have in place, what they are doing to achieve them, and how companies can incentivise executives to achieve these targets.

In this interview, we speak to Sorouch Kheradmand. Sorouch is the Global Head of Sustainability at Schneider Electric, a global leader in assisting companies to prioritise sustainability in a way that resonates with their business to make it a competitive advantage while maximizing impact.

Who is Sorouch Kheradmand?

Sorouch, building on his Masters of Science degree and executive MBA from INSEAD, has developed extensive knowledge on sustainability, becoming a key figure in driving changes within businesses around the world.

For over eleven years, Sorouch has worked with Schneider Electric, from managing complex global projects from Japan as a Strategy Director and M&A Integration leader to leading large global teams as VP of Commercial Operations in Singapore, conceiving and launching a first global loyalty program, recognised best in the industry by CRN in 2021.

When the Covid-19 pandemic started, he began to question sustainability and the motivations of industries to make changes to the way they operate, leading Sorouch down the path of sustainability, exploring the gaming, transportation and manufacturing industry among others over more than 500 interviews, offering consulting on sustainability, which then led him to lead Schneider Electric’s Sustainability efforts towards its product portfolio first and global business ecosystem (Scope 3) then, at a global level.

We had the pleasure of delving into Sorouch’s personal philosophy and experiences of maximising sustainability as a profitable competitive advantage throughout the business world.

Entwining sustainability and profitability

Hi Sorouch, thank you for giving us the time to share your ideas with us today and giving us a different perspective with our questioning.

Firstly, what advice would you give leaders looking to make a commitment to achieving their sustainability targets?

As a leader, you cannot disregard current trends and possible risks for your business. Your role is to ensure your company can thrive today but is also future ready. We must be able to deal with the ever-growing regulatory world and trends that are coming, which I call the “Net-Zero World”, including expectations changing from the market, employees and customers.

Neglecting these trends, or treating them as pure marketing communication topics, is a mistake. Not merely as we have a crucial role in contributing towards this ‘net-zero world’ but because sustainability is a business opportunity now. Moving first with these trends increases your chance to take the space, and create long-term value and differentiation, reaping the benefits, be it financially, through improved branding or customer satisfaction.

Consider carefully what you want to end up with and how to get there. Taking the correct framework can help you chose the right topics to start with, as they align with your business models & operating models, organizational skills and even customer expectations best. By fully considering these, you maximise your strengths and your impact, making your success and differentiation more likely.

This is why sustainability cannot and should not be treated separately from business acumen. Integrating sustainability, intrinsically, within the strategy as a driving force in the markets your address is key to ensure long term shareholder and stakeholder value creation.

Should sustainability targets be aligned to financial incentives?

Definitely. They should also be tied to all matrixes that are key to the company. How they target customer satisfaction, margins, pricing, employer branding, supply chain resilience and more. Once you look at how you leverage your framework to support your business, decision making is much easier as you become able to marry long-term value creation and impact rather and take educated and intentional decisions linked to well defined strategic objectives, rather than settling for the lowest cost or easiest projects.

Who do you think is responsible for owning sustainability targets and driving the agenda within large organisations?

Bridging the science of sustainability with the art of business is key.

The focus for management should be in understanding the basics and letting the conversation happen at the board, with subject matter experts to help the right objectives, decisions and processes be set, in link with the business’ long term interests, priorities and model. It’s important to note Sustainability, or ESG (Environment, Social and Governance), goes well beyond carbon only. We see many companies focusing purely on carbon, which we call the “carbon-tunnel effect”.

Translating those in a language the organization understand and empowering them to embed sustainability into their decision-making processes throughout, to translate it in a meaningful way at every level of the company, through robust processes and governance.

I personally believe the ‘sweet spot’ of sustainability to continue this journey is standing together with corporate and business strategy.

Having a well-defined strategy that considers sustainability against your strengths and weakness, but also your competition or other industries, gives a far better platform to articulate a meaningful and impactful plan to build further, giving the best opportunity for maximal impact and value creation.

Once sustainability is embedded as part of your organisation’s business & performance frameworks – be that as an opportunity or a risk – you start to appreciate it and drive key performance indicators meaningfully.

Involvement of the leadership to drive that change management while reaching for the strategic objectives of your company is crucial. By leadership, I mean every level of the company. Middle management should communicate around your strategy thoroughly and have full accountability by being given responsibility, knowledge and tools for what they need to do and how they need to do it so that change happens at the right pace.

Building a core group of sustainability experts on relevant topics to your business can support this ramp-up process and facilitate the business transformation. They should set the streamlined processes, provide tools, define how transformation is carried out, how it is reported and drive verification mechanisms in a way that is scientific, ideally with a methodology in line with the company, industry and peers.

Just like business strategy, comparison with competition is a great way to know where you stand but also how you are differentiated. Looking at other industries is also a great way to find inspiration and learn the typical pitfalls existing.

What are the key sustainability targets for your industry?

Again, ESG covers more than carbon but let’s admit there is a huge focus on carbon today, while I am confident new areas will rise in the next 3 to 5 years, such as biodiversity and water/resource usage.

When considering carbon alone, we look at targets on embodied and operational carbon. This is usually complimented by life cycle analysis – how a product is being extracted, manufactured, assembled, delivered, used and then decommissioned – for embodied carbon. We do the a similar exercise at system levels to assess the same for operational carbon to have a broader view of how different usages within or through a system affect the behaviour and hence footprint of our portfolio for us and our customers.

For embodied carbon our targets are to minimise resource usage and waste to reduce the life cycle footprint of a product, while encouraging life-time extension where possible, but also circularity and use of green materials.

For operational carbon our targets are to improve energy efficiency, improve resiliency by managing for instance energy fluctuation prices efficiently and improve the adjusted operating income of assets.

At a company level, our new Net-Zero commitments (validated by the Science Based Targets initiative) aim to reduce our scope 3 emissions by 25% by 2030 and by 90% by 2050 against a 2021 baseline. All Schneider Electric factories and transportation, and those of our suppliers in the entire upstream value chain, need to transition towards operating without using any fossil fuel and run only on clean energy. To achieve this target, we have launched The Zero Carbon Project, which aims to cut 50% of operational carbon emissions from our top 1,000 suppliers by 2025. We are now also leading a similar exercise in the downstream value chain, being the first in the industry and beyond to do so.

How are they measured?

Our company level targets include six long-term commitments: climate, resources, trust, equality, generations and local, each with their own targets. Each quarter we assess these areas against a baseline and map the progress to our 2025 target. For example: measuring the amount of green material in our products, aiming for 50% by 2025, up from 7% baseline to 27% in our latest quarter.

We are always acting on matching industry targets by first looking at reducing, then replacing and finally when we cannot do these, we offset.

What do you think is the biggest challenge in achieving these targets?

There are quite a few challenges that are still very true for the industry in general.

Firstly, knowing how to set the right targets whilst having the confidence and ability to achieve them. Part of the challenge is educating and setting out the understanding of how ambitious companies should be with their targets to ensure compliance and having capacity to work on a high-level plan.

When you have successfully set suitable targets, the next challenge you will most likely face is skill shortage. There is a growth in the market’s availability of skills but it is far from meeting the needs. There is a very tough fight ongoing for the sustainability talents available. The values of your company and its leadership are going key to attract them as they are more sensitive and intentional than the average to pick the company and boss they will work for.

Thirdly, driving the change into the correct actions and measuring the impact of these accurately. But I often see the pitfall of technology as an answer to everything, which is a dangerous shortcut.

Whatever technology your use, make sure you ensure these are being used to their maximum potential. Purchase of high-end technologies needs support from the correct profile of people driving and maintaining them to maximise for instance energy efficiency and resource usage.

The next challenge is providing robust but adapted and well designed performance review mechanisms and governance to maximise benefits and ownership throughout the organization and understand the impact on your business and beyond.

There is no one-size fits all: depending on your business’ size and culture, you may need to go for concentrated or distributed processes and governance to maximize your success chances and build the right focus and accountability.

Finally, and that is personally the challenge that I am most passionate about and what we strive to help companies with: how quickly can you “sublimate” sustainability for your business or industry by moving away from pure compliance to actually become future proof and differentiated against your peers, with sustainability as a competitive business advantage?

I believe this challenge to be most interesting while being the key to help every business owner how he can act and prepare his business to the Net-Zero World with shareholder and stakeholder value in mind, and hence accelerate the pace of the change we all need.

That sums up our conversation today very nicely. Sorouch, thank you very much for taking the time to share your insight with us today.

My pleasure, thank you for letting me share this with you.

If you would like to discuss any of the topics raised in this piece or if you need support with your leadership resourcing strategy, please get in touch with James Pope on: James.pope@beaumontbailey.com