Good morning and good afternoon, everyone. On behalf of the executive leadership team, welcome to our 2020 Capital Markets Day, an event which will be held in a format we could have not imagined a year ago, but has now pretty much become our modus operandi. Thanks very much for joining us today. We're really pleased to see that there is strong interest from all stakeholders in our story. As is customary with these type of meetings, let me ask your attention for the usual disclaimer related to any forward-looking statements we could be making today and how they need to be interpreted. Let me now first introduce the team you will be meeting today. Virginie Duperat, our CFO, who joined Arcadis just two months ago, and who will be talking to you from Paris.
Mary Ann Hopkins, who is making the most significant sacrifice as she is connecting from Washington, D.C., where it is now shortly after 3:30 A.M. Stephan Ritter joins us from Cologne, Germany, and Alan Brookes from Manchester, the U.K. Welcome, everyone. Finally, Jacoline Blokland is with me here in the studio in Rotterdam, where we are obviously observing the appropriate social distancing rules. Secondly, let me now guide you through the agenda for today. After a quick introduction of Arcadis, I will spend some time reflecting on the past three years, talk about the commitments we made in November of 2017, and how we performed relative to these commitments.
I will then turn it over to Mary Ann, who will explain what we consider to be the most significant global market trends impacting Arcadis and how these market trends translate to very significant opportunities and demands our clients will have in the immediate future. I will thereafter explain how these megatrends, the associated client demands, and other relevant factors fed into the development of our strategy and how we arrived at the outcomes, as well as the major consequences resulting from this. We do expect all of this to take approximately 40, 45 minutes. After, we will allow you a short, about 10-minute break. After the break, Stephan Ritter will take the stage to speak to you about the significance of sustainability and digital leadership in our new strategy.
Alan Brookes will then follow Stephan to explain how our strategic direction will be put in action as it relates to the major business areas which we intend to focus on going forward. I suspect that thereafter you will be interested to hear how all of this translates into the financial framework and what our direction is on capital allocation, and Virginie will share this with you. Finally, I will be back to wrap it all up before we will give you the opportunity to ask questions. Our presentation after the break is also expected to take about 40-45 minutes, which means that we have about 50-55 minutes available for the Q&A. Okay. With these formalities now out of the way, let me get started. We normally start our meetings with a safety moment.
Since I do not need to tell you where the emergency exits are, I will now revert to more of a combined value safety moment. This moment has all to do with the current pandemic and, more specifically, how we as an organization have responded to this extremely challenging situation. It is probably an understatement to say that our world has changed. I, for one, could have never imagined that we would have to convert 27,000 people to working from home on a moment's notice. We achieved this in just under two weeks and without any major disruptions to our projects. While we did so, our people really didn't miss a beat. They continued to focus on our clients and how to best serve them. They went beyond the call of duty as our clients also needed services they never imagined they would need.
Eight months into this, we're still just doing exactly that. I find it quite remarkable that we recently delivered our third quarter results, which are arguably stronger than what we've seen in a long time. For that, I owe my fellow Arcadians a big thank you. Let me now quickly explain where we operate, who our clients are, and what services we provide to them. Whereby I do realize that this will likely be well-known to many of you. We do provide services to our clients in four different businesses, infrastructure, water, environment, and buildings, with a global footprint which we manage and report our performance in three segments. The Americas, Europe, the Middle East, and the U.K., and Asia Pacific, with CallisonRTKL being our separate architectural entity, as you know, reported separately. Our client base is roughly divided 50/50 between public and private.
From all these three dimensions, geography, businesses, and clients, we're very diversified, something which has proven to be very valuable during the current pandemic. Back on the type of services we provide. They're also described as professional services to distinguish our work from the typical blue-collar construction work, which is something we do not do. This distinction is relevant, as the risk profile associated with our type of services is obviously very low, something which is also reflected in the monetary value of an average Arcadis project, which is roughly about EUR 100,000. It's furthermore noteworthy that although we are the fourth largest global pure play engineering design and consultancy firm, we still only capture less than 1% of the annual spend in our industry.
Finally, we are obviously very pleased to see that our strong ESG resume has been recognized by Sustainalytics recently with the first place in our industry in terms of industry risk rating. Just a little bit more detail on the type of services we provide, as you can see on this slide. Firstly, most of our work is so-called local for local, which means working for local or regional clients. That said, these clients do value our local face and presence, but they also do expect us to bring our global reach to their projects so that they can benefit from the enormous amount of experience we have gathered globally.
Secondly, if you think about the global trends in the world, in particular population growth, urbanization, and climate change, I think it becomes very clear that these trends do impact all the four businesses in which we operate, and that there's actually a strong interconnection between these four businesses and the resulting impact. More about these trends later. I do realize that you're all obviously very interested in understanding our strategy for the next three years, but please bear with me for a few minutes as I look back. When we shared our current strategy with you in November of 2017, we introduced the three pillars. We said what our areas of focus would be in each of them, and how we would hold ourselves accountable for specific goals. Let me speak about the focus for each of these pillars first.
We did acknowledge at that time that we had an opportunity, and actually a necessity, to create a more inclusive culture with high employee engagement, and also a necessity to significantly reduce our voluntary turnover. We wanted to create a people-first culture and become employer of choice. We also explained that we wanted to become more agile and efficient in how we would utilize innovation, and did identify a need to upscale our capabilities to become the digital front-runner in our industry. We aimed for a controlled growth. You might recall that I actually spoke about the quality of earnings as opposed to just growth of our top line. We also communicated the importance of supporting those Sustainable Development Goals we identified as applicable to our work.
Finally, in the focus and performance pillar, we identified the opportunity to become more focused on the right countries and regions, as well as on providing the right type of services to the right clients, and on the obvious opportunity to improve our project performance and increase the utilization of our Global Excellence Centers. On the next slide, I will once again highlight the commitments we made at the time, as well as to share our actual performance against these commitments. We took our recent Q3 performance as the cutoff and are proud to share that for virtually all criteria, we've met the commitments made, except for return on capital and obviously also not on dividend over 2019, which, as you all know, we canceled earlier this year due to the COVID pandemic.
When looking at the first pillar, our people are increasingly more engaged and are also increasingly staying with Arcadis, which is what we want. We did meet our revenue growth targets, specifically with our key clients, which was and is an area of focus. We upskilled our digital capabilities, and although not necessarily a stated goal at that time, we also launched Arcadis Gen at the beginning of this year. Almost 80% of the service we provide do actually support one or more of the five Sustainable Development Goals we have identified. Finally, we're obviously very pleased with our improved financial performance in terms of higher operating EBITDA margin percentage, lower net working capital in DSO, and significantly improved free cash flow and leverage ratio. Where does that leave us as we are about to start our next three-year cycle?
Well, first of all, with a much stronger foundation. Our improved performance, our stronger balance sheet, the fact that we have resolved long-standing and painful legacy issues and have institutionalized, but not quite exhausted, our Make Every Project Count program, which focuses on better project execution, the broader use of our Global Excellence Centers, and our key client program all support that conclusion. Our sharpened focus on key regions and markets, our very strong ESG resume, and the additional opportunity of the Make Every Project Count program and the GECs, as well as the key client program, positions us very well for the megatrends in the world and for the opportunities these megatrends provide to us.
Speaking about megatrends, this is the time where Mary Ann Hopkins will share our vision on these trends with you. A very good and early morning to you, Mary Ann. Welcome to the Capital Markets Day.
Yeah, it's good to see you, Peter, virtually.
Same here. With the events of about two weeks ago, just a question for Mary Ann, and I'm specifically now talking about the elections in the U.S., which took place on November the 3rd. I'd be curious, Mary Ann, I'm sure the same is true for the audience, to hear from you how the new administration is going to impact our business.
Yeah, that's a great question, Peter. We're actually very optimistic about the Biden administration, for a couple of reasons. One, he stated that he's going to make climate change a priority of his new administration, and he wants the U.S. to become a leader in decarbonization, which will really support the energy transition market in the U.S. A second reason is that he's focused on economic recovery, and he believes that infrastructure and construction can support that recovery, and he actually specifically called out green infrastructure. We're hoping for a stimulus in the first half of 2021.
Well, you could almost say, Mary Ann, that actually the Biden administration sort of helped to develop the four megatrends you're going to talk about next. Please take it away.
Yeah. Thank you, Peter. I would like to add my greetings to everybody watching. In this section, I'm going to discuss the global megatrends that are most impacting our markets and influence the evolution of our strategy. When we started to develop our strategy, one of the first things we did was to identify trends and then assess how they are impacting our markets today and how they'll impact them in the future. We identified four trends as being the most important: urbanization, digitalization, climate change, and societal expectations. I should point out that these trends aren't all that different from the ones that impacted our last strategy cycle, but they have evolved. In analyzing them, we concluded that each one is clearly driving client needs for smart and sustainable solutions, which really aligns to the core strength of Arcadis.
Let's look at each trend one by one. Starting with urbanization and population growth, it can put tremendous pressure on cities, its citizens, and the environment. You can really understand these pressures when you look at the numbers. Three million people are moving to cities every week, and that's going to result in approximately 70% of the world's population living in cities by 2050. To give you some perspective on China, just within two or three years, they expect to have 221 cities with greater than 1 million inhabitants. In order to accommodate this population growth, there needs to be significant investment. Over 60% of the land to become urban has yet to be developed. From a mobility standpoint, the increased congestion is creating complex challenges for many cities. What does that mean to our markets and clients?
The pace of urbanization, like I said, can negatively impact the inclusivity and livability of cities if it's not managed in a sustainable way. This is driving a response for smart and sustainable solutions. For example, the mobility market is becoming more connected, optimized, and sustainable, and there's an increased demand for both light rail and high-speed rail. The buildings market, for example, is also increasingly relying on smart, inclusive, and sustainable practices to not only lower the operating costs for owners, but also deliver climate responsive and healthy buildings. How are we responding? More and more often, we're responding to these multifaceted and integrated challenges with smart city initiatives. As an example, Arcadis is right now supporting the smart city program in Mesa, Arizona, and providing program management services for the installation of their advanced metering infrastructure.
Once installed, both the city and its citizens are really going to benefit from optimized utility usage and management. The next megatrend, climate change, is already severely impacting our way of life, and this is only going to increase unless it's addressed. I think we all know some of these impacts, that the sea levels are rising and the coastal areas are losing ground. Temperatures are increasing. We saw that the last decade was the hottest on record. It's causing severe droughts. It's also causing wildfire destruction like we saw in the U.S. and Australia last year. There's an increase in the number and severity of storms, and while there's water scarcity in many parts of the world, there's too much water in other parts of the world, causing inland flooding. How is this impacting our markets?
I think we all know that there's a global imperative to combat climate change. Our government and industry clients must make significant investments to both mitigate future climate change and adapt to its inevitable impacts. One of the largest efforts to mitigate climate change is the energy transition from fossil-based fuels to renewables. There's already over EUR 1 trillion committed investment here. This is going to continue to grow as more cities and countries commit to carbon neutrality. In our markets, we already see demand for decommissioning existing power plants and for design and installation services for renewables projects. Adapting to climate change will also require significant investment around the world. In the U.S. alone, it's estimated that $400 billion is needed to protect communities and infrastructure from rising sea levels.
We fundamentally have to change how we live, invest, and build in these communities. Arcadis is a leader in climate resiliency and well-positioned to address these challenges. As an example, we're currently supporting the Louisiana Coastal Protection Authority by developing their 2023 update to their comprehensive master plan for a sustainable coast. When this plan is completed, it will provide a 50-year strategy for restoring and protecting this coastal region. The third megatrend, digitalization, is all around us. It's connected the world, it's put services directly in the hands of users, and it's put data at the center of some of the most successful companies' business models. We see this with technology companies becoming some of the highest market cap companies in the world. It's really not their size that matters, it's their influence.
They have fundamentally changed how we shop, consume news, work, socialize, and even hold virtual meetings like we're doing today. As an example, our shopping habits have been transformed and e-commerce sales continue to outpace in-store sales. This is impacting some of our markets by driving the need for new warehouses, distribution centers, and more efficient and sustainable transportation options for all of these goods. Also impacting our market is the amount of data that is being acquired, processed, and stored, which is creating an explosive demand for data centers, and increasingly these data centers are incorporating green energy solutions. It's not only impacting the infrastructure demands, digitalization in our industry, it's also spurring investments in digital services and products. More and more we see that our clients' expectations around solution delivery are aligning more closely with their personal experience with technology.
What does this mean? It usually means that they want data and insights right at their fingertips. We see this especially in the asset management field, where the expectation is that asset data is going to be collected in real time. It's then going to be analyzed using advanced analytic techniques such as the Internet of Things. It will be applied to provide insights and decision-making. Then it's all going to be wrapped in an enterprise approach that allows clients access anytime and anywhere. Arcadis Gen, our digital incubator, offers several digital asset management products which directly address this client need. As an example, Icon Water in Australia used our Enterprise Decision Analytics tool to develop a comprehensive analytics-led approach for all of their maintenance and investment decisions. This was the first application of its kind in the Australian water utility.
Stephan will go into a little bit more detail about Arcadis Gen later. The fourth and last megatrend, societal expectations, has probably evolved and accelerated the most recently. Stakeholders are demanding companies and government act with integrity and create a resilient, sustainable, and inclusive future. How are governments stepping up to this? The European Union has created the European New Deal, and that's going to provide EUR 1 trillion in sustainable investment in the next decade. We have countries like China who have committed to carbon neutrality, in this case, by 2060. This is going to create the world's largest market for low carbon technology and drive innovation. This change is not going to be led all by governments. Investors are increasingly supporting or seeking to put their money in ESG related funds.
120 of the world's largest companies supported the World Economic Forum's efforts to develop a core set of common metrics for non-financial factors, known as Stakeholder Capitalism Metrics. Finally, publicly held companies such as Amazon are pledging and increasing awareness in social justice reform. What does this mean for our markets? Well, this expanding ESG agenda of governments and business is going to drive significant investment in two areas of strength for Arcadis, the environmental remediation market and the green technology and sustainability market. The remediation market continues to grow and addresses decade-old contamination issues, but also increasingly emerging contaminants like PFAS. Far this year, we've booked over EUR 100 million in PFAS-related gross revenues, and we still have over EUR 700 million in future opportunities in our pipeline.
The green technology and sustainability market is also growing significantly. This is a market where it combines the subject matter expertise in environment and sustainability with digital technologies like analytics and the Internet of Things. You can think of this example markets such as the intelligent water market and the smart cities market. This is a real area of strength for Arcadis, as evidenced by benchmarking firm Verdantix recognizing Arcadis for a second year in a row as a leader in digital environmental health and safety. In conclusion, our summary, the four megatrends of urbanization, climate change, digitalization, and societal expectations continue to move our markets and clients' needs towards the core strengths of Arcadis offering and are increasingly putting sustainability at the core of everything we do. With that, I'll turn it back over to Peter.
Yeah. Thanks very much, Mary Ann. Thanks for a very clear explanation as to what is happening in the world, how that creates and influences these megatrends, and how that in turn then creates opportunities for Arcadis, which we're already capturing as we speak. Thanks very much. After this explanation by Mary Ann, let me now take these megatrends and explain how they have been used as the basis for our strategy, how they were combined with other major data points and factors such as client developments and requirements, competitive landscape, internal capability assessment and geopolitical issues, and ultimately culminated in a new strategy maximizing impact. In doing so, I will bring a very significant effort over the past six months back to about a 15-minute presentation.
As I said, we obviously started with the four megatrends, which are impacting societies, are impacting our clients, and which do indeed provide the many opportunities Mary Ann spoke about. We then added what we see as the major expectations our clients will have from Arcadis. In addition to the to-be-expected largely core technical capabilities, which we obviously need to demonstrate at all times, our clients now increasingly expect us to help them in designing resilient assets, which can, for example, withstand the potentially detrimental impact of climate change or advise them on their energy transition. They also expect us to deliver our services and products in a digitalized way, which in turn allow them to scale them where applicable. Finally, they expect us to put ourselves in their shoes to really understand what the end users desire.
The obviously very relevant question when looking at these megatrends and client demands is how Arcadis can benefit from it. I'm convinced, as I already mentioned before, that we are in a great position to do exactly that. I believe we are in this excellent position because of our much stronger foundation, but also because of the global expertise and experience we have in the businesses which are most impacted by the megatrends, businesses which will inevitably see very significant investments to make them more sustainable, to make them more resilient, and to make them more future-proof. Arcadis obviously has a very rich resume, one which combines extensive and deep asset knowledge with a strong ability to proactively integrate sustainability requirements into the design. In addition, we already now see the growing demand for digital products and services through the launch of Arcadis Gen.
With the many opportunities available to us, it will obviously also be again important for us to make choices and to focus our business even further, just as we have done in the past three years. Let me use the next couple of slides to explain what this entails. Our purpose as an organization is actually quite simple and hasn't changed. It is to develop human-centric solutions that improve quality of life. To propel our ability to meet the increasing demand we see, we will use the power of three elements which will allow us to maximize impact. The first element which will maximize impact is through embedding sustainability in literally everything we do, including in every solution we offer to our clients.
The second element which will allow us to maximize impact is through digital leadership, enabling us and our clients to make data-driven decisions in the creation of efficient and resilient assets. Our last element for maximizing impact is to further advance the focus we already applied in the past three years, and to scale our solutions for global application. Let me unpack each of these further. As I've mentioned before, projects totaling just under 80% of our revenues contribute already to one or more of the five Sustainable Development Goals we have identified. Whereas this is significant, it's not enough.
We do need each and every project to be designed and delivered with the certainty that we have considered all relevant sustainability requirements, and with the necessity to clearly, and in a very tangible manner, articulate to our clients how our solutions have contributed to a more sustainable world. We need to do this in a consistent and deliberate way, effectively leveraging the tremendous capabilities and experiences we have available within Arcadis globally. In addition, we will need to become a leader in creating a diverse, equitable, and inclusive culture reflective of the societies in which we operate, and allowing our people to bring their whole self to work, and to continue to give back to communities like we do today, for example, with our shelter program. We have come a long way in the past three years in establishing ourselves as digital front runner.
Also here, we will do more going forward. Arcadis Gen has taken off and is an ideal springboard for us to broaden and grow the delivery of digital products, and to offer software as a service, and in doing so, create recurring revenue streams. The upskilling of our employee base through Expedition DNA has been truly exemplary. These improved capabilities will now enable us to drive innovation more efficiently with a strong focus on the opportunity for scaling and for global application. We will continue to invest in the creation of a common Arcadis technology platform, as well as in selected opportunities to enhance our capabilities. The recognition as a leader in providing digital EHS services, as explained by Mary Ann just now, indicates that we are on the right path. The third and last opportunity is to maximize impact through focus and scale.
By once again being selective about countries and regions, about clients and projects which provide us with a right to play and an opportunity to win. We have created significantly more transparency around the right data we need to make the right decisions. As for instance, evidenced through our key client program. We, however, still have additional opportunity available to further leverage and grow the capabilities we already successfully deployed during the current strategy cycle. Such as Make Every Project Count and the Global Excellence Centers. Finally, our focus is also being reflected in our decision to consolidate our current four businesses into three global business areas. Resilience, Places, and Mobility. To summarize what I just explained, here is an integrated view for you.
The four megatrends have a distinct impact on the requirements our clients have, which put the onus on Arcadis to satisfy these requirements to the best of our ability. Our strategy will use the strong foundation we have created to accelerate our impact in three ways. Through the offering of sustainable solutions in all we do, by providing the digital leadership required to be efficient and relevant, and thirdly, through focusing on the right opportunities and to use our technology and organizational platform to simplify, to consolidate, and to scale. The consolidation to three global business areas will be a phased approach, which will be delivered through 2021. Ultimately resulting in full global responsibility for delivery to our clients in these respective global business areas. In addition, we believe that it is also our responsibility to ensure that we satisfy all stakeholders.
Let me now explain why I think this is not as difficult as it might sound, or as it might have been in the past. I think it's fair to say that I can't recall a time in my life during which the interest of all stakeholders have converged as much as they have now. Virtually everyone is convinced about the necessity to combat climate change, to solve inequality, to create sustainable solutions, and to act in a socially responsible way and balance the impact on the planet with the opportunity to make a profit while protecting people. These consistent expectations all stakeholders seem to have are shown at the bottom of this slide. With that as a truly strong, aligned foundation, I'm actually convinced that it is not too much of an ask to also satisfy the more unique needs each stakeholder group individually might have.
This concludes the first part of our presentation. I do hope that you found it insightful and interesting. We will now actually show a brief video summarizing what we have shared with you so far.
We continue to see significant changes to the world around us. Changes to our urban landscape, climate change, putting pressure on resources and requiring cities and businesses to become more resilient. Demands on housing, commercial property, and infrastructure, and the potential to empower data, unlocking decision-making and automation for our clients. These trends continue to accelerate, increasing clients' demands and shaping our future strategy. To maximize that impact, Arcadis are focusing on three key business areas: helping clients to use, renew, and protect essential resources, capitalizing on our experience in North America. Through human-centered design, we will create the spaces people need to work and live, building on our successes in Asia Pacific, and keeping cities and people moving and connected, as we are doing across Europe. These complex challenges require the proven expertise of Arcadis.
Over the next three years, we will maximize our impact by putting sustainable solutions at the heart of what we do, leaving clients more resilient, effective, and secure. By simplifying operations and focusing on leveraging our experience and global scale. We will continue our drive towards digital leadership, targeting investment on digital products and services, and investing in the skills of Arcadians to maximize their impact. In three years' time, we will be measuring the impact of all our projects against the United Nations Sustainable Development Goals. Our clients will know us for giving them access to digital solutions that maximize their impact, and we will have a reputation for the best training when it comes to skills in digital and sustainable leadership. We are Arcadis. We exist to improve quality of life.
Welcome back. I hope that you are as eager as we are to continue, and we're going to pick up the pace. First, Stephan Ritter is going to explain once again why sustainability and digital leadership really matter. Thereafter, Alan Brookes is going to share with you how we take strategy in action, and he will share some wonderful real project examples with you. Virginie will talk to you about the financial framework and the capital allocation. I'll come back to wrap it up. Good morning, Stephan. Also welcome to you into the Capital Markets Day.
Hello, Peter.
You've been responsible, Stephan, for innovation for the last three years. What the audience probably wants to know is what has gone really well, and where do we have opportunities to further improve?
Yeah. Let me start with the positive. I think we created a very clear strategy, clear framework, and a common language to provide a lot of clarity of our digital and innovation agenda over the last few years. At the same time, provided our 28,000 people in Arcadis the opportunity to proactively engage through Expedition DNA. That created, again, a lot of clarity, but as well, a lot of energy and enthusiasm in the organization. From a cultural perspective, I think we've done really well. The opportunity to improve is, I think, connect the business strategy more closely with our technology approach. That's, of course, something that we will be addressing in this strategy and in the years to come.
Excellent. Well, it's up to you now to explain why digital leadership and sustainability are so important to our strategies. Please go ahead.
Thank you very much, Peter. My name, Stephan Ritter, Chief Innovation Officer at Arcadis, and I have the pleasure to talk to you about two of the main themes of our next three-year strategy, which is sustainability and digital leadership. Let me start with sustainability. Why is sustainability so relevant? It is relevant for us because it is relevant for our shareholders and stakeholders. Our user expectations, client expectations are shifting, and you can see in the example below that our clients don't just expect us to respond to their needs, but they expect us to be progressive, to be provocative, to be challenging them so we can together develop strategies and concepts how our clients can become better in sustainability and as well, help their clients to become more sustainable companies.
Investors increasingly demand ESG progress, as you very well know, and people are choosing sustainable companies. Purpose-driven organization like Arcadis does drive loyalty and reduces turnover quite significantly, and as well, enables us to attract talent in a better way. Why is Arcadis so well-positioned to lead in the sustainability space? It's quite simple. Our DNA is built on sustainability. It's in our roots, founded in 1888 as the Association for Wasteland Redevelopment. It's in our logo, the fire salamander requiring balance. It's in our name. Arcadis is derived from Arcadia, the finest place on Earth to live. It's in our purpose and has been for a long time, improving quality of life. Sustainability is very much who we are, and our DNA is built on sustainability.
On the timeline below, you can see a few data points that I will partially talk about in the next few slides. How are we delivering on our purpose? Three areas of focus. Business operations, people and communities, as well as client solutions, of course. We embed ESG best practices into our operations and report transparently on our performance, very much our license to operate. We cultivate a workforce that is diverse, inclusive, and empowered, and we continue to empower our people to engage responsibly in their communities. The biggest impact we have is through our clients, providing solutions that address our clients' greatest challenges, of course, is the area where we have the biggest impact and where we can differentiate.
Let's go through the three areas in a little bit more detail. We are leading in ESG rankings, and Peter already mentioned we ranked number one in our industry from Sustainalytics and as well, top 5% in our industry from EcoVadis, a more client-focused rating agency. For the years to come, we will continue to lead ESG rankings within our industry. From an inclusion and engagement perspective, our voluntary staff turnover has reduced over the last two years, down to 9.4% this year, which was of course, a little bit as well, COVID-related. We'll, in the next three years, have the ambitious target to reduce our staff turnover to below 10%. Women in workforce as a percentage of the total workforce, we have improved and will continue to improve to a level of above 40%.
Of course, women in workforce is not the only measure of diversity, but it's one of them, and an important one. Yes, we will continue to engage with our people, enable our people to give us feedback on what can be done better, and having a good understanding of how our people engage with us as an organization. When you talk about sustainable business operations, of course, you need to talk about emissions reductions. We've reduced our emissions by 33% over the last few years and set ourselves clear targets for the years to come. Reduce emissions aligned with a 1.5% science-based target before 2030, and be carbon neutral in our operations from this year by investing in high quality certified abatement and compensation programs. When we talk about people and communities, let me start with the World Business Council for Sustainable Development.
We've been a contributor since 2014, and Peter has been a member of the executive committee since 2019. Being part of those associations is very important so we can share our thought leadership, but as well, learn from what other companies in our industry, but as well in other industries are doing. What is even more important is how we engage and empower our people. We've been doing this through Expedition DNA, a engagement program for 28,000 Arcadians that gives them an opportunity to proactively contribute to our strategy. We launched it about three years ago to drive the cultural movement towards our digital and innovation agenda, and we're now expanding it towards sustainability to accelerate our sustainable development.
Two examples how we interact with the communities, Local Sparks, where we help our people who want to engage locally in their communities, and UN-Habitat, a partnership that we've had for 10 years that we are very proud of with 120 global missions, having 2,200 Arcadians participating. On Expedition DNA, Local Sparks, as well as UN-Habitat, I would like to share that this would not be possible without the Lovinklaan Foundation, I do want to take this opportunity to give a big thank you to the Lovinklaan Foundation. As I said at the beginning, the biggest impact we have is through sustainability driven solutions with our clients. Let me give you three examples. Arcadis is holding a patent on sustainable soil remediation, TISR, that helps multiple clients across the world to reduce their life cycle cost by up to 50% compared to conventional technologies.
We're designing bicycle connections in Los Angeles, ones of the most polluted cities, congested cities in the world. Of course, to allow people to move more safely, healthier, as well as more environmentally friendly. We are designing sustainable offices, in this case, at the Triodos Bank in the Netherlands, where we enable the client to design bio-based with reused materials, energy neutral, and with closed water circuits. With that, I would like to conclude my presentation around sustainability and would like to continue with sharing a little bit of our thoughts around digital leadership. Again, digital leadership is very much a continuation of our journey so far. We have three areas that we will focus on, building a technology platform, rethinking the way we work, and positive disruption.
We continue to invest in our technology foundation to digitize our core business and to build digital solutions and products. We continue to rethink the way we work, developing and engaging our people and partners to develop innovation towards end users and clients. We continue to focus on positive disruption by building scalable SaaS products that connect the asset knowledge of Arcadis with scalable business models, and we do that through Arcadis Gen. Again, let's go through these three pillars in a little bit more detail. Through a consistent enterprise and data architecture, through common security standards and the ability to provide those services and the hosting in the cloud, we invest into a common technology platform. That foundation allows us to enable standardization and automation.
It allows us to enable to capture data that we create every day, to connect it with client data and store the data in a way that we can accelerate scalability and value creation. That acceleration allows us to differentiate in the market space in two ways. To deliver digital solutions, so we can deliver improved client experiences at margins that are beneficial for Arcadis, secondly, through delivering scalable products in order to deliver recurring and scalable revenues, as well evolving our business model. When we talk about rethinking the way we work, we always talk about how we can grow our people. We grow our people by providing them with the clarity that we have on the creating a common framework, the same language, so everybody can contribute, of course, as well, build the capabilities of the future and a strategic workforce of the future.
We do that through Expedition DNA as one tool with a very high participation rate, as I mentioned before. Let me talk a little bit about innovation. When we talk innovation as a process, we look at it from three lenses: desirability, viability, and feasibility. It really starts with very clearly identifying what is actually the problem we are trying to solve. Once we have identified that need, that problem, we then start developing a solution that makes sense from a business perspective for our client as well as for Arcadis. Once that is clearly scoped, we think about what is the technology and is it doable from a technology perspective? Secondly, innovation can never happen in isolation. It requires co-creation with clients, with end users, with ecosystem partners.
One good example that many of you know is our collaboration with Techstars, where we basically helped 20 startups to be more successful, and they helped us to be more successful. As well, with a company of 28,000 people, you want to as well capture the creativity, the ideas, the entrepreneurship of our people. We do that through the innovation framework and then applying the three lenses I just talked about, very consciously decide which ones do we invest in and which ideas do we want to scale globally. Another area of focus is, of course, the increase of efficiency and productivity. We do that through the standardization of core services and functions, through putting the Global Excellence Centers in a leading position, as well as making sure that we use and reuse data for improved client solutions.
Let me talk a little bit about Arcadis Gen. Arcadis Gen we created at the beginning of this year, very much in order to act as a catalyst to accelerate our dual transformation, in order to develop new business models faster and scale them globally and position ourselves more closely to technology and startup ecosystems. In the end, of course, with a purpose of driving differentiated client and shareholder value and delivering recurring and scalable revenues. When you look at the product examples that I showing below, Mary Ann has already talked about a great Enterprise Decision Analytics example in Australia. Let me talk about maybe two more. Applied Insights, for example. Applied Insights is a platform that allows the development of data analytics applications that help clients to optimize their investments, specifically in a constrained environment, which we currently have.
Second example is Enterprise Asset Management, where we fundamentally help clients to streamline their processes, to understand the data of their processes, to collect that data, to move that data into information and knowledge, and then better decision-making, how to run the assets. In this particular case, for a U.S. rail client, where we were able to reduce cost by 40%, that then that client could reinvest into their operations and into better rail services for their clients. With that, I would like to conclude my presentation, and I like to hand it back over to Peter. Thank you.
Thanks very much, Stephan. I think it was a very clear story, explaining how our heritage and our pedigree is rich, how sustainability is not something we need to tell people to do. It is in our DNA. It is in the passion of our people. Also for sharing the tremendous work which has been done to create that digital leadership over the last couple of years, and we will greatly benefit from that foundation. Thanks very much.
Thank you.
Welcome, Alan. How are you this morning?
Very well. Thank you, Peter.
We're going to move on to strategy and action and allowing you to explain why global business areas are important. Before we get there, I know that people in the U.K., just like people in the Netherlands, love to talk about the weather. What have you seen in terms of weather changes over, say, the recent period?
Well, correct. I'm here in Manchester this morning, of course, we've seen rain once more. Perhaps linked to that is floods. I think we've had flood alerts already this week. That's not untypical right now, but it is quite a change, I think we can see the climate change coming through. I think therefore, it's going to be really important, not just in the U.K., but around the world, where the changing weather patterns are going to influence the decisions that we have to make. I'm sure will be a key part of our strategy going forward.
Yeah, I think that we can probably all relate to that. With that, Alan, please get started. You have some great information to share, and particularly the project examples. Things we already do for a living, I think will be very meaningful to our audience. Please go ahead.
Thank you, Peter. Let's have a look at turning our strategy into action. We've already heard today from Mary Ann, and we've looked at the megatrends that we can see around the world: urbanization, digitalization, societal expectation, and of course, climate. We looked with our clients to see what the changing needs are of our clients around the world impacted by these megatrends. Through the strategy process, we started to develop our solutions and look where we have real expertise and experience. We can use this to accelerate our profitable growth in the future. Let's have a look at the three global business areas that Peter referred to: Resilience, Places, and Mobility. It would be quite easy to say that Resilience is environment, water, and energy, Places is buildings, and Mobility is infrastructure. Actually, it's so much more than that.
These global business areas can connect us across the world to the work that we do and our expertise. As you will see on the chart, we've now started to develop our solutions to address these megatrends and our clients' changing needs. If we look at where our expertise is in the world, we can see, for example, in America, we have really strong resilience expertise, and we see demands for this in Europe. We can move our expertise and target our markets and clients in other parts of the world. The same in places, real strength in Europe and the U.K., of course, in CallisonRTKL. We can bring this to bear and target other parts of the world. Of course, the same in mobility.
Mobility has strength in parts of Europe, Asia, Australia, and we can then use that to develop our target markets. This is not to do everything everywhere. This is to develop our solutions into the target countries. If we start to have a look next at resilience as a megatrend and a global business area, what we see is that we've got expertise, yes, in water and environmental, but also in energy transition. We see the regulations coming in around the world from different governments and obviously environmental pressures. We're developing our solutions, looking at our target markets through the strategy period, and connecting and collaborating to accelerate that profitable growth. Let's have a look at the megatrends that we see. For example, not surprisingly, we can see governments targeting zero emissions. We can see the demand for increasing environmental stewardship.
We've seen this, if you like, with the people asking more for us to take care of the planet. We see urbanization causing pressure on our cities and on our water supply. What we've been doing is talking to our clients, looking at the solutions that we can develop, and how we can help them by focusing where we're strong and building out into our target markets. Let me give you some examples. For example, Amsterdam has already targeted to say they want to be natural gas-free by 2040. They turned to Arcadis and said, "Help us on a program to achieve this goal." We start to look at our sustainable solutions around energy transition, and we start to then develop a new program to help the clients move to achieve that natural gas-free target of 2040.
As I'm sure you can understand, that's a small example, but a hugely scalable example across the world, and we can target this in other cities. A second example I could give you is in remediation. We see, as was referenced earlier, PFAS as a contamination of our soil through firefighting substrates. We've got huge strengths in America that we've already used to target Australia. The PFAS strengths that we have, we've already identified the target markets in Europe. We take the expertise, we look at the target markets with our client need, and then we can grow across the world. The last example here I would give you is Tarrant Regional Water District in America. They've come to us and said, "Actually, we need a safe water supply.
Can you help us understand how to optimize this?" We've looked at our solutions and our technology solutions for real-time reporting. We've looked at our asset management skills and capabilities and really produced a real-time energy consumption optimization tool and delivered this to the client so that technology can make a difference. Again, we can see there are other companies and clients around the world that will need these skills. Let's have a look now at our second global business area, places. This is typically where we all live and work. Our homes, our schools, our hospitals, the rail and bus depots, if you like, transportation hubs. Places has got huge skills around the world already in Arcadis. What we've recognized is the changing needs and the need to target our new solutions into other parts of the world to achieve that profitable growth.
Let's have a look at what we're seeing as the trends. We've already seen that buildings generate 40% of the annual global emissions. Many clients are understandably worried about this and asking how to improve. In digitalization, we've already seen smart buildings, this market growing four times faster than the industry average. In urbanization, the population growth, combined with the pressures this brings on transportation, on the way we live and work, has caused clients to say, "How can I improve?" Again, we take our global expertise we see in the world, and then we bring this to bear in a focused way on target markets and clients to deliver that increased growth. Let me give you some examples in places. First of all, a client in the U.S., in San Francisco, building a really tall residential tower.
As I just said, buildings are 40% of the global emissions. How can we improve this? How can the client really improve the way that they deliver a high-rise tall tower? Well, we analyzed this really carefully. We looked at the construction process, and we've reduced the construction waste by 75%. We've brought in grey water as a reuse within the building, and this has achieved a LEED Gold standard for a residential tower. Quite an achievement, but you don't have to think too hard to say, well, this is a very scalable solution right across the world. If we look at another example, in Costa Coffee, we have a client who has many coffee shops, something I'm sure we're all used to. They said to us, "How can we manage our rollout program better?
How can we manage the refurbishment of our shops better?" We've introduced our solutions to them in digital cost management, in project management, and created new technology solutions. We've done is integrated the cost process into a real-time data platform. This allows the client instant access to the costs and the program, so he can make better, more informed decisions faster. Again, a very scalable solution, but one that will also accelerate our own growth as we demonstrate this to other clients. The last example I'd like to share in places is a university. There are many, many universities around the world, and it's not uncommon that they have a broad portfolio of buildings of different ages.
In the University of Manchester, the client asked us to look at the life cycle of the buildings, the asset modeling, if you like, as how they use the buildings, and how could they then improve sustainability? Something many clients are clearly focused on right now. What we've done is created an asset life cycle and technology solution for them to look at how they can improve the use of the buildings, improve the refurbishment program, and where buildings are no longer fit for purpose, how can they repurpose those buildings to a better use? There are many, many universities around the world, so I'm sure this is a really good target market to accelerate our growth. Finally, let's have a look at mobility. Mobility is how we move people and goods around our cities, around our countries and the world.
We use roads, we use rail, we use ports, and we use airports. All target markets for Arcadis. We have really strong expertise in different countries that we can bring to bear on target markets for our future growth. Let's have a look at what we're seeing as the trends. Well, first of all, we see climate, extreme weather conditions. I'm sure we've all, in different parts of the world, seen the impact of climate on the way that we move around. In digitalization, we see clients looking to optimize the energy efficiency of public transport. We have an example here in the U.K. of HS2, the largest infrastructure project in Europe, where we're supporting design innovation to support the reduction in the carbon emissions to more than 40%. We see traffic congestion in our cities. We see increasing demand in urban areas. Let me give you some examples.
In Georgia, we see congestion is a problem and commuter times are lengthening. By focusing on standardizing the way that we approach the work with this client, we can automate what they're doing and what it's using. We've got mobility management as a solution that we've already been developing. What this has done for the client is allowed him to analyze better and deliver safety improvements whilst actually cutting the congestion and reducing commuter times. The second example here is a major U.K. client in Transport for London. They have nine underground lines and above-ground transportation systems. This is a client where we've led with Arcadis Gen. Stephan referred to our Enterprise Asset Management tools. Well, this client has asked us to look at how we can improve their asset management. What does this mean in reality?
Well, by a single integrated system for all their transport lines, we can optimize the maintenance, when it's done and how it's done. By optimizing this, we reduce the downtime for the clients and improve their cost efficiency. This new technology solution is something that can be rolled out to any major transportation system around the world. A great benefit. The last example I'd like to share in mobility is back to Amsterdam. Again, looking at the commuter experience. Our clients, if you like, are looking to say, well, their own clients need an improved experience, and how can we achieve that? Well, we've developed a solution, which is mobility as a service.
This is an app, and we're all used to using apps, but it looks back on past data. It looks at the existing situation and then recommends on the app to the customer the best routes that they can take. This is real technology as a solution using our core skills, but by bringing those skills to bear from around the world, we can target markets and increase and accelerate our growth. If we put all of that together, what we're really looking at is accelerating Arcadis' ability to address these client needs that result from the megatrends which we're seeing. For our clients, it optimizes access to our global capabilities and experience, delivering best-in-class solutions to them in an efficient way, and introducing products and digitalization in what we do. For Arcadis, it means that we're more focused.
We can actually target clients and countries where we have a right to play and the ability to win. We do not try and do everything everywhere. We increase the opportunity to standardize and automate and digitalize what we do. We can then increase our performance improvements, building on the work we've already done with our initiatives, like Make Every Project Count, like our use of our Global Excellence Centers, and the benefits that we've already seen from our key client program. This will mean that we're more focused, that we can bring the megatrends and address them in the changing client needs, and truly in a collaborative way, accelerate the profitable growth of Arcadis. with that, Peter, I'd like to hand back to you.
Well, thanks very much, Alan. I'm not sure that there's much I can add to this great summary other than probably saying that the message you have clearly conveyed is that the capabilities we have through the consolidation into three global business areas will put us in a really great position to address the megatrends we see in the world, and you've done so with project examples which everyone can clearly relate to. Thanks very much. Good morning, Virginie.
Good morning, Peter.
I think everyone who has moved to a new company knows that that comes with some special moments. You moved to Arcadis back in September, which obviously gave you the special moment, but you did so in a very special situation. Maybe tell us a little bit about how the integration has gone so far, and whether you have actually seen any surprises since joining two months ago.
Thank you, Peter. Maybe if I need to choose something, I would say that really, I am amazed by Arcadis' adaptability and their ability to work so efficiently in a full virtual mode to maintain a true team spirit. That's straight. I am able to feel it. Even me, even being alone, and even if my onboarding has almost been entirely virtual, I can feel that heat of everyone around, and that's just fantastic, I think.
All right. Thank you. Well, this is the moment to allow you to present how everything we've shared so far translates into financial numbers, which is obviously also of interest to the audience. Please go ahead.
Thank you, Peter. Let me turn, yes, maybe to the context of the presentation. I'd like to come back first on what we've been achieving over 2017-2020 plan. Over the last cycle, executing our strategic priorities allowed us to improve our performance. Looking first to the left chart, net revenues grew in line with GDP across the cycle, resulting from solid client demand, a successful setup of our key clients program, and the emergence of more digital solutions. In parallel, we focused on improving our project delivery and launched an MEPC program. We proved to be very voluntary in using our Global Excellence Centers and addressed underperforming businesses and existing legacy issues. With that, over the cycle, operating EBITA grew from 7.6% to 8.6% quarter to date, as you can see on the middle chart.
Moving now to the right chart, DSO significantly improved, down to 82 days, and net working capital percentage is at 16.6%, resulting from management increased attention and a change in the group incentive schemes to add operational focus on free cash flow generation. As such, cash generation increased over the period. During that cycle, we used our cash in return to our shareholders, as you can see, and we also did some opportunistic M&A while we identified building blocks to add to our capabilities. It's also worth mentioning that a large amount of cash has been used to clear some legacy issues, such as ALEN, including EUR 65 million in H1 2020.
The focus has been to strengthen the balance sheet, reduce the net debt amount, which is EUR 195 million end of Q3 2020, and consequently, deliver a low leverage ratio and remain far below covenants. This allows to start this new three-year strategic plan with a robust balance sheet. With this brief summary of the group achievements in terms of financials over the last strategic cycle, I think we can turn to the financial objectives we set to ourselves for the 2021-2023 plan.
As explained by Mary Ann, the group is well-placed to benefit from promising market trends and growing client demand and markets, focusing on continuing our successful key client program, as well as enhancing value proposition with sustainable solutions, global leverage, and more digitized. We expect to be able to deliver net revenue organic growth of mid-single digit over the cycle. We will support this revenue growth with operational efficiencies.
We will focus, first, on achieving full speed return from Make Every Project Count program. Secondly, on benefiting from the geographic footprint refocus we have undertaken. Moreover, we will further increase Global Excellence Centers utilization and use this capability to streamline work processes and ensure the highest quality level across the organization. Finally, we will simplify and streamline our organization, embedding some of the savings achieved during 2020 to face COVID crisis as more structural savings while defining Arcadis' new normal. For us, this will notably mean achieving our carbon neutrality commitment, reducing our travels, but also delivering a different setup of our office footprint and reduce it by 30% over the plan. The combination of all these elements should lead us to deliver an annual EBITA margin above 10% by the end of the plan.
On top of these net revenues and EBITA targets, we intend to keep our focus on reducing further our DSO, which should decrease below 75 days. Net working capital strict management should allow to get below 15%, and consequently, return on net working capital should be in the range of 40%-50%. As a summary, maintaining our focus on cash and efficient working capital management, the targets we set today to deliver an organic mid-single digit net revenue growth over the cycle and an annual EBITA margin we expect to be above 10% at the end of this strategic cycle, combined to these cash management targets, will allow the group to deliver sustainable cash generation. With this, our capital allocation should be framed as follows.
First, we will invest EUR 40 million-EUR 60 million per year over the cycle, mainly on technology and digital capabilities, building on our investment on our ERP and accelerating the development of our technology platform while embracing new ways of working, as explained earlier by Stephan. Secondly, we intend to go on investing on small to medium size both on M&A operations. As such, we would consider opportunities which would allow us to expand our global footprint in line with our strategic priorities, but also those which would strengthen our position as digital front-runner. Finally, we confirm our intent of a dividend payout ratio of 30%-40% for this strategic cycle, complemented with share buyback to avoid dilution, and eventually add additional returns when appropriate. While keeping a disciplined leverage of one to two over the cycle, the group shows its ability to generate sustainable value creation.
With this, I will hand you back to Peter for the wrap-up session.
Thank you very much, Virginie, for a very clear, comprehensive presentation. Also thank you very much for becoming Arcadian so quickly. I want to take a moment to thank the entire team for delivering our new strategic plan. I trust that this presentation has helped you to understand how we plan to capture the right opportunities for Arcadis and how we plan to create profitable growth by taking advantage of the significant global megatrends. I will now wrap this up with a final summary of our commitments, which builds on what Virginie just shared, as well as some final closing comments. Just as we did three years ago, we want the commitments we hereby make to all of our stakeholders to be a mix of financial and non-financial targets and ultimately let them culminate in fully integrated reporting.
I'm not going to dwell on the financial targets, as Virginie went over those just a minute ago. Suffice it to say that virtually all are a further improvement compared to where we are today. We simply aim for predictable and sustainable profitable growth while satisfying the interest of all of our stakeholders. In terms of non-financial targets, we want to further advance our course to be an employer of choice through continued low voluntary turnover and continued higher engagement. We'd like to do so by creating a more diverse and inclusive culture, one which truly reflects the societies in which we operate. Finally, it goes without saying that we commit to further lowering our carbon footprint, but more importantly, that we plan to, in a more tangible way, define how the work we deliver to our clients contributes to a better and more sustainable world.
I realize that we have shared a lot of information with you, but let me please summarize the main takeaways for you. Looking back over the past three years, I believe that we have come a long way. Our performance has steadily improved even during the unprecedented current period, during which the world is grappling with the impact of the pandemic. Our voluntary turnover is significantly lower. Our EBITDA margin percentage has increased, and the lower net working capital and strong free cash flow, in particularly this year, brought the leverage ratio down to the lower end of our target range. We have resolved a few, at times, painful, long-standing legacy issues. It is fair to say that we're starting our next three-year cycle from a very strong foundation.
Looking ahead, it becomes very obvious that the combination of population growth and urbanization, climate change and social, societal expectations, excuse me, require very significant measures for the world to take in order to create a sustainable future in which the environment and economic developments are balanced and inequality will be something of the past. We clearly have the capabilities, the skills, and the experience to support our clients in creating the necessary solutions. Our new strategy sets the course for us to maximize our impact by delivering resilient and future-proof solutions. For the past three years, we focused on laying the groundwork, and now we will accelerate our strategic progress. We will further leverage our global scale and consolidate our expertise by concentrating on three global business areas: resilience, places, and mobility that all offer the solutions that our clients need.
In creating these solutions, the consistent central themes that all stakeholders demand is the requirement to deliver sustainable solutions and to act in a socially responsible way by demonstrating ESG advocacy and leadership in all we do, or to say it differently, that Arcadis will weave the orange sustainability thread through all of our solutions, whereby it goes without saying that digitalization will be the most significant enabler. We deliver services which do need to benefit societies in the broadest possible sense, and the citizens who make up these societies and provide them with so-called human-centric solutions. Who to better provide these services than my fellow Arcadians through the power of an increased global collaboration between the 28,000 men and women who make up this company.
Through the pandemic, we have demonstrated that our strong focus on where we can win, combined with the technical skills and agility of our people, as well as the improved operational efficiency, creates very strong performance. And last but not least, the stronger foundation we have now created, the undistracted focus of our employees on projects for which we have a right to play and an opportunity to win has enabled us to significantly strengthen our balance sheet, and the current, very unique circumstances have reminded us once again about the value of this. Building on the strong foundation, the strategic plan includes raising the targets combined with clear capital allocation that will result in sustainable cash and value generation. all of this gives me great confidence that we are in an excellent position to maximize impact for all stakeholders. Thank you.
Thanks, Peter, and of course, every one of our executive leadership team for your presentation. Before we start in a minute with the Q&A, I would like to briefly explain the Q&A procedure. In case you dialed in via Zoom, please raise your virtual hand if you have a question. Via the chat function, we will let you know when a live video connection to the studio will be facilitated. Please limit yourself to a maximum of two questions at a time. If you have dialed in via the webcast functionality, you can raise your question via the chat function. We aim to answer as many questions as possible in the next 45 minutes. In the case it will not be possible to address your questions in this live event, please reach out to us, to Christine or myself, and we will follow up.
Now it's time for the first question. I see that Hans Pluijgers from Kepler Cheuvreux has our first question.
Yes. Good morning.
Hello. Good morning, Hans.
Good morning, ladies and gentlemen. Thanks. If I can ask two questions, I will limit my two, although I have a lot more. It was a very interesting presentation, so a lot of new things. First, looking at, of course, financial targets. Your top line, your net sales growth target, mid-single digits per year. How should we interpret this, first of all? Are you talking about 5% or, let's say, between 3% and 5%? Could you give a bit more granularity on that? Especially, how do you see it in light of the current pandemic and uncertainty visibility? Are you already, let's say, you will see it really as an average or really each year you would expect to reach it already in 2021? Could you give more granularity on that, how you see it, especially for next year? Then secondly, on capital allocation.
You already indicated that you would do somewhat more on M&A and that in principle you would distribute additional cash when appropriate, which gives more granularity what you mean with appropriate. Is that meaning that you distribute any cash below one times net debt to EBITDA? Or with the exception of course, if you have M&A in the pipeline, could you give some more freedom on that, how precisely that we should see that?
Okay. Thanks, Hans. Peter, two questions. One about top-line growth and the other one about cash allocation.
Yeah. Thanks very much, Hans. I will ask Virginie in a minute to address the question on capital allocation. Your question on top-line growth, I think has all to do with how we feel about the megatrends and our ability to capitalize on the megatrends. When we speak about the definition we have used, mid-single digit growth, then that is intended to be mid-single digit growth on an annual basis. We believe that when we look at the outlook, and we look at the megatrends and our ability to capture our fair share of the markets, that is a realistic target. You added something about the Corona pandemic. Needless to say that that still creates uncertainties for all of us in the market, but in spite of these uncertainties, we still feel comfortable with our net revenue target.
With that, I'll ask Virginie to answer the second question.
Yes. Thank you, Peter. Many thanks for your questions. In terms of capital allocation, yes, for sure, what we mean by saying when appropriate, when we discuss about additional share buyback, we really want to keep flexibility to be able to take any opportunistic M&A operation we would see on the market. Meaning that we're not going to commit to give back an extra amount on top of the 30%- 40% and the anti-dilution effect of any share buyback. We'll be flexible on our cash. We expect, as you can see, to deliver sustainable, both in terms of revenue, sustainable margin, and for sure, the cash generation with good management of our working capital and internal management should follow and be consistent with what it has been over the past months and year.
At one point of time, we might have some additional cash to return back to our shareholders, but we don't want to obey our capability of being very opportunistic if something significant happens to be encountered on the market.
Okay. Thanks, Virginie. Thanks, Hans. I see that next question is coming from Quirijn Mulder from ING. Quirijn?
Good morning. Can you hear me?
Yes, we can hear you, and we can see you, Quirijn.
Okay. Thank you. Two questions. First of all, with regards to the COVID-19 and also the third quarter results, and given the lengthy period to prepare for a Capital Markets Day and a strategic update, can you give me an idea what has changed in your Capital Markets Day because of the completely changed situation from the mid of March because of COVID-19 on your cash strategic update? Maybe you can give me much more details on what happened since then and what you have changed there. My other question is, you are looking at the 40%-50% return on net working capital. What's the reason not to use the normal return on capital employed? Certainly given in the light of that you are looking for more M&A than in the last couple of years.
Given the goodwill which is accompanied with that development and your total assets basis, which is, in my view, the basis to make the returns. That were my questions.
Thanks, Quirijn. Two questions, Peter, for you.
Yeah. Thanks, Quirijn. We'll follow the same sequence on this question as we did with regards to the question from Hans. I will take the first part, and then I will defer the second part to Virginie. Trust me, the rest of the team will get an opportunity later. I'm sure that there will be more questions which will be directed your way. Let me first address the question Hans asked about, or Quirijn, sorry, about to what extent the Corona crisis has impacted our strategy. Now, when we started the development of the strategy, it coincidentally was at the same time as Corona hit us all. Back in March, when we started in all earnest to develop the strategy. As we learned more, we of course made some tweaks to our strategy to include anything which we feel is significant and/or sustainable.
I would be lying if I would suggest that our strategy, because of Corona, has all of sudden become a totally different strategy than what we would have had without Corona. Couple of comments to illustrate that. First, I would say that whereas at the beginning of the Corona crisis, there were some people thinking and saying, "Well, because of this crisis, the focus on sustainability will probably something of the back burner now for some time." That is not what we have seen. In fact, on the contrary, I think we have learned from this crisis that we were much more vulnerable as societies than we wanted to be. We have now seen that a virus can bring economies on a global scale to its knees.
The whole drive and necessity to create much more resiliency in the broadest possible sense in societies has probably only been amplified because of the Corona crisis. Second one, and I suspect that Virginie will talk about it a little later, is that we have indeed seen that the crisis also created a different view on certain things like, for instance, working from home. I've actually commented before that it is quite conceivable that we will find a new normal, which is in between what we had before Corona and what we have today. It will not be close to what we have today, whereby almost anyone and everyone is exclusively working from home, but it will also not be where we were in the past, that people almost exclusively came to office.
It will probably something in the middle, and that of course, creates some opportunities for us to embed sustained savings and cost reduction. That is probably how I would answer your first question, Quirijn, and we'll turn to Virginie for the second one.
Let's say that I think that as far as return on working capital is concerned, you're right, we could have chosen something else. first, the competition is increasingly using this metric, and we wanted to offer the capability of being compared to our peers, which we recognize is important for our investors and the people following us. Secondly, if we think about assets and the type of investments we undertake at the moment, for sure, a lot of what goes around technology is not only about CapEx. You will have a lot of OpEx investments to go in, and to sustain what we want to achieve in this strategic cycle. it might be a kind of not sufficient focus. Reason why we base more what we want to say in terms of working capital.
We calculate a return on investment, and for sure, we don't put any money on the table if it doesn't bring enough return. With the margin we expect to get, our return on net assets will probably be sustainable on each and every CapEx we will undertake. Based on the fact that a lot of what we invest is CapEx, but a lot of OpEx also next to that, we thought it was not the most appropriate indicator for us.
Thanks, Virginie. Thanks, Quirijn. I see that the next question is coming from Henk Veerman from Kempen. Hello, Henk. Good morning.
Hi, good morning, Peter, Jurgen. Good morning, everyone else, and thank you for the very clear presentation. I have a lot of questions as well, but I will restrict myself to two questions. Firstly, coming back to the mid-single digits organic sales growth targets. During the last Q3 results, you also announced the proactive downscaling of your activities in the Middle East. How should we look at your target in relation to this downscaling of the Middle East, which is about 4% of the Group? Does it also imply that you may be also looking at alternative scenarios for these activities? Do you maybe plan a divestment of this subsidiary in the Middle East or maybe a management buyout? That's my first question. My second question is in your EBITA margin. I think you already elaborated on it, on the building blocks to get there.
If we look at the situation today and also before COVID started, your profitability margin was quite significantly below that of competition, which they are about 9% currently, adjusted EBITA margin. Now you guide for 10%, which is clearly above or at the upper range, versus competition. What makes you so confident that you can turn around this situation? We already heard something about the excellence centers. Some offshoring of activity. When you look at the operations, really on the operational side, so the dynamic between the sales and your personnel, how can you make your organization more profitable? Can you elaborate a bit more on that? Thank you.
Thanks, Henk. Two questions, but one very long question, but we will address it. One about the top line for the Middle East, and the other one about how do we achieve our EBITDA margin.
Yeah. This time, I will still follow the same pattern, Henk. I will take your second question first, probably do an introduction on your first question, then turn it over for the second part of the first question to Virginie, particularly on how we would treat the declining revenue in the Middle East going forward. Building blocks to create the margin growth which we expect to see. It'd probably be good to separate them in a few different building blocks. The first one is the building blocks you all know. That is building blocks which indeed includes the use of our Global Excellence Centers, even further than we do today. It also includes our key client program further, and it continues to include our Make Every Project Count program to further improve our project performance.
That is a building block which has been successfully deployed over the last two years. Because of that success, we like it, and we will continue to deploy it. Secondly, is when we commit to revenue growth, that is another opportunity, of course, to create bottom line growth as well, provided that you control yourself in terms of growth of indirect costs. That is typically what happens in an organization like ours, and with this model, when you get more volume, it typically has a positive impact on your margin. Thirdly, we will try to capture some of the sustainable savings, the operational efficiency Virginie spoke about. We do expect going forward that we will need less space. We still expect that in the future we will probably travel less than we do today. That is the third one.
The fourth one, we are also, of course, increasingly delivering digital products and services which we expect to come at a higher margin as well. We are comfortable and confident that these four building blocks will contribute to the revised EBITDA margin percentage we have shared with you. On the Middle East, just going back to what we did share for everyone's benefit when we announced with our Q3 results that we were reducing our footprint in the Middle East. We also, at that time, explained that that will be an effort which will take a number of years. The impact next year will be relatively small because of the work we have in backlog. We also mentioned that we would continue to honor our contractual obligations, and of course, we will do so. We will definitely deliver the work which is still in backlog.
how we would go forward with implying or introducing and including the Middle East is something I'll ask Virginie. one more thing before I forget, and that was actually the question I wanted to convert to with Virginie. Virginie, please go ahead.
Thank you, Peter. yes, I think we want to consider our organic growth first for sure at constant currency rate, as you can imagine, but also at constant perimeter. The Middle East, let's say, will be a kind of perturbation or change in what we could see in our revenue goals. we will restate the impact to calculate this growth. We don't expect, as Peter said, that this has a major impact for 2021 because there's still a backlog which is rather significant to execute in 2021. for sure, we expect a decrease in terms of new order intake, and consequently, this probably will have an impact starting somewhere in H2 2021.
Yeah, Henk, I missed one part of your question, so let me take that now. You also asked if we would consider something like a management buyout or a takeover. With our announcement a couple of weeks ago, that is something which we now have an ability to pursue. If you look at what is happening in the Middle East and what some of our competitors have done before, the chances that we will do something different than what most of our competitors have been able to do are not very high. A takeover is, in my view, somewhat unlikely. A management buyout for part of the organization might be possible. It is being pursued as we speak.
Thanks, Peter. Thanks, Henk. I do see that we have more questions. The next in is Luuk van Beek from Degroof Petercam. Luuk, are you there? Good morning, Luuk. You're still on mute. I can hear you.
Yeah. I unmuted myself. Thank you for taking my question. My first question is on the digital investments. You mentioned EUR 40 million-EUR 60 million. How does that compare to what you spent in the past years? Also, is that capitalized or is it mainly expense through the P&L? My second question is on basically the cleaning up of the companies you've done over the last years, focusing on the most effective services and clients. Is that process now largely complete apart from the Middle East, or is that something that will continue to a significant extent in the coming years? On the reverse of that, have you seen any blind spots in your matrix, basically, that you would like to fill up now with more M&A?
Thanks, Luuk. Two questions, Peter. One about the digital investments and the other one about our business.
What was the second one ?
The second question was about that we have cleaned up our businesses.
Do we see some wide spots where we can grow, and can we elaborate on that?
Yeah. We'll once again follow the same sequence. I'll take the second question first, and then we'll ask Virginie again to answer the M&A question, which, of course, is high on people's mind and list. Since we introduced the Make Every Project Count program, we have gone through a fairly extensive set of actions deployed in all regions to improve our performance, to look at things in our backlog which deserved further attention. I would say that the improvement we've seen over the last four or five quarters in terms of margin performance, is also because of the improvements we have seen coming out of the Make Every Project Count program. There's always a possibility in a project environment whereby you do 35,000 projects a year that you will have a surprise.
As I also mentioned in my comments, we believe that we have successfully closed out the legacy issues. the things, Luuk, you described, in my view, are legacy issues. let's leave it with that. with that, I'll ask Virginie again to take the other part of the question on the digital M&A.
Yes, sure. Thank you, Peter. To answer your question, the EUR 40 million-EUR 60 million investment is about CapEx. It's pure CapEx. A huge part of it, for sure, will be devoted to technology. As much as we invest in technology and that we are able also to sell our products as we started, for example, with Gen. There's probably a need for us to show this also in an investment on the face of our balance sheet as we are going to use it for several years. Part of the digital platform for sure will be found and starts to be found on the face of our balance sheet. CapEx is not only purely about technology, as you can imagine. The EUR 40 million-EUR 60 million is not the total amount of digital CapEx only.
As I said earlier, part of this is pure OpEx also that will come after, because you can't capitalize everything you do in terms of technology, obviously. In terms of M&A, we've been doing some small, let's say, clever moves over the years, and especially also adding some digital capabilities and such. If we happen to identify some things that bring us a building block which is significant and would, let's say, prevent us from developing it ourselves in-house, then we'll probably want to take this opportunity. We are not, let's say, purely focusing on digital capabilities. We remain open also about everything that support our sustainability strategy, and we have a look to everything that's been happening on the market. It's not our first focus.
I think we've been explaining that a lot that supports our strategy today is mainly an in-house project and will probably spend the vast part of our time over the next few years on developing this strategy from in-house.
Thanks, Virginie. I do see that we have more questions coming in. Martijn den Drijver, ABN AMRO. I understand no video, but I hope we can hear you.
Yes. Good morning, gentlemen and Virginie. Can you hear me?
Yes, we can hear you, Martijn. Please go ahead.
Awesome. When you talk about operational efficiencies, you mention in the presentation simplify organization. Can you elaborate a little bit on what that means and what that might entail in terms of charges or savings? Just a little bit more color on that element. In relation to that, you mentioned 30% savings on office costs. It would be good to hear what those office costs then actually are, so we can actually track what you're doing on that level. My second question is for Peter, I guess. You mentioned the higher margin digital services as a key component to getting EBITA margin to over 10%. What is the percentage of sales actually being generated by that type of service today? Perhaps, if possible, can you share what your target is? Perhaps not an exact target, but maybe a range.
Just to give us a bit more color on that element as well. Thank you.
Thanks, Martijn.
Yeah. Well, unfortunately, I have to follow the same sequence again with me taking the first question and Virginie, or actually take the second question first and then ask Virginie to take that first question. Martijn, the contribution the software products and services provide as part of the bigger delivery is still relatively small, but it is growing at a very rapid clip. I didn't necessarily intended to say that it was a key component. I said it is one of the four components which will help us to create a higher margin in addition to the other three. It is growing at a very good clip in terms of top line. It is not, at this point in time, a key component, but one of the four contributors to the higher margin. The first question you had was on the efficiency office cost.
Virginie, again, back to you.
Thank you, Peter. In terms of office costs, for sure, today we are 27,000 people all around the planet. For sure, we have a lot of offices everywhere. We've been also increasing the number of offices over the years, either because just of deciding ourselves to open an office, or also because we were doing some M&A, and mechanically, you had some offices coming with the people joining the company. We probably have the capabilities to first do a kind of rationalization job. We've also seen, over the last months, new models of working being developed. We've also seen our capability of being more flexible and probably a desire of keeping a part of this flexibility in the future. Meaning that turning to more agile ways of working, we don't need also the same type of space. It doesn't mean that you don't need any space.
You need space to meet, you need space to be together. You don't need maybe a longer range of big open space where you could sit each and every person at the same time, because this is not the way people live. They are with the clients, and this is not at all the way they will live in the future, being either with the client or at home or again, somewhere else, and then in the office. We probably need different type of spaces than the ones that we have today. Based on the very large capabilities that we have today in terms of space, we expect that we are able to reduce it by 30% over the next three years in terms of cost rather than in terms of footprint or square meters.
I think there was Alan, you'd like to add to what Virginie just shared. Please go ahead.
Thank you, Peter. Just to add that we are primarily a people business, and we have been surveying our people through this crisis, looking obviously after their well-being, but also trying to understand how they want to work in the future. What we have seen is that people have said, yes, of course, they'd like to get back to work to an office maybe, but not five days, seven days a week. They really would like to have a better balance and a work-life balance. I think seeing the success of how we have worked from home, we can achieve this, and this will add to what Virginie just said in terms of us needing a reduced office footprint in the future.
To simplify the organization components, can you add a bit more color on that? I understand the office cost bit, but to simplify the organization, is that solely on the office costs or are there other elements?
No, I can take that question, Martijn. That has some other components as well. We're not simplifying the organization because we think that we can reduce our office footprint. We're simplifying organization because we think we have opportunities to do so. That actually builds on comments I've made around the use of our Global Excellence Centers, but also the use of our global shared services centers, which is still in the fairly early days capability, which obviously exist in the same places virtually as where we have our Global Excellence Centers, but give us an opportunity to streamline our organization more and reduce the cost of the organization as well.
Thank you.
Thanks, Peter. I do see that questions are also coming in via the chat, but before we go to the chat, I'll go to Hans Pluijgers, who has a follow-up question. Hans?
Yes, thank you. Two follow-up questions from my side. First of all, on your presentation, page number 44, the business areas at a glance. You provide, let's say, details on the current revenue breakdown. Two things on it. First of all, how do you see, let's say, the breakdown developing going forward? Do you see material change, or let's say, what are the key growth focus, or where do you see the highest growth coming from going forward? Secondly, with respect to how do you see, let's say, currently the margins? Are there differences in margins between those areas, and how do you see that also developing going forward? Secondly, on your margin targets, cost reductions, and also other measures you are taking to improve your margins. Also, for example, on digital, but also probably on your savings.
Could you give some feeling on the improvement in the margin? Is that more back-end loaded, or do you believe it's more gradual spread over the period you're targeting now? If you could give some more granularity on that.
Thanks, Hans. I counted three questions, by the way, but one was about the breakdown of the business areas, where is the highest growth? Can you say something about the margins, and what about digital and also other improvements?
Yeah. I'll take that last question first, Hans, on how we see the margin developing to that target of above 10%. I'll ask Alan this time to address the question because slide 44, if I'm not mistaken, was actually your slide, and I think you can talk about the global business areas obviously quite well as well. The margin development, Hans, will be gradual. It will be like what we did in the last few years. We made a commitment back in 2017, and if you look back at what we did actually deliver, it was a gradual improvement whereby we benefited from the levers we identified, same levers we still have available. It's safe to assume that also this time it will be more of a gradual development.
Alan, please address Hans' question about global business areas revenue and where we see growth.
Yeah, I think what we're looking at, Peter, is growth by targeting. It's not simply in our countries or simply saying about our sort of segments and countries anymore. What we're looking at is taking our capabilities and expertise and targeting our clients and our markets. Where we see today that we've got the resilience places and mobility, what we do see is the expertise I mentioned before, and we'll start to see our planned and steady growth by bringing in digital products, new solutions, and really addressing them to our clients and the megatrends that we see. We see a good balance. You see a balance today across the three global business areas, and I think you'll still see that balance tomorrow, where we target growth in areas from the expertise we have in one into another and into those target markets.
You'll still see that good balance, but as Peter said earlier, by bringing in digital products and solutions, we expect those to be at a higher margin in the future.
Okay. Yeah. Thanks.
Maybe one follow-up question on looking at the margins by business area. Do I understand properly that in principle, the margins by those different areas are broadly in line with the company average? I should see it?
Yes. That is correct, Hans.
Thanks.
Okay. I go to the chat. I see a question coming in. Will you continue to report on the regions on a quarterly basis as main financial reporting segmentation? Is there a cost-saving element included in moving from four business areas to three? Peter.
We'll take the second one at the same time, which is how much of the margin improvements will come from growth and how much from efficiency improvements?
I'll once again defer the second one to Virginie. I'll take the first one. We will continue to report, as we are doing today, at least for 2021. The consolidation to three global business areas, as I had mentioned in my prepared remarks, is going to take time. It will be phased. It's not something which we do in a hurry. For 2021, we will continue to report in the same way as we've done in the past, which is by region. Cost savings. If there's cost savings, then we will capture them, of course. We will take this opportunity if we can identify those. Clearly, that is a possibility that it would also create cost savings.
The second question, which was a follow-up on what was already in Virginie's slide in a way, how much of a margin improvement will come from growth and how much from efficiency improvement? maybe, Virginie, you will reiterate what you said in your prepared remarks.
Thank you, Peter. I'm not going to give, let's say, a very clear or split with figures. This is not where we are today, and this is not what we intend to do. I think these two buckets of elements, whether it is the operational efficiencies or what rather come from the growth and from the additional revenue, I think we can imagine that the buckets more or less compensate one the other.
Thanks, Virginie. I do see there is a next question from Henk Veerman from Kempen. Hi, Henk.
Hi. Thank you for taking my follow-up questions. I have two more. Firstly, you put a lot of focus on the global and scalable solutions. How should we look at these solutions? While at the same time you mentioned that Arcadis still does thousands of projects per annum, and a lot of it is local for local. How do we square those two comments? Can you give an indication of what percentage of revenue or of your services currently comes from these exportable global solutions? My second question would be on the organic growth target, again, the mid-single digits. Just trying to clarify what, in recent years, you reported on average about 3% organic sales growth, and that was in a very strong economy.
Given going forward, should we think about now that you guide for higher growth, that this incremental growth comes from digital and from these sort of environmental-focused solutions? Is it still that your key accounts will still grow twice as much as the group? Can you clarify a bit more on that organic growth target? Thank you.
Yeah, thanks, Henk. Now I can bring Mary Ann in for the question about key accounts and to what extent they will contribute to our growth. Let me take your first question first, Henk, on local for local, and a specific question as to how much of the scalable solution can you actually deploy if you are a company, which we are, which does a lot of local for local work. I did say in my prepared remarks that even recognizing that a lot of the work we do indeed is for local clients, consistently and very consistently. These clients have an expectation in hiring a company like Arcadis that we bring global experiences to their projects. If they were not interested in global experiences, they would probably hire a much smaller outfit, which just provides them the local services.
Fundamentally, and I've tested this many times when I meet with clients who say, "What is it we can do better?" then quite consistently, the question is, or the answer is, "Well, you must be doing a lot of work for clients like us in other parts of the world, and I really like you to bring those experiences to my project so that I can benefit from it." that is still a big opportunity. It is absolutely not true that clients would expect that we would customize a solution specifically for them. They realize that that is actually unattainable. It's something we can't afford.
With more global solutions being deployed to local clients, we expect to be more efficient in developing solutions and actually at the same time satisfy our clients who want a company like Arcadis with a global footprint to bring all of the experiences to their respective project. Clearly, still a big opportunity in spite of the fact that you're right, most of the work we do is for local clients. Mary Ann, why don't you address Henk's question on growth and particularly on the key accounts?
Yeah, thanks, Henk, I think you mentioned that did we expect to get growth from our digital solutions, our environmental solutions, and then our global key client accounts. I would say yes to all three, but let me start with our key client program. We do see that we typically generate double growth, double our revenue growth for our key clients over all of our other clients. By focusing on those key clients and continuing our focus there, we do expect to continue that kind of accelerated growth, going forward. As Alan mentioned, one of our key enablers will be globally scaling some of our world-renowned solutions, such as environmental solutions that we can take from the U.S. to other parts of the world.
This will provide a great growth opportunity, especially in parts of the world where there's a regulatory driver for those types of environmental services. The last piece is the digital. Yes, beyond just Arcadis Gen, we are offering kind of digital solutions with services wrapped around those solutions today, and we really see a client need for those increasing in the future. We expect to get growth from that area also.
Thanks, Mary Ann. Quirijn. Quirijn Mulder from ING has a follow-up question. Quirijn, please. Hello.
Yeah, two follow-up questions from my side.
Yeah.
The first one is with regard to the GECs. You didn't give any target for GECs, but I remember from 2017 you were quite eager to raise that percentage. I would like to know what the situation is today and what your targets are for 2023 with regard to the contribution from GECs. The other question is about the buildings. Of course, the outlook for all the other divisions is quite good, or the segments. For buildings, it's somewhat more dim in my view, and maybe you can elaborate that because working from home, and you see it also at Arcadis, we need less office space. Has it impact on buildings? Maybe you can elaborate on that development there in the coming years, and to give me an idea what your plans are outside, let me say, to look more at green buildings, for example.
Yeah, thanks Quirijn. I will ask Alan to address the second question. I think part of the answer he's likely going to give was also in his presentation when he spoke about the 40% of emission, which is coming from buildings and the opportunity that creates to be reduced. Let me take the GEC question first. What we did share at the beginning of 2020 or the end of 2019 I should say, is that we indeed wanted to grow the utilization of our global excellence centers in 2020. We actually said that we wanted to increase it by about 15%. 15% more billable hours in the GECs than in 2019. Corona then hit us, of course. I'm actually pleased to say that in spite of a Corona impact, we will still at the end of this year be able to also deliver on that commitment.
We have increased the number of billable hours in the GEC this year with about 15% compared to last year. We will continue to increase the targets for particularly regions which are still lagging behind compared to other regions. We will continue to capitalize and seize the opportunity for further growth in the GECs. This year was probably a good indication of what is possible. Alan, why don't you take the second question on buildings and what the opportunities are on buildings?
Thank you, Peter. Maybe just one reflection on the GECs. We've grown 75% over the last strategy period from 1,200 people to 2,100, and we will continue that push and journey as Peter just said. On buildings, you're quite right to say, when you look at parts of buildings that it will come under pressure. However, I'd mention three things really. One, we see a difference between public and private, and we have a good, healthy public sector workload. Linked to that is the second point that Peter touched on, which is sustainability. Many, many governments, cities are looking at buildings being a major cause of emissions. This is a really profitable growth area for us to look at buildings and say, "How can we improve?" I gave the example on universities, for example, where they said, "Really, how do we bring in sustainability?
How do we repurpose, and how do we improve our asset management?" we see this as a major growth area. The third comment I'd make is really linked to the type of building, because whilst we automatically think about offices and maybe residential, there is a big push into urbanization
We think that will continue. If it doesn't, then actually the growth could be more as we move out of cities after the pandemic. Whichever way it goes, we see that as a good growth market. Don't forget also, we've got a really rising trend in things like data centers, data management, and other types of buildings. We see these as major target growth areas right around the world.
Thanks.
Do you agree with me that buildings, let me say, if you look on average at 5% organic growth of net revenues, and maybe the other divisions or the other segments will do better, that maybe also buildings should be instrumental to that growth? it's not something like flatish, maybe 2% or 3%, that makes it very challenging for the other segments to reach that 5%.
I think, Quirijn, to answer the question, diversity in the work we do from a service perspective, from a business perspective, and geographical perspective is important, as I also mentioned in my comments. Because as much as you'd like targets to be applied to each and every part of the globe, no matter what, the reality is quite often a little bit more stubborn, and you will never be able to quite achieve the same goals in each and every region, in each and every country, in each and every business. It will be, at the end of the day, the sum of some puts and takes, but we still stand behind our revenue targets.
Thank you.
Okay. We have a question coming in from Elisabeth Deslongchamps, one of our shareholders. Does this new strategy have an impact on the way managers are incentivized through the organization? Peter?
Thanks for that question, Elisabeth, and a very relevant question. I think as a matter of principle, we do want the incentivization, and particularly the criteria we use for incentivizing people, to be very closely aligned with the strategy. Assuming that your question is related to what criteria will you be using to incentivize people, the answer is absolutely yes. It will mean that because of the strategy and the emphasis we have on certain parts of our strategy, that criteria will change to ultimately incentivize people.
Okay. I see that Maarten Verbeek from the IDEA! has also a question. Hello, Maarten. Still good morning.
Morning. It's Maarten of the IDEA!. Two questions from my side as well. Firstly, I think one of the most challenging one I think most of us agrees, the organic growth rate, which more or less reflects a clear outperformance to the market. Could you more or less indicate what you expect as market growth for the three different segments, being the places, mobility, and resilience? That's for first. secondly, with your target concerning DSO, I don't really see it as a real improvement in target, particularly taking in mind the Middle East, which you're going to carve out. The Middle East will have an impact of about five days in DSO. when I subtract the current level, then I'm already at your target of 75. More or less, I arrive at 77. according to me, that's not really an ambitious target.
Could you comment on that one?
Thanks, Maarten.
Thanks, Maarten. Those are two questions, I think, for Virginie, but I'll kind of preempt the second one by saying, you almost answered a question someone else had on how quickly do you take the Middle East out of how you report. we just said that for 2021, the Middle East will still be an important part of our portfolio, and therefore, we will probably not see a significant reduction because of eliminating the Middle East next year. That will come over time. I'll let Virginie speak.
It's a 2023 target. Sorry. It's a 2023 target.
Yeah. It will still take time for that backlog to be worked off, of course. Virginie, please go ahead.
Yes. Thank you.
Thank you. I will not say that it is the most ambitious target that we have chosen. If I take the portfolio of targets that we have, you said that, and I concur with you, the revenue growth target is more ambitious than the DSO one. No issue on that one, and I follow you on this. Peter is right. It will take time with Middle East, and it doesn't mean that when you work less somewhere, that then your receivable will decrease over time, but they might take time for us to be able to capture this receivable, and we need to take that in mind. We also do some other things that we like to do in the world, is that we have different phasing of contracts. Not all of them are built in the same way.
The conversion from unbilled to receivable can take time also from time to time. if we have our portfolio turning a little bit in a different contract, then we might be in a position to have, let's say, a bit of a different view on what is on working capital. I don't comment on some things that is, let's say, over complex today, for sure. there are still a lot of work to do to manage to maintain this 75 days on a very recurring basis in the future. We've not been yet there. let's try to first be there, and then we'll see how we can further reduce it and even making sure that it's not, let's say, an effort to remain on that commitment. I think you had another question about organic growth rate. I'm not going to give any guidance by segment.
This is not the purpose of today, and this is not
I'm sorry to interrupt you.
what you've been deciding to do.
Sorry not to interrupt you. Not for you specific, but what do you see as the market growth, in general market growth, for those three segments of resilience, places, and mobility? The on average market growth in the world. Just to see, to match your target against the market growth.
Against the market growth. Maybe I'll ask Mary Ann and Peter to complement what I'm going to say because they probably are more expert than I do in that respect. Coming back to the megatrends and to the fact that we turn our organization, I think that on sustainable megatrends that help us to see the increased demand of our clients and also changing the way we work, having the capability to replicate in other areas what we do today in some. We see it as an enhancement and probably also a kind of acceleration of what we do. Making us able to seize that opportunity and to really transform it in what we do, we really think that's going to help us.
If we just take a GDP growth for next year and you weigh it on what we do today, we should even I would say mid-single digit growth rate is even lower than some of this growth rate that we see for next year. This is not the case probably for the rest of the cycle, but then what we do in terms of strategy will support our growth for the rest of the cycle.
Yeah, Maarten, if I could just maybe summarize it. We understand that everyone seemed to be consistent in seeing the net revenue growth as the most challenging one. That is probably also the one we spent most time on, to be perfectly honest, because we didn't want to commit to something which we think is unattainable. To summarize what Virginie just said, and it's publicly available information, so it doesn't take rocket science. If you look at what current expectations are for GDP growth next year, then our definition of mid-single digit growth fits quite nicely into what several sources expect for GDP for next year. Of course, for the years thereafter, we'll see what happens, but we're quite comfortable with our growth rate, and what we see in the market happening in the foreseeable future.
Okay. Thank you, Peter. I do understand that this was the last question. When there are no further questions from the chat or the video, I'd like to hand over to you, Peter, for your final remark.
Well, this is the final moment of our Capital Markets Day. Final moment which allows me an opportunity to, first of all, thank you again for your attendance. I already mentioned in my opening comments that we were very pleased with the number of people who participated today. We also realized that in addition to presenting a lot of information to you today, that there is additional questions you might have. As always, we will try to answer those questions as well as we can through our investor relations organization. I'd like to also point you towards our revised website. On there is a special section available to talk about the strategy in more detail. Use that resource as well, if you like. With that, I'm really closing out the meeting. I want to thank you for the active involvement today.
I trust that we've been able to convey to you that the megatrends and the client requirements we see, combined with our capability, our heritage, our resume, positions us really well to write the next chapter in Arcadis history. As you will have hopefully gathered from our conversation today, we're quite optimistic about our future. Thanks for being in attendance, and please stay safe.