Hello and welcome. On behalf of all of Schneider Electric, I'm delighted to have you join our 2021 Capital Markets Day. I want to thank you, our investors, for your strong support and engagement in past years as we have continued to generate shareholder value. Today, we are here to focus on the future, a future which is sustainable, electric and digital. A future full of opportunity, and a future worth investing in. Let me share the agenda for the day. We will start with a session from our Chairman and CEO, followed by sessions from our Chief Digital Officer, as well as our Chief Strategy and Sustainability Officer. We will then have an interactive panel with our business leaders before hearing from our Chief Financial Officer. Following the sessions, all of our speakers will join in the Q&A session.
Keep your questions ready as you go through the event, and we will be sure to address them. We know that your time is precious, so we really appreciate that you choose to spend it with us today. I want to thank you again for your interest in our company, and I'd like to pass the ball now to our Chairman and CEO, Jean-Pascal Tricoire, for his opening presentation.
Thank you, Amit. Hi, everybody. I'm really happy to be with you again for this Capital Market Day. I want to thank you for the time you are taking with us to share on the priorities and the strategies of Schneider. Indeed, this time is important. This time is quite paradoxical. On one side, we are facing together and collectively the biggest pandemic crisis we've ever known. At the same time, I've been titling this presentation Accelerating. Accelerating because time of COVID has been a time of inflection for most of our markets, and the past years have been also a time of acceleration for some of the new business we are putting together. Let's go straight to the point. Today, I'm gonna speak about three things. First, our markets and why they are accelerating. Second, our new pillars of growth.
Third, our unique operating model, which is supporting our strategy, but also making us fit for a world which is with COVID or post-COVID. Let's first start by the big picture, the big problem we have been tackling at Schneider for the past 20 years, climate change, on developing technologies to fight this phenomenon. We are just out of Glasgow, COP26, and the consensus is very simple. We need to do much faster and do more. Why faster? Because everything we do in the next decade till 2030 will have much more value than what we do afterwards. If we look at those next 10 years, we need to do 3x more. Today, the sum of the pledges, governments, companies that were put together is only 4 gigatons.
If we want to bring the curve of the evolution of the world from where it is today to a 1.5-degree trajectory, we need to do 3x more. Three times faster, 3x more. There is a path. We've been working on that at Schneider for the past 20 years, and we can combine existing technologies today to resolve the problem. If you look at the equation, 45% of the solution to carbon emission reduction is in the supply, replacing fossil sources of energy by low carbon sources of energy. 55% of the solution is on the demand side, combining electrification and efficiency, digitization principally. Let's face it, the world that this supposes to develop it is very different, will be very different. On one side is gonna be immensely more digital, and we know that.
The Internet of Things coming at scale. On the other side, is gonna be much more electric. Today, 20% of what we consume as energy is electric. This world in 10 years' time will be 10% more electric. 30% of what we're gonna be consuming will be electrical. Most of the evolution in the next 10 years will happen in buildings and in mobility. There will be even more electrification in the 20 years following. Let's all be prepared to a world which gonna be massively more electric. Let's be practical, and I wanted to share with you one example, the example that we all know because we all have a home or we all have one apartment. Today, we all live in places that were built some time ago.
Those places are powered by fossil fuel, they are not automated, and they are connected, not connected really in an interactive dialogue with the grid. Today, as of today, with existing technologies that are already available, we can create homes of the future. They have local generation, which is green generation. They are smart, and they have a permanent communication with the grid. Look at the consequences in terms of results. A home of the future has an energy demand which will be divided by two to three with respect to a traditional one. Carbon emission divided by four to 10. Consequences for Schneider is that the part of the market that we can address in a home of the future is 5 x the market that we can address in a traditional home. Make no mistake, I'm not saying that our market is getting immediately multiplied by five.
This is a transition, but we are clearly going to a world which is made of homes of the future. I've taken the example of a home, but I could make exactly the same example in a building or an industrial facility. Now, the second point of which we should be all sure of, it's not a fashion, it's really a tipping point. It's an inflection, which is powered by the change in government attitudes, where governments are putting incredible stimulus to create a future which is greener. It's also brought along by companies which are signing in thousands to commitments in Science Based Targets on trajectory of 1.5-degree. The most important probably change that happened recently is investors, which are holding now CEOs in boardrooms accountable on their extrafinancial, and especially on their carbon footprint.
Be prepared for a future that's gonna be very different. There are four things that we need to do to make this future happen. The first thing is to do 10 x more retrofit, because most of the carbon emissions are not happening in the new build, they are happening in the already existing building or plant stock. It's only possible to accelerate retrofit if we use massively new technologies. Old technologies won't allow an acceleration. It's a lot about digitization on energy efficiency. Second point, let's make sure that in developed countries, everything we build anew is built to net-zero using the newest technology, and especially software to optimize the process of construction. Third, we need to create the future-proof infrastructure which will enable the development of those smart places, namely smart grids, electric vehicle infrastructure.
Longer term, more innovation is coming along that will make it possible to address the hard to abate segments of industries, building, and cities. What is important to realize here is that 70% of the present carbon emissions can be abated with present technologies, and the urgency is to deploy what we have in creating a future which will be more digital for efficiency, more electric for decarbonization, and therefore realizing that the equation of sustainability, smart and green, digitization and electrification goes together. This explains very largely what we've done at Schneider for the past 20 years, making sure that our persistent strategy was to develop technologies to empower all to make the most of our energy and resources. Bridging progress means energy for all, and sustainability, reducing carbon emissions for the planet we share all.
We call it Life Is On, and we want through this, and we have become over time the digital partner of our customers for sustainability and efficiency. Where are we today? We are a company of EUR 25 billion. Last picture at the end of 2020, 130,000 employees around the world, and a few characteristics that distinguish Schneider. We are very focused on that combination of energy and automation technology for more efficiency and sustainability. We are also a very balanced company in terms of end markets and in terms of geographies. From the beginning, we have taken the strategy to solve our customers' issues. Our customers are facing incredible complexity, so we have created EcoStruxure as a digital architecture to allow them to become more digital and more sustainable.
Two years ago, I explained to you that we would be going one step further in efficiency to bring our customers one step further in digitization on sustainability by bringing together four integration. The one of energy and automation for energy and process efficiency, the one from endpoint to the cloud, connecting every connected product to the cloud through EcoStruxure. The one of the whole life cycle of installation from design to build and to operate and maintain through our portfolio of software. The last integration is bringing our customers from the traditional way of managing their company side by side to a unified company management.
Of course, all of this has provoked a tremendous transformation of our company, and you can expect as we go forward to see the level of R&D to sales keeping on increasing as we develop more digital and more software in our business. If we come back to our history, I'd explained to you that we had three phases. First phase, 2003, 2013, 10 years to build a portfolio. 10 years with many acquisition. In parallel, we already started to integrate those acquisitions. 2008, One Schneider, 2009, EcoStruxure. On that period of integration finished roughly in 2017. From 2018, we've been scaling all of this to transform our company. The transformation has been immense.
Going from EUR 1 billion in digital to EUR 11 billion in digital, reinforcing our world-leading electrical capability, electric business from EUR 6 billion to EUR 22+ billion of business. On pivoting the solution that we offer to our customers to more sustainability, which is now representing 70% of what we sell to our customers. Now that's where we are. Now let's look at the next cycle. Let's look at the future. It starts by the realization, which was the point of my introduction, that our markets are accelerating. In fact, our four end markets are really well positioned for a significant acceleration. Building in the future will be at least twice more electrical. In data centers, storage, computing, data is going to keep growing and generating units. Infrastructure is becoming smart and green, and this is accelerated by the stimuli of the government.
Finally, every of our industrial customer has at the top of the agenda, digitization and sustainability. If you look back at the fundamental of our market, the best proxy I'll find to estimate the growth of our market over the past five years is the average of the growth of our peer competitors. On the market, if you look at that, was around 2% of growth over the past five years. Good news that we grew twice faster. We overgrew our competition. Now, if I look at the next coming three years, we see a market that will be much more positive, actually probably growing to an average of 4% and allowing much more opportunities for us. Now, adding to a market which is clearly more dynamic than what it used to be in the past years, we've, over the years, created new incremental growth drivers.
Those growth drivers are not a parallel universe. They plug into the core of Schneider. The first of them is, of course, services. You know that over the past 10 years, we've been investing consistently in services, and you've supported this investment. When we sell a mission-critical product, and many of the products we sell are mission-critical, if we sell EUR 1 at the time of the sales, we can generate EUR 2 of revenue over the whole life cycle of that asset. What we needed to do was to track those assets and then serve those assets. The great news is that now we track many more of those assets which are on the field, but we still serve only a tiny minority of them, around 15% of the assets which are already installed.
We see the potential to keep growing field services twice faster than the average of the group. Of course, we do those services with the purpose of bringing more efficiency, more sustainability, which are the known taglines of Schneider. What we've seen over the past years, and especially during the COVID years, is more services are coming from the need to elevate the level of safety and resilience of installation. Let me be a bit more specific about what we do in services, and I won't go into the detail of this slide, but you see that we can bring services at every stage of the life cycle of the installations of our customers. Thank you for supporting over the past years the development of our capabilities in services.
We have now thousands of field trained specialists in the field going every day to the installations of our customers. The great news is that we have a rate of satisfaction in services which is very high. More than 80% of our customers are very satisfied, both of the service on the level of compliance of safety to the safety rules. Our second growth driver is, of course, software. Software is so central to everything we do. It gives sense to all the systems we are connecting and to all the data we are collecting from those systems. We've been, at Schneider, very focused on the software we want to develop for our customers. It's all dedicated to the work we do with our customers.
What we do at Schneider with our customers is to develop projects and help them to manage their operations in IT, building, plants, power, and infrastructure. All of those systems are incredibly complex. We focus really on two points we want to solve. First, offering a complete and continuous digital thread from design to build, operation, and maintenance, so that our customers have one digital twin, which is a faithful replication of what is happening in their operations. The second problem to solve for our customers is that all of their projects include several domains, industry, infrastructure, power, building, and all of this has to integrate into the real life together. Let's make a simple example.
If the industrial department wants to increase the size and the power of a machine. This will have modification induced into the power system and at the same time, the construction site will need to accommodate that bigger machinery or that bigger motor. We want those changes to be seamless across the domains and across all the phases of life of our customers. Summarize, three domains, three phases with over the past years, and thank you for supporting the building of that. We've brought along number of companies that offer the necessary blocks to build those two simplifications for the digital life of our customers. On this portfolio of software interfaces with the physical world through EcoStruxure, through the IoT, the connection to IoT.
What we are aiming, in fact, to do here is for the first time to offer to our customers for their complex projects and operation, a unified asset lifecycle management, which brings a number of benefits. Of course, one unified digital twin across that life cycle. One big, huge data federation on which our customers can run their analytics and their algorithm. One unique portfolio of algorithm on AI capability because we work with number of customers on number of installations, which makes that we have developed those portfolio and those capabilities for other customers. Finally, a unified user experience on a unified software federation. Second growth driver is clearly digitization. Now what is the main topic on the agenda of our customers? There again, of course, sustainability.
We've developed over time our sustainability service business, which is today the spearhead of what we do at Schneider for efficiency on sustainability. That business today, which is around EUR 500 million of turnover, is made of consulting on digital using our digital platform, Resource Advisor, NEO Network, on some performance contracting services. We are developing these sustainability services fast today, and we intend to keep growing them double-digit as we go forward. Services, software, and sustainability, those three incremental growth drivers have one common point. They bring us into the life cycle of our customers. They allow us to stay connected with our customers. The other point is that they have a strong relationship between themselves. Software will detect problems, that will create a space for services. Our service teams can connect more installations, that will generate more data and give place to more software.
Today, as of today, those activities represent 50% of our business, digitization and services, and we intend to bring it to 60% of our business around 2000, by around 2025. Now if we focus on that third part, which is software and services, which is even more important because this is where you stay truly connected with your customers. Today, they represent 18% of our total turnover. We ambition to grow it by at least 5% of our total turnover by 2025. Today, when you look at the detail of those two activities, already 30% of the business we do here is recurring revenue. If we look to 2025, we ambition to bring that to at least 45% of the revenue that we have in software and services.
Now, those three business, they don't live in a parallel world. They really plug in into the core. To make it more practical, I'd like to share with you this slide, which is showing our software service, sustainability and products and controls combined together for a much higher integration of applications. Rather than speaking about it, I'd like to call a customer, Lifetech, to speak about the value of this integration.
The automation challenges that we are facing nowadays are Industry 4.0, the Internet of Things, virtual reality, and of course, the sustainability and the green impact that our machine should have. Actually, we don't think there is any difference between sustainability and efficiency. Schneider Electric EcoStruxure solution allowed us to create a new machine that is totally modular, flexible, interconnected, and it's looking at the sustainability, minimizing the energy consumption, and making quicker and easier the changeovers.
Now let's go to the next big application of Schneider, buildings. Same story. All of those new activities plug into the core to supply complete solution. There again, I leave you with the detail of that slide, but I'd rather call Sean Chiao of AECOM to speak about what we do together.
At AECOM, we create iconic buildings, not only the look of the building itself, but also the function, the technologies, and the efficiency of the building. Design and technology has to work well together. This is the core of our partnership with Schneider Electric. We work with Schneider on this amazing platform called EcoStruxure. With its integrated building management systems, we can optimize energy consumption and reduce costs. This creates a more sustainable future for the building and provides comfort down to the individual level. This is not just about individual comfort, it is about working together to build resilient, livable, and equitable communities, which Schneider is one of the best partners we're working with in order to achieve what we want to achieve.
Now let's go to my third point. I want to remind you the unique characteristics of our operating model. Integrated, open, multi-hub on ESG at every level. I want to do that because any strategy can be executed if it can be supported by the right operating model. Let's start by number one. We have decided in 2008 and 2009 to be one Schneider EcoStruxure, because our customers want us to simplify their lives. They want one Schneider on one solution for them. This choice of organization, which can be at times demanding, brings benefit for our customers. One customer experience, one digital journey, the biggest data lake for digitization. It brings also significant advantages for Schneider.
Attractiveness for talents at a time when the market is pretty hot, scale for deployment, capacity to position strategically, and especially within our ecosystem, let's say for suppliers at the moment, on simplicity, on cost efficiency, especially when you go region by region. Second characteristics as we speak about partners. We are the company which works the most with partners. 70% of our products are done with suppliers. 60% of our solutions are integrated by partner integrators. We've also consistently developed our new technology with technology partner doing alliances, and we are bringing together all of those people on Exchange, our marketplace where developers, integrators, end users can put business on technology solutions together. Third characteristics is our unique multi-hub operating model, which you will realize is extremely important at the time when the world is more divided by politics, trade, digital, and finally, sanitary condition.
Probably the unique characteristic of Schneider there is that our people are really in the regions. We are not a centralized company. I want to take a detour through the last hub we built, India. I'm very proud that by merging together with Larsen & Toubro, we've made India, which is one of the most promising places in the world for electrification, digitization, urbanization, and manufacturing. We've made India one of our major centers in the world. 30,000 employees, 30 factories present in 500 cities, indirectly in 150,000 cities with massive power in terms of R&D. Finally, probably the most differentiating aspect of what we've been building over the past 20 years at Schneider is to become what we call at Schneider an impact company. That has been our compass for formulating our strategy on creating our operating model.
What do we mean with an impact company? We think at Schneider, we come to Schneider to make an impact. For us, an impact company is a company that number one is performing. Because if you perform, then you can impact positively your environment. If you don't, you will want it or not damage your environment. Performance and sustainability go together. Second characteristic is that we have a commitment to all stakeholders and in all dimensions of ESG. Fourth characteristic is that the strategy, the mission, the added value of our company goes directly to the cause of sustainability. Finally, ESG is embedded everywhere in our model, in our culture at the global level, but even more important so in the world we live today at the local level.
We were honored that in Davos earlier this year, beginning of 2021, we were recognized by Corporate Knights as the most sustainable corporation in the world. I would take just one example to show you that multidimensional commitment of Schneider into ESG, taking the climate dimension of ESG. Well, not only we bring 100 million tons a year of CO₂ savings to our customers, we have taken ourselves very stringent commitments to the carbon-neutral, low-biodiversity-loss company at different horizons. We have committed to bring along our Scope 3, our suppliers. Today we have engaged with 1,000 suppliers to cut their emissions by a factor of two. We have committed to communities in developing countries where we operate to supply electricity, green electricity to 50 million people, training 1 million people to the future trade of smart energy.
Finally, we offer to you, investors, the promise of 80% green revenue. We've also made sure that our business is built on trust with every stakeholder around us. That trust is based on the highest level of ethics, cybersecurity, safety, quality, and of course, sustainability commitments. At Schneider, we really believe that great people make a great company. When people join Schneider, they will certainly every time find something we could correct, and we listen to them. There is consistent feedback that Schneider is a people company. People come to Schneider because they want to work for a meaningful mission in a meaningful way. They want the most inclusive workplace, and they want a place where themselves can make an impact, where they can be empowered, thanks to our multi-hub model.
This is supported by very practical things, incentives, flexibility at work, and engagement to community. Time to conclude. Of course, we recognize that the next quarters will be disturbed in terms of supply chain, but we still see accelerating markets. We still benefit from our incremental growth drivers, and we have this operating model which actually support them, but at the same time is very fit for a world with COVID. We stay optimistic. We see that shift to digitization and electrification unfolding and accelerating as we go forward. Our ambition is to go into a phase where we are aiming for sustainable revenue growth coupled with margin and cash expansion. Over the next three years, we see an organic growth on average of 5%-8%. We also plan to expand every year the margin by 30-70 basis points per year.
Finally, we are targeting by 2024 to have a cash generation of around EUR 4 billion. Beyond that horizon, and I know you're gonna ask me the question, we see a growth that would be 5%+ organic on average across the cycle. We still see the possibility to further expand both margin and cash generation thanks to the transformation of our portfolio and the growth of our business. Beyond those objectives, I want to share the aspiration we have inside of Schneider, the way we think. At Schneider, we want to grow, and at the same time, we are interested only by profitable growth. We aspire all the time to be consistently a company of 25, around 25 if you sum up the organic growth and the operating margin that we are delivering.
That is a fair reflection of what our business must deliver, profit and growth at the same time. With that, I'm happy to hand over to the next session, and you're gonna have all the details of our objectives with Hilary later today.
Hello, everyone. I'm very happy to have the opportunity today to talk about our digital transformation at Schneider, a digital transformation at scale. My name is Peter Weckesser. I'm the Chief Digital Officer at Schneider, and I have been in this role for about one and a half years. When I came on board, I saw a company with very good digital maturity and strong foundations, which was also proven through our resiliency in the COVID crisis. I also found a company that has digital at the core of its strategy. While we have solid foundations, we are also convinced that we can generate a lot more value as we scale and accelerate our digital transformation. In my presentation today, I will introduce what that means for us at Schneider.
I want to spend most of the time today talking about how we will create even more value for our customers and partners. It all starts with ourselves. We are on a significant transformation journey for Schneider, for our employees and our business processes. We have a clear ambition to drive best-in-class productivity and efficiency across all of our business processes in supply chain management, in product life cycle management, and in go-to market. Every function in Schneider, every line of business is part of this. We are on a path to improve the efficiency of all of our employees, delight them with a cutting-edge digital experience, support their work-life balance and career opportunities. For our customers and partners, we want to evolve our portfolio to augment it even more with software and digital offerings. We will orchestrate an open ecosystem across our industrial data platforms.
Most importantly, we will do all this at scale. Jean-Pascal has already introduced our Digital Flywheel that drives new growth opportunities. With more software and more digital services, we are moving the conversation with our customers from a function and feature discussion to a value discussion about productivity, efficiency, and sustainability. It is not a surprise that the number of our C-level engagements is continuously growing. More software and more digital will continue to drive more recurring revenue. The various elements of the flywheel generate pull-through on each other. More value from our advisors generates more connected products. More assets under management generate more demand for edge control and digital services. This flywheel already represents 50% of our group revenue today, but our ambition goes even beyond this. Our digital transformation at scale serves two main purposes. One, drive more productivity for ourselves and our partners and customers.
Second, continue to fuel growth through our digital portfolio and new business models. This is why we have defined a clear strategy that will unlock unprecedented productivity and growth for our customers. Our approach is about unifying our software portfolio, unifying the user experience, and creating a unified data federation. Our customers today are asking for integration across life cycle stages from design, build, to operate and maintain. Our enterprise customers expect a second dimension of integration. Many of them manage factories and infrastructure. They manage power distribution in their sites. Finally, they all manage buildings. The result is a need for unification at scale across these two dimensions. Naturally, our customers expect a software portfolio that stretches across industry and infrastructure, power and building. A software portfolio that unifies the approach. This is exactly what we are working on.
With our software portfolio across EcoStruxure, AVEVA, OSI, RIB, ETAP, Planon, IGE+XAO, ALPI, and our partnerships, we already have an outstanding coverage and a clear market-leading position when it comes to data platforms, particularly in operate and maintain. We have already heard from Jean-Pascal that our plan is to make unification a reality, providing our customers with unmatched integration and interoperability. We call that unified asset life cycle management. Let me go into more details of our software strategy across the group. What is unified data federation and AI? We have embarked on the journey to build a data federation across our data platforms, which will also be open for third parties. This will provide our customers access to their data across multiple industrial platforms. It will also allow the utilization of AI at scale. One of the greatest challenges in successfully implementing AI is access to data.
We plan to solve this for our customers. What is unified user experience? We will enable our customers to find, to select, to buy, to deploy, to get support for all of our software portfolio with one unified experience in our group. What do we mean by unified software? We are building the technical integration of our software portfolio. That means creating the technical interfaces among our software products along the customer journeys, from designing a digital twin to building and operating the assets. We already have hundreds of customers using multiple of our software products today. Our unification approach will provide significant added value to our existing customers, as well as to new customers that we will attract. These customers represent all industries and geographies. They all have specific needs.
How can we at Schneider make sure that we meet those needs as their digital partner for efficiency and sustainability? We believe the answer is openness, and it is my pleasure to introduce the next level of EcoStruxure openness. Today, EcoStruxure is already a leading industrial IoT platform, connecting 6 million assets under management with 50% growth rate this year. We have 100,000 collaborators in our exchange ecosystem. In recent years, we have built a fast-growing business with our EcoStruxure Advisors, allowing our customers to generate actionable insights from the data we help them to collect from their assets. We will continue to invest and evolve this portfolio to make our EcoStruxure Advisors even more interoperable in the future. We are extremely proud that we have been able to build a digital service business leveraging the EcoStruxure platform and our Advisor portfolio.
To drive even more productivity, efficiency and sustainability for our customers, we are taking the next step to further open up EcoStruxure. We are offering APIs to our customers and ecosystem partners to allow them to build their own advisors and applications and to define and operate their own business models around them. Schneider Electric Exchange will play a major role in building and enabling this ecosystem. With this step, we will commercialize EcoStruxure through recurring platform and Data as a Service business models. We are working actively with customers and partners on our open platform approach. Let's hear from one of them.
Hi, I'm Eugene Murariu. I'm the Head of Global Engineering for BMO, and I'm here to discuss about the collaboration between Schneider, BMO and BGIS. Bank of Montreal is a highly diversified financial services provider, is the eighth-largest bank by assets in North America, serving 12 million customers globally. We partner with BGIS, a leading global real estate and facility management services provider, helping us to achieve our energy, operational, and health and well-being goals. We have very ambitious targets to reduce our carbon footprint by 30% by 2030, and this project is helping us to achieve that goal. We have been using EcoStruxure for retail solutions in our facilities, and now with the next level of EcoStruxure openness, we're starting to capture the value of data as a service.
Our solution is integrated in BMO's remote command center to provide remote monitoring of alarms and key parameters within our buildings. The result is greater operational efficiency through enterprise-level management and integration of alarms enabled by open EcoStruxure data. This level of visibility and integrated management, it helps BGIS reduce our energy costs while also driving down our cost to serve. The collaboration started as a pilot project and now is being scaled with deployments in more and more sites.
As we could see, the Bank of Montreal and their partners, BGIS, are already unlocking added value through the integration of EcoStruxure data and leveraging an open API approach. Time to summarize. Schneider is fully committed to the digital transformation. This transformation is a business transformation impacting every employee at Schneider. We have the same commitment and ambition when it comes to helping our customers with their digital transformation. With our software portfolio, we have embarked on a journey to make what we call unified asset lifecycle management a reality, helping our customers to create unmatched value across the lifecycle and across industry and infrastructure, power and buildings. Finally, I was really happy to share that we will be giving our customers the opportunity to use open EcoStruxure to build their own advisors and own business models in the largest industrial data ecosystem.
We believe that our digital transformation at scale will have a lasting impact on all of our employees, customers, and partners. Thank you.
Schneider Electric is the world's digital partner for efficiency and sustainability. By putting collaboration at the center of everything we do, we empower our suppliers, partners, and customers to thrive in an all-electric, all-digital world. Would our partners agree? New Zero Carbon Project working with us to reduce their carbon emissions 50% by 2025 through solutions like renewables. Talk to one of the 400 member companies in the NEO Network, which brings together corporate renewable energy buyers and solution providers to accelerate renewable adoption globally. Chat with the partners in our new joint ventures, AlphaStruxure with The Carlyle Group and GreenStruxure with Huck Capital, about how collaborating with leading investors is unlocking access to microgrids. Ask customers about collaborating on innovative renewables programs like Walmart's Gigaton PPA. It's helping suppliers access renewable energy and avoid 1 gigaton of carbon dioxide by 2030.
That's just our work with other companies. What about our community efforts? Talk to the 650,000 global e-learners taking some of Schneider Electric University's 200 free energy courses. Or the more than 30 million people from underserved communities worldwide who now have access to clean energy. Collaboration requires trust, transparency, and credibility. At Schneider Electric, we see collaboration as the only way forward for our company
Our customers, our partners, and our planet, which is why we're acting now, and we're definitely not acting alone.
Hi, I'm Olivier Blum, the Chief Strategy and Sustainability Officer at Schneider Electric. It's my pleasure to be with you today to share our sustainability strategy and how it contributes to the growth story of Schneider Electric in the next cycle. As it has been explained by our CEO, Jean-Pascal Tricoire, we are an impact company. An impact company for us is a company that performs, which is really the foundation of doing good. It's a company that impacts all stakeholders in our ecosystem in all ESG dimensions, but it's also a company that impacts a lot through business positioning, so the mission of the company.
Last but not the least, it's a company that integrates sustainability everywhere in the model, in the culture, in the way you manage a company, from the purpose to the strategy to the execution, from an external and internal governance standpoint, being also included in incentive. At the end of the day, it's a company that set up a model and a culture to have a very strong impact at the global and the local level. Let me go more in details. We continue to accelerate our commitment to sustainability. I will start quickly by telling you how we want to lead ESG by example and spend more time in the second part to explain how we have been evolving our business really in the field of sustainability. 2021 has been an important year for us.
First of all, because we've been elected as the most sustainable company in the world by Corporate Knights, but also because we have launched our new strategy for the next cycle. We have introduced our new ESG strategy with six long-term commitment. Five global commitment in the field of climate, resource, trust, equal, and generation, which are basically commitment we are taking at the global level and where we want really to progress everywhere in the world in all the subsidiaries of Schneider Electric. Because also we believe that the solution to create a more sustainable world is also related to the local dimension and the local ecosystem, we are also asking our local country president to build a local path, and we want to really empower them to build a strong impact for the local communities. What do we want really to impact as a company?
We are committed to address the biggest challenge of our time, which are climate change and social inequality. That's why we always like in our pledge to have a kind of 10-year, you know, ambition. First of all, on the environment, we want really to make sure we achieve our ambition to be net zero by 2030 in line with the 1.5 trajectory. We have approved our target through the SBTi process, but we have also taken a new commitment, a new pledge, which is in the field of biodiversity to achieve no net biodiversity loss in our operation by 2030. We continue to be very much committed on the social part of our agenda, continue really to empower people across generation and region to create equal opportunities for all our employees everywhere in the world.
Last but not the least, we want to continue to have a very strong impact on governance by continuing to earn the trust of all stakeholders by living up to our principle of trust in the field of ethics, cybersecurity, safety, and quality. This is really the agenda for us in the coming years, and again, addressing the two biggest challenges of our time, which are climate change and social inequality. Starting from this really long-term ambition, what is very important for us is to make sure that we have an impact in the short term on all our stakeholders. That's why we have been using this methodology of the Schneider Sustainability Impact, where we want to measure basically the progress we are making.
We are publishing externally on a quarterly basis, the progress we make on those top 11 metrics, which are really the key transformation indicator of the company, but also measuring the local impact with our colleagues from the different part in the country. Of course, last but not the least, we continue to make external disclosure in the field of ESG in compliance with all the key standard in the market. We are well on track so far with this ambition by 2025. I'm not going to go into all details on the progress we are making, but what I would like today is to do a deep dive on what we are doing in the field of climate, because it is very important for Schneider Electric in our ESG strategy, but it's also very important on the business side.
As you know, we have taken an important commitment. We built a pledge in the past year, which is to become carbon neutral in our entire value chain by 2040. For us, what is very, very important is what can we do in the short term. We want to become carbon neutral in our own operation, but we want to go to the next level. We want really to go build the scope of our own operation. This is why in 2021, we have built a massive program to engage our supplier and divide by two their CO2 emission. We continue also to have an impact on communities by adding 20 million people in the next cycle will have access to green electricity. We have already achieved in the past cycle 30 million, and now we want to go to 50.
We want, of course, as a result of that, to continue to have a strong impact on the profile of the company by making it greener in order to achieve 80% of green revenue according to our own internal methodology. Last but not the least, we want to have a strong impact in the market, because when you combine all our commitment in the field of climate, I think Schneider will go fairly fast to become carbon neutral in our operation. We hope to have a strong impact quickly on our supplier, but the biggest impact at the end of the day is what we can bring thanks to the solution of Schneider Electric. Here, what we want to deliver in the next cycle is to deliver 800 million tons of CO2 saved and avoided thanks to our solution.
That's a natural transition to the second part of my presentation, which is how we want to deliver that. You know the mission of the company, and we have been focusing a lot in the past years on how we could have a stronger impact to help our customer to go through their decarbonization journey. First of all, we are convinced, and I'm not going, you know, after the COP26, I'm sure you're all very well aware about the conclusion, but we all know that we have to go much faster, three times faster, in the way we save CO₂ emission if we want to be back in line with the trajectory by 2030. We believe at Schneider, I think it's still possible.
It requires a lot of effort, but it's still possible and we've done a lot of extensive surveys and worked a lot with a large number of customers in the past two years. There are three key transformations which are required to be back on this really net-zero trajectory by 2050. One, it's energy supply decarbonization that represents probably 45% of the solution. Two, process electrification, 30%. Three, demand optimization. I'll come back on that later, but we believe technology solutions are available to deliver those savings that will help us to be back on the trajectory. Second point, which is very, very important, when we look at the market, we see really the corporate world moving very fast. You know, it started in 2015 with the Paris Agreement.
It was fairly slow at the beginning, but now as you can see on the chart, in the past four years, every year, you multiply by two the number of companies which have targets in the field of climate, which are approved by SBTi. We see also the large companies moving. 16% of Fortune 500 companies have set targets approved by SBTi, but at the same time, there is 84% who have not done it yet. The good news is I would say it's moving, and as Schneider Electric, and I'll come back to that later, we are engaged actually with 50% of those large companies who are really setting up their targets in line with SBTi. Now, one good news, strong momentum on the corporate side. One bad news, it's still difficult for corporate to achieve their targets.
We have observed in the past two years that the common roadblock are, one, difficult to go through this kind of, you know, complex landscape of reporting and assessment in the field of climate. Difficulty for corporate to track energy data, and therefore, CO₂ emission. Difficult to engage their ecosystem internally and externally. Bottom line, difficult to structure a program to consider that climate, like any other dimension in a company, should be handled with a strategy, with a plan, with an organization, with a reporting. Based really on this evolution of the market on the customer side and what is needed on the climate side, at Schneider Electric, we've came to the conclusion that best-in-class company do three things. They strategize, they digitize, and they decarbonize.
They follow a simple three-step approach from target setting to execution to be able really to deliver results in line with their climate ambition. What we have been doing in the past two years is really to position Schneider Electric along those three dimensions. We believe today we have a unique value proposition to support our customers from strategy to execution. I'll come back more in detail, but Strategize is about basically helping companies to define the strategy and the trajectory, so it's basically done through consulting and agnostic consulting. The second part, which is Digitize, it's basically about creating a platform where you capture all your energy data and therefore you are able to monitor your CO₂ emissions. Point number three, once you have done that, is what are all the solutions that you should implement basically to reduce your carbon emissions.
Of course, we believe we have a very unique positioning because at Schneider, we can do one, two, or three. We can do both if a customer want to engage with us at each level, or we can engage with customer at one of the level, depending on their journey, and also depending on the maturity of the customer. Let me go a little bit more in detail in each of those steps and to share with you more importance on customer testimony. Let me start with step one, which is really about the definition of the climate strategy, what we call strategize. We've been reinforcing our consulting practice over the past year to help our customer because as I said before, there are more and more corporation who want really to build their strategy. They don't know where to start.
This is where we come with different solution depending on the maturity of the customer. For those company who start from scratch, it's basically about measuring the baseline, creating the roadmap, structuring a program and governance, but also being able to communicate and to report to the market. Let me share with you one example of Roca, who have been through that journey in the past 12 months.
I'm Carlos Velázquez, Sustainability Director of the Roca Group. The first step of our decarbonization journey was to define who could help us, and it was Schneider Electric. With them, we defined a holistic vision of what climate action meant for us as a multinational industrial group. Schneider's support was instrumental to help us fully understand our starting point, where are we now? Such as measuring our carbon footprint baseline. The next step of the work with Schneider became to develop the decarbonization roadmap. Where do we wanna go? Define the milestones to reach our future goals through different milestones. Structuring a program by defining and putting in place the right governance, teams, resources, prioritizing the different decarbonization levels, has been key to manage our budget and to maximize the return of our actions.
This example is a very interesting one. Roca is a company that has started really from the beginning, from scratch, and their need was basically to find a partner that help us to understand really this overall story of ESG carbon strategy. You understand how we have helped them really to measure and to build the first level of ambition and program. Step one being very important, defining the strategy. Step two is about how you can digitize to create a single source of truth for energy and sustainability data. Let me give you a simple example. Would you imagine a chief financial officer in the world of today being able to do his or her job without a proper ERP where you have all your financial information? We strongly believe at Schneider Electric this is the same in the world of climate for the future.
If you want really to deliver your ambition, your long-term pledge, your short-term ambition to decarbonize your company, you need one single source of truth where you can monitor all your energy data, therefore your CO2 emission. Where you have the opportunity, thanks to digital services, and we have built over a year a lot of knowledge that help our customers to identify opportunity of saving energy consumption. Last but not the least, being able to report your data for internal or external purpose. We build over the past year a very strong leading platform in the market, which is EcoStruxure Resource Advisor, where we have accumulated a lot of experience by working with a lot of multinational and that make this platform a very powerful platform to help our customer to digitize their information related to climate.
What I suggest, let's go through this video to go more in detail to understand how EcoStruxure works, but also how it has been used by one of our customers, Marriott.
Resource Advisor provides a single source of truth for an enterprise's energy and sustainability data. Monitor specific energy and resource consumption with access to hundreds of global data streams for comparison, benchmarking, or analysis. This consumption data is also translated into emissions by source, scope, and pollutants to give you your enterprise's global carbon footprint. Dynamic dashboards make it easy for different stakeholders to find the data that they're looking for. The collation and centralization of data from multiple sources, including utility invoice data from vendors, partners, or clients, is automated and managed by our experts with quality ensured. With connected meters and real-time analysis of consumption patterns across facilities or individual systems, energy-saving opportunities now become clear and actionable. What's more, a broader view of your energy procurement options help you migrate to not just lower carbon, but also lower cost alternatives.
Helping you stay on top of your progress and performance on decarbonization initiatives and sustainability goals. A single platform to track all your ESG metrics. Consolidated data and reporting templates streamline external ESG reporting. Partner with our consultants for further support. Resource Advisor is here to help you measure, manage, and accelerate your sustainability journey.
The way Marriott International tracks our energy and water, and waste and carbon data is through the use of Resource Advisor. We've implemented that platform, or in the process of implementing that platform, across all 6,200 hotels that we have, managed and franchised, to make sure that all of our data is in one single location. Having the right data at the right time has been critical in where we're going with our strategy.
As you can see, EcoStruxure Resource Advisor is really one single source of truth where you have all your information and you've understood how it can be leveraged by our customer. Of course, we have a very good example with Marriott, but we have also other implementation, you know, with private equity firms, for instance, want really to have a very strong implementation of an ESG program with a strong focus on climate that will implement EcoStruxure Resource Advisor in all their portfolio company and will have the opportunity to consolidate and to monitor that data and to be able to challenge real-time all their company in their decarbonization journey. Let's now move to the step three, which is about the execution of your decarbonization strategy.
We have identified four levers, and of course, the way to implement it can be very different by segment, by type of customer, depending on the maturity. We believe that in most of the cases, those four key levers are the ones that will help you to maximize your chance of achieving your decarbonization target. One, it's about the electrification of the operation. Two, it's about energy efficiency and how you can reduce energy use. Three is about how you can replace some energy source by leveraging more renewable. Fourth, more and more, we believe it's also about how you can engage your value chain. We have a unique portfolio of solution that can help you to achieve your target. Depending on the customer, that's going to be a mix of all those solution.
Of course, it can start by the electrification of your operation, by leveraging EV solution, by electrifying your process in industry or in building. It could be the installation of microgrid. You could have a strong focus also on energy efficiency by leveraging, for instance, our EcoStruxure Power solution or all the product that we have that make you more efficient. Variable Speed Drives, UPS, for instance, or our latest, AirSeT SF6-free switchgear that will help you to reduce significantly your carbon emission. It's about also, for instance, leveraging the unified operation center, thanks to AVEVA solution, and so on and so forth. Of course, a big focus on the renewable, helping you really to have access to power purchase agreement to switch to renewable energy. Also more and more, we've seen a large number of opportunity to engage your value chain.
Let me give you here two example. One, what we have been doing with RIB, which is basically the sixth dimension, you know, when you design and you build for sustainability, which is focused on how you can simulate a building at the design stage to make it as efficient as possible from a carbon standpoint. We are leveraging RIB, we are leveraging ETAP, but also solution with AVEVA, in the field of industrial software. The one I would like to highlight on this slide is what we have been doing with supplier. Why? Because just to do a deep dive on this one, many company who have been engaged in their decarbonization strategy realize that the Scope 3, not all of them, but it's a large number, represent an average 10x more than their operational emissions.
10x more than what they emit in their Scope 1 and 2. Usually they face three major challenges. One, very large number of suppliers in front of them, lack of visibility in terms of data, and lack of internal competency to help suppliers. What we've been developing at Schneider is an offer that combines all basically the capabilities that I've explained before to help our customers really to have a strong impact on the emissions coming from their Scope 3 suppliers. Probably you remember that one year ago, we've communicated what we've been doing with Walmart around the Gigaton PPA program, which was basically to help Walmart to consolidate all the needs of their suppliers to aggregate their needs in terms of access to renewable PPA.
We launched in the framework of our own ESG strategy, the Zero Carbon Project, which is basically what we do at Schneider to help our top 1,000 suppliers to reduce their emissions. Recently we launched the Energize program in the pharma industry with the same objective. Let's hear from one of the leaders of the company in the pharma industry to understand the benefits seen by them.
The Energize program, which was announced at COP26, will really accelerate our internal and external goals, primarily around Scope 3, which is all of our extended supply chain. The goal of the program, working with Schneider Electric and nine other leading pharmaceutical companies, is to really enroll our suppliers, educate them, and assist them in their own electricity and energy requirements, therefore giving them access, removing barriers for them, so that they can do more internally, which in turn will make our Scope 3 goals and our overall net zero and net climate impact goals be attained faster and hopefully easier.
Very exciting program. How does it work? Basically, the Energize program, as I said before, gather 10 company in the pharma industry, and what we have been doing for them is to create a platform that will offer decarbonization services to all their supplier. We call this platform NEO Network, which is a platform Schneider I think has developed in the past for PPA purpose and that step by step we have expanded to offer other decarbonization services. The supplier wants access to this platform, they will be able to access to training module, they will be able to access to some solution that helps them to measure their carbon emission, for instance, but also to have access to other provider of solution in the ecosystem that we are creating. How does it work bottom line?
The vision we have is really to create a marketplace for decarbonization solution. You've understood that we started one year ago with Walmart, with a group of supplier focused on PPA. We extended that with 1,000 supplier of Schneider, now Energize, and you could imagine in the future that we could add more community of supplier if some of our customer are interested to have access to this same ecosystem, where basically we connect buyers or people who have a needs to go through their decarbonization journey with a very large number of solution provider. We are part, at Schneider Electric, of those solution provider, but we are also connecting our customer, our supplier in that case, with provider of PPA, for instance, in the field of renewable energy. That creates a very strong marketplace for decarbonization solution, which is very, very promising in the future.
To conclude, you understand that with our sustainability strategy, we have the ambition to become the preferred partner of corporates at all stage of their sustainability journey. We can engage with our customer in the step one, two, or three. Some of them will engage with us at all level. What is very, very important, the sooner we enter in the process, the more chance we have, of course, to go through the other part of the journey, which is the digitization and decarbonization. As you understand, there are more and more corporates who are engaged in their climate transition. Of course, all those decision are taken at the highest level of the company, and that create a very, very strong position for Schneider Electric at board level, at CXO level, which is excellent for the position of the company in the future.
To wrap up, sustainability is a strong driver for Schneider Electric. You have understood that it's very much integrated between what we do on the ESG side and what we do for our customer. We implement some of those solutions for Schneider. We innovate, we learn a lot. We can bring that expertise to the customer and vice versa. We are also bringing back from all the experience we have with our customers, a lot of innovation for our own decarbonization strategy at Schneider Electric. By doing that, we have the ambition to create a very strong agnostic consulting practice and increasing significantly the revenue in the next cycle. We continue to grow our digital services thanks to our two core digital platforms that could create another 15 GW of renewable solutions for the market.
Last but not the least, it's a very strong accelerator of the growth of our entire portfolio at Schneider Electric and of course a contribution in our journey to reach 80% of green revenues. As a result of that, we believe we can have a very strong impact on the decarbonization of our customer by achieving this 800 million tons of CO2 saved and avoided by 2025. Thank you very much for your listening. I'm of course available today or later for any kind of question that you have on our sustainability strategy.
As your digital partner for sustainability and efficiency, Schneider Electric is driving building transformation using simple integrated solutions.
Together with our software partners, we're accelerating digital transformation across every stage of the project lifecycle. Engineers trust Caneco ONE for 3D modeling of electrical installations, from automated design to equipment sizing. Once the BIM model is exported to Revit, engineers can use ETAP to analyze the power system on a unified digital twin. Electrical engineers rely on SEE Electrical for 3D switchboard design and manufacturing planning for accurate bills of materials. From design to build, general contractors and real estate developers trust MTWO, construction enterprise cloud software for project planning, costing, and carbon emission monitoring. During the operate and maintain phases, Planon's leading real estate and facility management software takes data and turns it into insight.
This helps you better manage your portfolio. To enable smarter, more sustainable buildings for you, we bring it all together for continuous data insight with EcoStruxure, our open, interoperable, IoT-enabled system architecture and platform. Your vision, our expertise. Make it for exhilaration, for reconnecting, for endorphins. Make it for her, him. Make it more efficiently while protecting our planet. Tomorrow's industry calls for stepping up today. The industries of the future mean being truly open, so you can make what you make with the next generation in mind. Employing resilient operations that make efficient use of energy, redefining the role sustainability plays in industry, and delivering people-focused solutions that empower your workforce. Because whatever you're making. We will help you make it better so you can make it for life. We have been living in an age of fire.
Since harnessing its power, it has fueled our evolution, but it came at a cost. It's time to decarbonize. It's time to evolve to a new electric world. It's time for a change of mentality. Let's look at electricity through a digital lens and let them bring out the best in each other. When electric meets digital, it gives us new ways of thinking about it, new ways of distributing it, new ways of saving it. Energy becomes visible, connected, smarter, and more controlled. It becomes Electricity 4.0. Electricity 4.0 works for you and with you. It delivers more and wastes less. It helps companies and individuals operate more efficiently, more successfully. It helps our planet become more resilient. A new all-electric, all-digital world. The future is simply electricity for zero. Zero waste, zero emissions, zero carbon. Electricity 4.0.
Design and technology has to work well together. This is the core of our partnership with Schneider Electric. We work with Schneider on this amazing platform called EcoStruxure.
We felt EcoStruxure and EcoStruxure Energy Advisor in particular was key to collecting and analyzing data from multiple site locations.
The outcome exceeded our expectations, which meant reduced power consumption, reduced carbon footprint, reduced noise emissions, and the ability to go into the future without any reductions to the system. It's future-proof.
To maintain machine productivity, we use EcoStruxure Augmented Operator Advisor, which can provide real-time data to know the machine status, and is able to reduce maintenance time by 50%.
Over the period of implementation, the Schneider Electric system has substantially contributed towards our 20% increase in throughput in the plant. The EcoStruxure platform from Schneider Electric has provided us with an increase in total plant operational efficiency of up to 15%. Through the AVEVA Operations Advisor system, we have optimized the technology adjustment group, reduced manual operation, and through digitization methods, reduced energy consumption by 10%. We naturally approached Schneider Electric because we wanted a reliable solution that no longer uses SF6 and plug and play. Schneider Electric was there to respond, and thanks to this solution, which replaces SF6 with air, we have a more efficient solution. With the products coming from Schneider Electric, we expect to achieve a PUE of 1.15.
Combining that with using hydroelectric power will make sure that we are one of the most sustainable data centers in the Nordics, and hopefully in the world.
Welcome to our next session. Having already heard about the vision for the future, our digital ambitions, as well as our positioning for sustainability, we now turn our attention to the business and to our customers. I'd like to introduce the panel that we have here. First of all, we have Barbara Frei, who's leading our industrial automation business, a long and illustrious career in automation, and previously actually heading our European operations as well. We've got Peter Herweck, who is the CEO of AVEVA. AVEVA, as you know, is a listed leading industrial software company in which Schneider has a majority holding, and it's consolidated in the group's financial statements. Joining us from Asia is Philippe Delorme, who is the head of our energy management business. We're gonna kick off the conversation now.
I'm gonna kick it off with you, Philippe, because I know you stayed up late to join this panel. Philippe, if I may ask you around the topic of how the needs of our customers have evolved in recent years, as a business leader, how do you make decisions which keep the needs of the customers at the forefront?
Well, it's very simple, Amit. We operate at Schneider with a simple principle, which is we always start with a customer perspective. If it comes to sales, whether channel sales or end user sales, we are organized by customer type and in markets that represent the whole portfolio. For every customer category, we define the right portfolio and the value proposition with EcoStruxure as a backbone of our solutions.
Barbara, anything to add?
No, I just can confirm what Philippe said. We really try to look from an end user's perspective. This is also why we have strong segments in place, which are segment leaders with very strong teams, which are experts in those different end markets. When we look at how our end markets, 50% is in building and data center. Another 50% is in industry and infrastructure. When we look at the maturity level of those customers on their digital journey, you see differences. For instance, I think building is a little bit behind, industry historically is a bit more advanced. All of them need exactly, as Jean-Pascal has mentioned, these four steps of integration. We really would like to look with our customers from an end-to-end perspective over the whole life cycle.
Right. Effectively we're looking at what the customer needs, and in many cases, it's pretty evident that what they need is an integrated sort of solution from both of your businesses.
Absolutely.
Maybe if we sort of dwell a little bit deeper into the integrated nature of the portfolio, Philippe, maybe I come back to you again. Some thoughts around that, please.
First of all, it's important to realize that when we talk about energy management, this business is pervasive across our four end markets. In energy management, we see great opportunities around all our end markets. With regard to industry and infrastructure, the ability to provide energy and automation together is a key competitive advantage. Now, if we move back to building, efficiency and sustainability are really the key trends shaping what we call the buildings of the future. These buildings must be the cornerstone of the energy and the climate transition to move to a net zero future. That's where it's so important to drive the deployment of net zero building.
To build net-zero building, you need to build an all-electric infrastructure that is very efficient and reliable, and you need to add on that a digital backbone to ensure energy visibility and automation to drive efficiency. Practically, what does it mean? It means highly reliable power distribution, medium voltage and low voltage, of course. A digital layer on top that we call EcoStruxure Power, and, say, in parallel, the automation layer to drive building management. Those layers, of course, can include PLCs, drives to manage motors, because there are many motors in a building. In many cases, we have cybersecurity, augmented reality. Really we see the full Schneider portfolio at play here. If we take an example of a customer, let's take the U.S. for instance. We have a great reference there with...
Actually, we have many more, but one that I wanted to talk about, which is United Therapeutics. It's an American biotech company which decided to work with us to build their new flagship building in Silver Spring, Maryland. It's a six-story building, 120,000 sq ft. The first net-zero building on the East Coast and one of the largest net-zero commercial buildings in the U.S. Of course, certified LEED Platinum. You're gonna ask, "So how does it work?" Well, it's pretty simple. The building does utilize 3,000 solar panels on each roof. It also leverages a full geothermal energy system, which makes on one side the building very electrical and energy frugal.
On top of that, in this project, Schneider Electric has provided an extensive power and building management offer, thanks to our EcoStruxure Power and Building portfolio. All this combined allows us to optimize the system performance and reduce totally the energy use.
Sounds very exciting, Philippe. That's a great example to share. Barbara, maybe from your perspective around the same question.
Let me take the angle of the industry. The industry is really one of the primary user of electricity, and specifically when we talk about the energy-intensive industry. Here we take fertilizer, chemical, glass, cement, all things we always need to continue to use also in the future. For instance, when we look at the European Union, this energy-intensive industry is eating up more than half of the energy consumption in the European Union. The integration of automation and energy over software is really giving us the chance to make the life cycle over the whole plant. Bringing together power and the process automation domains, this really drives profitability, and it also drives the sustainability, the industrial sustainability, which is important for us as a business driver.
Positioning energy management industrial automation is, for us, quite unique, and I think it's a competitive advantage that we have at Schneider Electric. I would like to bring the example of Veolia Water Technologies. It's a global provider of water and wastewater, very well known, and they are active in the public and in the private sector. We talk here about a project in Italy. It's a water treatment facility at the coast of Sorrento, and sustainability is really at the core of this customer. Reusing recovered material for industrial and irrigation purposes is one of the key mandates we had there. The solution we provided was covering both process and energy. We gave a DCS, a hybrid application, that's the EcoStruxure Process Expert.
We also installed medium voltage, low voltage equipment, frequency converters, and also EcoStruxure Power to really have the full approach here. In the end, we were really able to save 15% of energy and up to 20% production efficiency, and I think that's really a powerful combination we can provide here.
No, that's great, and that clearly shows that how you've been able to bring energy as well as automation together for the benefit of customers, for tangible results which are quantifiable.
Absolutely.
I think.
Accountable for.
Absolutely, yeah. I think the one other angle which we've discussed, which we haven't discussed so far, which I think really brings all of this together for the benefit of customer really is software, right? Software is something which is pervasive across our entire portfolio, and I'd like to bring in Peter over here. Peter, not only are you, of course, CEO of AVEVA, but you know Schneider Electric very well as well. Share with us and with our audience the strategic sort of thinking behind the portfolio that's been built together today and, of course, with a little bit of specific emphasis on AVEVA.
Sure. Thanks, Amit. Let's talk about AVEVA first before going a little bit larger on the Schneider software portfolio. Now, AVEVA is the leader in the industrial software market, you know, enabling the digital transformation for our clients to achieve efficiency and sustainability. They both go very close together. Now, that's of course at the heart of EcoStruxure, because many of the clients buy a complete solution when Schneider goes to market, meaning also across the layers that we have described in EcoStruxure. Now, we've been fortunate that we can also bring the OSIsoft PI System into the game. It is the gold standard if we're talking about the data infrastructure that we have at our industrial and infrastructure clients.
Now, when you look at the Schneider software portfolio, there are really two uniquenesses that we, and that you need to keep in mind. Number one is there are really three threads of software that we need to look at, and they all go from design to build to operate and maintain in the industrial and infrastructure market, in the buildings market, and then of course both of those, and that's why I have it in the middle, is the power market. So that's one uniqueness. The second uniqueness, and that's why it's important that we have the structure we've chosen with AVEVA, is the software needs to be agnostic and it needs to be neutral. What does that mean?
Agnostic means when I talk to some of my partners and they go into clients, the automation base is vast there, and it needs to connect to Schneider systems, but then unfortunately, there are also some other systems there, and that's the uniqueness. Their ability to sell is just fabulous because it connects agnostically to the automation layer. It's open because other software can be connected to it. These two unique features, if you will, differentiate us also in front of the client. So how does it work? A short example of somebody who's gonna build or modify a plant. Usually, they do the design of the process, then they wanna actually build the plant. In the build process, they may find out that they need to change a pump.
Now, if they change the pump, the pump has different electrical specifications. They would use ETAP software to do the simulation to see how much power the network uses. That may result in a new transformer, or it may result in one additional electric panel that needs to go into the cabinet. You go back to the design software, and all of a sudden that panel is added and they're looking whether size-wise it fits together. You go from there and basically you spit out the bill of material that will, with the RIB...
Have in this regard. Some of the software assets are of course, you know, working very close with Barbara's automation system. When we're talking Automation Expert, it's a world-leading, it connects flawlessly together. No issue here. Secondly, some of the assets are hosted with Philippe. Maybe you wanna give a couple more insights here.
Thank you, Peter. Indeed, last year we finalized the acquisition of RIB Software, a global player in the digital transformation of the construction industry. We also concluded the acquisition of ETAP, which is a worldwide leader in electrical calculation and simulation. We also completed our investment into Planon, which is a reference in smart building for real estate manager and facility managers. You also remember that in 2018 and 2019, we completed the acquisition of ALPI on one side and IGE+XAO on the other side in the field of electrical CAD. Thanks to this unique portfolio, we are empowering our customers to make better informed decision to drive sustainability and efficiency across the full life cycle. Here I'd like to provide some pretty exciting example.
The first one is here in Hong Kong with Swire Properties, which is a leading property developer and owner and developer of mixed-use property [audio distortion].
Split ratio today, 75% goes on software and 25% on hardware developments. Another important aspect that specifically the market is asking for is the openness, the open standards. Customers don't want to have any more proprietary systems where you cannot interoperate between each other. They want open standards, and the open standard in automation, which is called universal automation, is based on IEC 61499. It really enables communication, open protocols between the different vendors, and we think vendors which will not in the mid-term jump on this train might lose out in the market. When hardware and software life cycles are decoupled, the systems are more agile, processes and machines are easier to engineer and to reconfigure and diagnose.
Because we believe in this concept and the standard of IEC 61499, as already mentioned by Peter before, we have launched to the market such a solution, which is called the Automation Expert. This is something that we are now penetrating the market with gaining first projects and convincing not only the customer which are asking for it, but also others in the market to follow us.
Right. Maybe Philippe, I come to you as a follow-up on this one. The entire concept of, you know, obviously there's a lot more digital and software as a value proposition to customers. How has the relationship or the go-to -market to customers evolved or changed as a consequence of this?
Well, the world has changed clearly, and really this whole move has led to a shift in our relationship with our customers as digital and software are actually a very good entry point at C-level. As we focus on efficiency and sustainability, we are more outcome-focused, and it create more stickiness and actually more recurring revenue. Let's take a few examples. Take one. A year ago, we started a conversation about data management and workplace occupant experience with a large fragrance company. The conversation involve C-level, whom we don't talk to traditionally at Schneider. That included the head of workplace, the digital strategy team, HR, transformation team, the CFO.
While this conversation actually started with EcoStruxure Engage Enterprise App, which was Schneider, we expanded the scope to include an entire ecosystem of solutions around workplace management, such as room booking, visitor management, ticketing, which allowed us to introduce Planon. One year later, we are now deploying on one side EcoStruxure Engage, which is a Schneider piece, and Planon workspace management solution in 60 buildings across 40 countries for 60,000 users. Digital is also impacting the way we think about R&D with software and connectivity first. If we take an example which we recently launched, which is PrismaSeT Active, which is our newly launched natively connected low-voltage switchboards, which offers a whole range of cutting-edge features that are essential to shaping buildings of the future.
It is not really more expensive than the conventional equipments, 100% wireless, and any of our partners can implement it easily and in the most cost-effective way, just using a cell phone. We deploy PrismaSeT Active in France at big and small facilities. Take an example. For instance, we implemented that with Cegelec, which is a contractor, and B2EI, which is a panel builder. Both of them chose PrismaSeT Active for large tertiary projects in the Paris region. They were seduced by PrismaSeT Active because it can detect fire hazards in the cabinet even before it would occur, thanks to its HeatTag sensor, while its energy data captured by the PowerTag sensor can be transmitted to the customer's smartphone.
Maybe, Amit, I can follow up on some of the things that Philippe has said because I think it's essential. You know, we've said in the past that the software is gonna bring you to the C-level. I think this has been further augmented by the topic of sustainability. It is on the agenda of the CEOs and the C-level at any of our clients in any industry these days. The two things are very much linked together. You've seen this earlier from Olivier, but there is, let me talk about maybe two examples in industries where we're on. I think we need to look at the vast installed base that is there that needs refurbishment and needs to be more efficient and more sustainable.
Secondly, we need to look at whatever is newly built. Let's start off with something that's newly built with a client that we have in clean power, it's Ontario Power Generation. They have a vast fleet of hydro and also nuclear power plants. They use the PI System as their single truth of data, as I said earlier. Now with the integration of the PI System into the AVEVA portfolio, you can directly, from the PI System, start the predictive analytics. What they do is, or what we do is we can predict if there is gonna be a problem in a hydropower plant or in the nuclear power plant and enable them to drive the asset in the most efficient way. That gives them tremendous savings.
In this regard, it's in the neighborhood of a single-digit million dollar range just for a catch that they would have in a nuclear plant, for example. If we look at the bigger opportunity, it's the installed base that's out there. Of course, we're competing with a lot of folks out there, and one of the largest contracts that has just been awarded in the last couple of months was from Aramco, the largest energy company on the planet. They wanted their assets also, you know, deployed with a predictive analytics package. We've been fighting technically against all competitors that are out there. You name them.
It's been the largest contract that has been awarded to AVEVA to manage 2,500 assets that they have currently in operation to reduce the energy consumption and increase efficiency, and with that, reduce CO2 footprint. I think it's essential to it. We'll look forward to expanding that to 10,000 or maybe even the 34,000 assets that they have in operation.
Thank you for sharing that, Peter. I think what I'm taking away from all of this is it fair to assume that most of the investments that we probably need to deploy in the coming years will therefore be linked somewhere to the topics of digital and sustainability? Is that a fair assumption, Barbara?
Absolutely. Of course, we also refresh our core offers. That's still important. We ensure, of course, the native connectivity, as also Philippe mentioned before in his R&D priorities. Most of our products are connected, maybe with the exception of a push button, our EcoStruxure layer number one. From this, more digital services also can, of course, be derived. The next step, which will now come for us, is artificial intelligence. You can do artificial intelligence on different level. You can do it on the connected products, on the edge control, but also on the apps and analytics. In the next 12 months, really would like to focus on two areas. The one is the artificial-based insight, intelligent insight.
This is the one where we expand our advisor's capability to make more predictions and make recommendations. Here, we are in close collaboration, of course, with AVEVA. We are not going to reinvent the wheel, but we are reusing, as just Peter described, what is already available, but bring them on top of it our more domain expertise for certain segments. The other one is the AI, artificial intelligence-based control. That means there is a coexistence of the traditional control that you have in a certain process and artificial intelligence model. This model will allow you, in the certain scenario, to make certain decisions, like a dynamic pick-and-place process, or you can really improve the quality over the lifetime of the process.
This gives us ample of opportunities now in the future to even bring more value in the sense of artificial intelligence. What I would like to emphasize here, this is not replacing human, it's more augmenting human. Also with scarce labor and skilled people, this will help certain operators to make more, let's say, qualified decisions based on artificial intelligence that we provide.
Philippe, would you like to add something to this comment as well?
I would say Barbara summed it all. I would say in energy management, we have pretty similar principle. Of course, we still want to invest in the core, and there are many new areas for innovation, mentioned SF6-free, everything related to the new energy landscape. Then we will also ramp up on R&D in digitization, first at the edge by embedded connectivity in our products to lower the cost, simplify the experience, keep developing software that would sit on the edge for real-time critical application. Then we see a massive acceleration on the cloud with two big things. On one side, the move to cloud multitenant, which is a big deal with built-in cybersecurity. The second one being artificial intelligence combined with the cloud to unleash new values, which is really what we call a software-defined innovation.
All right. Lots of good areas to look forward to in the coming years. Let me now pivot the discussion to a different topic, which is around our multi-hub setup. It's quite evident on this call. As we can see, our leaders are located in different parts of the world. I want, maybe Barbara, if you can start with you. Can you simplify what the multi-hub actually means and how it seems to work for us, and specifically in the last year or two, which were obviously difficult COVID periods?
Multi-hub means we are really close to the market. You know, we are a listed company, listed in Europe, in France. However, our largest single markets are the U.S. and China. With these hubs, we have really the capabilities or the possibility to be very close to what's happening in those markets. We can be part of local committees, we can influence standards, we can attract talent. We speak the same language as the customer, and this is extremely powerful. This, of course, also means that we empower a lot the people in the front, our zone presidents, our county presidents, to make decisions for the customer, and with a big trust between the different businesses and what is happening in the local market. Again, I would like to emphasize the aspect of talents.
If you want to attract a talent from somewhere in the world, we always can say, "Hey, you can choose between the locations. Wherever you feel comfortable together with your family or your private life, this is the hub we can provide to you." This gives us, from my point of view, a big competitive edge in this kind of talent market.
Yeah. I think we have many examples in the company of leaders who-
Absolutely
... who joined on account of this setup.
Absolutely.
Maybe Philippe, to you on the same question around the multi-hub, but maybe with a different perspective, more to do with the R&D and the development process.
Yeah. Indeed, as Barbara said, the world is becoming less flat, and there is a growing need for innovation to be done closer to our customers with stronger customization in the last miles. For this reason, we've structured mostly four main hubs, in North America, in Europe, in China, and in India, with strong empowerment, as Barbara mentioned, and a layer of orchestration on top to make sure that we would create platform and ensure a maximum reuse of core technologies across the boards. Besides, we've deployed agile methodologies to put our customers at the heart of our innovation process with more iteration and a shorter time to market. In parallel, our supply chain follows the same structure, so R&D and plants can work together.
Combined with agile, our multi-hub setup gives us an operational advantage in the regions to respond to local customers quickly, and it also contribute to global business through collaboration across geography. As a result, we are seeing a drastic acceleration of the number of innovation coming out to market despite COVID-19, which is a fantastic performance. To illustrate our multi-hub strategy, let me give you two great example. The first one is about our brand-new generation of automatic transfer switch that we developed with our hub China team. Back in 2004, we acquired a local company named Wingoal. In the past 17 years, this team has established a very strong competency in the field of automatic transfer switching. They issued over more than 300+ patents.
They were involved in the formulation and amendments of 40+ regulations and application codes in China. Since the multi-hub setup in 2019, the team took a more important responsibility to develop a brand-new platform for our global product for transfer switch. We did start with the first launch in China. That worked very well, and we are now launching in international markets. That's the first example. The second example is L&T E&A, which is another great illustration of this setup. Last year, as you know, we acquired L&T E&A to accelerate in India and drive exports from India with innovations that are frugal, fit for purpose, and close to our markets in emerging economies. India is now our fourth global hub of technology, innovation, and manufacturing, which is really super exciting.
Thank you for sharing, Philippe. Let's now talk about our partner model. I think it's a very important aspect of our go-to-market strategy. A large part of our business is done through distributors and partners in general. I wanna spend a few minutes just to let our audience get a better understanding of how our partner network works and how it's evolving and what we think about it into the future as well. Philippe, should I start with you?
Sure. Indeed, we build over many, many years a huge network of partners worldwide, over 600,000 partners and service provider. It's a massive advantage. Here, size and scale matter. All our partners, electricians, system integrators, our distributors, have always been extremely important to us to bring our core solution to our end users, customers. Over the past years, we have been working to help accelerate their digital transformation so that they can be more efficient and improve their service level. Let's take an example. We are supporting, for instance, a large French panel builder called Reyes Group with SEE Electrical, an electrical CAD software coming from IGE+XAO.
These tools allow Reyes Group to design and engineer in 3D a digital twin of electrical panels, which saves a lot of time in the manufacturing process and enhances quality, thanks to multiple error checks, mechanical checks, and wiring checks. Another example is our strategic partnership with Autodesk. The two companies, Autodesk and Schneider Electric, decided to partner to integrate BIM electrical design workflows within Revit. The end goals, first, more collaboration as we break silos between architects and electrical designers. Second, more sustainable and energy-efficient designs that help positively address climate change.
Barbara, maybe you wanna add something from the industrial automation side.
Look, also in the industrial automation area, we really have to partner together with others to make the adoption of this digital transformation also happen. When I'd like to go on two examples. One is the Universal Automation Organization that we just launched on November 4. There are 25 parties joining this one, and more are coming to join. It varies from machine builders over equipment manufacturers to universities and end users. With this, we want to enter in a kind of plug and produce environment for automation software. This is in principle like a bit like a app store where people start to enrich with their applications the library and where you can then take the runtime library free of charge from. This is really something how we want to accelerate collaboration in the universal automation space.
The other part is cybersecurity. As Peter was saying, in 2018, we started to enter into the cybersecurity business from a OT perspective, and here we have several partners that we work together with. Of course, also Schneider Electric Ventures is helping us in finding here the right partners in the market. That's for us really crucial.
All right. Peter, maybe from your standpoint, I mean, obviously, AVEVA is using partners as well, not the traditional Schneider partners, but
To a certain extent, you know, maybe let me start off with saying how differentiating a global partner network is in different categories and different stages, and it is very hard to copy, and it needs to be in the DNA of the company. That's what I learned in my journey. Now, in the software space, you'd be surprised also how sophisticated our partner network is. It includes just simple distributors that sell some of our software that is just a golden standard in the market, and we've grown with it. Now we've added the OSIsoft PI System. They have no experience with distributors, so we're bringing them into our distribution network. The first synergy deals sold to the clients that we didn't know before, as an example. There are system integrators.
The system integrators usually have software and they have automation equipment to it. They may have Schneider automation equipment or somebody else's. It's important from a software perspective, I said agnostic, that you serve both of them, and we do. You move to more complicated things where we have a software package where it requires real global implementations, be it on the cloud, be it into the infrastructure that our clients have, the IT infrastructure, and with that, it's important to have large partners and we're one of the strategic partners with Accenture, for example, or with Microsoft, or if it's a joint solution we're offering together with Schneider, it's important to have these staged approach, if you will.
In the end, if we're bringing something very new to the market, we do the implementation ourselves, but at the end of the day, as a software company, we wanna sell software. But if you bring like, for example, a methane reduction software or a greenhouse reduction software onto the market, you need to engage with the client in the beginning and drive this forward until you can hand it over to the distributor. The network of distributors and partners is key for superior growth in my view.
Just to mention here, process automation unit in Schneider Electric is really a key partner. It's a super system integrator for AVEVA, and that's really adding value then in the whole value chain. Having the agnostic software from AVEVA, then we bring our domain knowledge and cover a complete solution to the customer.
Interesting. It's interesting you said methane reduction, which is a very topical issue just from a couple of weeks ago in the COP discussions. Maybe just I want to labor this point a little bit further because some of the questions we get from investors from time to time is that as we're, you know, having more and more, you know, digital sales, we're having more software business model, what do you see the role of our partners changing or evolving in coming years? Philippe, if you just want to address that point, please.
I think Peter said it very well. Partnership is part of our DNA, and will continue to be part of the DNA. We believe our partner will continue to play a vital role, to the benefit of our customer and our planet. In this context, really, we see digital as a key enabler. To strive, there is no doubt that our partners will need to adapt to embrace the digital journey, but we are very attached to keep working with them because we believe they are absolutely part of our necessary ecosystems.
All right. Very clear. Let's talk a little bit about services. You know, we've heard earlier in the afternoon about the role of services in our future growth. Of course, services has been growing very nicely for us for a number of years. But I just wanted to ask you guys as business leaders as to, you know, what is the real opportunity in services and how are you going about it? Maybe back again to you, Philippe.
You said it. I mean, service is a very important growth opportunity for Schneider. It starts with our install base. We have a very large install base. We are already covering part of it, and we are working to cover it even more extensively. Additionally, what we are doing is deploying what we call a seamless CapEx to OpEx to recurring approach to all our greenfield projects. What does it mean? It means that for all our equipment, when they leave our factories, they are systematically equipped with native connectivity, with all technical information, and they are systematically tracked in our digital logbook. They are natively service ready, and after commissioning, the end users are registered in our database.
This means that it enlarges the tracking of our install base and allows us to offer our customers tailored services and generates, in the end, recurring revenues. If we take some example, Schneider is partnering, for instance, with Equinix, which is a large data center provider in several countries, including Ireland, the U.K., and Australia, on a multiyear maintenance contract to ensure predictive maintenance of their whole power system infrastructure. Since the start of the project, our service team closely work with Equinix to codesign, understand their CapEx and OpEx need at the same time, and coordinate with our operation team to ensure a consistent experience across the different geographies. We are deploying the same approach to brownfield projects, for which we provide green and digital monetization services.
Take an example, removal of SF6, system optimization, thanks to our Green Premium, digital to make the equipment services ready. All of this allows us to bring safety, reliability, efficiency, and sustainability to our customers. To illustrate, we are supporting Western Power, the state utility in Western Australia, to recycle its SF6 gas contained in their medium voltage switchgear equipment. Barbara, maybe over to you to share with us about the role of digital in services, because I'm sure it's playing a major role there.
Absolutely. We were mentioning before that now all our products are natively digitally connected. That means in principle, we can say to the customer from day one, we can give you a remote solution to help you to reduce downtime, to make predictive maintenance. However, that said, some of these solutions were already available 20 years ago, when I started to promote this kind of solution in the market. I would say it was really through the last 18 months with COVID that the customer demand for this kind of digitally enabled service contract has really increased. You were not able to go to the site physically. Many things had to be done remotely. Is it making the maintenance or fixing issues?
Of course, the appetite of our customers now to go really into a more predictive instead of a reactive maintenance has absolutely increased. Now with our Advisor portfolio connected products, we have all in our hands to make these kind of offers to our customers. One example I would like to bring here is from Froneri. Froneri is an ice cream producer, which is producing in 20 countries all over. We're talking here about a manufacturing plant in Egypt where there is an ammonia compressor which was regularly failing because of the motor. What we did, we together with the customer worked on a solution to install an Asset Advisor, so that we can always predict if something might happen or not.
We can then also send service people in advance there before something happens, and the downtime of this customer in his production has been reduced significantly. As you mentioned before, it's very attractive for us also because it's a recurring business, so you renew the service contract every year. Of course, after a certain period, you have to fight for it, but that's exactly what we are going for.
Wonderful. It's a great example on services and a lot more to come.
Yeah, absolutely. We are spending our R&D money also on this kind of the portfolio.
All right. Let's move to the topic of mega trends. We've heard a lot, and we have regular discussions with investors, you know, who are quite excited with the themes which are associated with Schneider, right? Electrification, digitization, and sustainability. I'd like you guys to give, maybe to go a level more granular than that and share exactly what within those large themes are the specific areas which are really related to our growth in coming years. Philippe, if you might want to give us a couple of examples there.
Sure. Very right, Amit, that over the past years we've seen a drastic acceleration of the three mega trends you've been listing. The COVID-19 crisis clearly created a much stronger appetite for sustainability as it really pushed many businesses, government and consumer to really pause, think, and look at the world that we are living in. To respond to all of this, we believe that it's calling for a very different world that we call Electricity 4.0 that relies on more electric and digital technology to drive sustainability and efficiency. Today, around the world, we see multiple regulation and stimulus packages that will help economies to recover while accelerating these three new trends.
To name a few, the $1.2 trillion infrastructure bill in the U.S. signed on November 15 aims at building a national network of EV chargers, electrifying thousands of schools, and connecting every American to reliable high-speed internet. In Europe, the European Fit for 55 package released last July advances decarbonization in the EU by aligning the energy and the climate regulatory framework with a 2030 target to cut carbon emission by at least 55%. It includes many impactful measures. For example, mandatory targets for annual increase of renewable in heating and cooling, mandatory energy management system for manufacturing sites or network losses, mapping of transmission and distribution network. We should mention a fourth trend, which is also increasingly visible, which is the world is becoming more regional and fragmented.
Overall, I would say Schneider is uniquely positioned to benefit from this momentum, thanks to the many competitive advantages we've covered in our panel today.
All right. Barbara, anything else to add, in terms of the mega trends from your perspective?
Look, I think it's worth to mention two trends. One is, as Philippe before, related to sustainability, the industrial sustainability, and the other part is the digital twin. Industrial sustainability is not new for us. We are doing this to be in the business, so to say. Whenever you add some automation to a process, usually it's more efficiency that you achieve afterwards. However, today we have an interplay, and we call it the industrial sustainability triad. It's the energy that you use, it's the software that you need to optimize the process, and then in principle, you have the automation part, which optimizes process, energy, resources, and so on. We have here very good examples in logistics, warehouses. Also when we talk about processes in water treatment.
Let me give you one example from a company called Blue Ocean Technology, how this works. It's a Norwegian company, which is handling sludge in aquaculture. What you need to do in these kind of things, if you want to reuse the sludge, which is produced usually from fish farming, you need to pump a lot of water, you need to look at the quality of the water, so that in the end you have a product that you can use again, like for instance, fertilizers. What we did, we applied the EcoStruxure Machine Advisor, which allows to look at the performance of the pumps, at the quality of the water, and in the end, we were able to reach with this customer 25% better performance in energy use and also in the output of producing these kind of fertilizers.
It's really this triad which makes the difference of getting the sustainability thought in this game. The other trend in our market is the digital twin. One key aspect of the digital twin is that all data are brought together and made visible and start to evolve over the time. If you have a running process, you can evolve your digital twin and therefore, even when the process is running, look into the future and optimize your process. Here, of course, it's extremely important to look also what AVEVA does in this kind of area.
Yeah, very happy to talk about, you know, if you will, two of the mega trends that involve the digital twin. One is the energy transition that we see with many of our clients, and the second is really the evolution that we see in the electrical usage, starting with the current grid and even starts in the transmission, but also further into the distribution grid, where we have a comprehensive suite of software products that help to work against intermittency in the grid. It helps nations to do all the arrangements in between their different utilities that are out there, that positions us uniquely.
If we go to the energy transition at our energy clients, it is totally clear to them how they need to reduce their CO2 footprint, while at the same time, staying at very efficient levels. Now, it does help if you have the engineering model that Barbara talked about, and now with the OSIsoft PI System that we're bringing in, we're able to bring a digital twin into a digital thread, where you can actually look at the total history of the asset digitally, simulate how you can change the process into the future to drive down CO2 emissions, for example, in very complicated calculations for the value chain that's done totally on the cloud.
I talked about the emissions reductions that we have, the predictive and prescriptive analytics, where we prescribe what needs to be done in the future to reduce the CO2 footprint or the utilization of energy to drive the asset. It's a really fabulous differentiating solutions that help us to grow in this market quite rapidly.
Well, fascinating discussion. Time just does really move fast, but I'm gonna try to put in one final question before we leave. You know, of course, investors are interested in the future and to see what are the exciting opportunities ahead of us, and I might just want to ask each of you, just in maybe one or two lines, as to what is the one aspect which to you is most exciting about Schneider as we look into the future. Maybe Barbara, I start with you.
Looking at the current trends we see in the market, which means increasing energy prices, scarce of labor force, so to achieve sustainable operations is one of the biggest challenges that the industry has faced up to now. I think at Schneider Electric, with our combined portfolio between industrial automation and energy management, we are very well positioned to help the industry in these kind of challenges.
Peter?
You see, digitization from my perspective delivers a secular growth, a trend, and Schneider with its software companies is uniquely positioned to participate in that growth journey.
Maybe the last word to you, Philippe.
Yeah. Maybe to conclude and combine, so the opportunity we have attached to Electricity 4.0 with a combination of a massive electrification and a massive digitization to drive sustainability, efficiency and resiliency is a super exciting, and indeed, Schneider Electric is fantastically and uniquely positioned to respond to that massive opportunity.
All right. With that, all I have to do is thank each of you for sharing in such an open manner. Don't go far away, because, you know, very soon we're gonna be back to take the question and answer session. Before that, it's over to Hilary to share about the financial framework for the coming years.
Hi, all. I'm excited to be here with you today and to spend some time together on the more financial aspects of our sustainable growth journey. To me, this journey is also about growth that's scalable over the medium and long term. Let's start first with growth. If we look at the history of our markets and our performance over the past decade, we see end markets that remained in the around 2%-2.5% range, paired with a company in significant transformation. That transformation has been across many aspects of our business, our segment and end market focus, our geographies, our acceleration towards digital, our focus on improving our systems business through selectivity and transactionalization, and the solidification of our unique, collaborative and open operating model, all the while with a focus on our portfolio through select acquisitions and disposals.
In simple terms, all of our actions have been geared towards more product, more services, more software, and better systems. These transformations have already resulted in a structural shift in our growth profile and drove around 4% growth for the overall group, two points above market since the end of 2016. Of course, sustainability has been a key part of our DNA since 2005, and has only grown in importance internally and as a business opportunity over this timeframe. In the next three years and beyond, we see a few key things happening.
First, based on economic data, we believe our end markets are poised to go through a period of higher growth in the range of around 4% between 2022 and 2024. Since 2016, we've proven our ability to grow above market, and Jean-Pascal Tricoire spoke in detail about our key future incremental growth drivers: services, sustainability, and our unified asset lifecycle management software that give us confidence to set our three-year revenue growth guidance at 5%-8% organic. Again, in simple terms, the strategic priorities that will drive this growth are more products, more services, more software, and more sustainability. Now, we're starting the first year of this guidance with some supply chain constraints, and as I mentioned a few weeks ago, during our Q3 call, these are unlikely to abate for at least another two to three quarters, including Q4 of 2021.
However, we've taken these potential impacts into account to the best of our knowledge in all of the guidance we've given during this capital markets day. As a management team, we're also focused on the long term across all aspects of our business. Therefore, in addition to our organic growth guidance of + 5% to 8% for our next three years, we're upgrading our across cycle organic growth guidance to an ambition of 5%+, another step change. By across the cycle, we mean the entirety of any economic cycle, and there are a few elements behind this upgrade. First, the journey towards a more digital, more electric, and more sustainable world is just beginning and will bring big changes over the next decades.
We certainly don't have a crystal ball, but we expect the opportunities in our end markets to remain dynamic, driven by these key global transformations over the longer term. Our current incremental growth drivers, software, services, and sustainability, will continue beyond 2024. Plus, we continue to invest in future-looking incremental growth drivers, both organic and inorganic, and I'll speak to both of those shortly based on our views of the future. One of the key elements for developing those future growth drivers is innovation fueled by our investments in R&D. We've seen a small step up in R&D as a percentage of sales over the past years, primarily tied to our shift toward digital. As we shared earlier this year, around 1/3 of our orders growth in 2021 is linked to new product innovations over the past three years.
We see the return on those investments. Tied to the continued evolution of our portfolio towards software and digital, as well as our focus on long-term sustainable growth, we expect to step up this level of R&D investment over time, both in euros and as a percentage of sales. With our R&D teams, we're keenly focused on allocating our resources towards our focused areas. Across the Digital Flywheel, including towards more and more native connectivity of our products, on sustainability, on cybersecurity, and some newer focuses like adapting our electronic offers for resilience and on artificial intelligence. You heard a bit about this from Peter Weckesser and during the panel discussion just prior. Of course, as CFO, a key focus for me is to follow return on investment as a key metric to ensure these R&D investments make sense.
While we do expect a step up in R&D over the next years, it's important for us that our sustainable growth also remains scalable over the longer term, so translates to further margin expansion opportunity and cash flows. Since the end of 2016, we've already been on a journey, both of growth and of profitability, and we're now on track to achieve our target of around 17% adjusted EBITDA margin at the end of 2021. That's one year early, and that's a margin expansion of around 365 basis points organic over the past five years using the midpoint of our 2021 guidance. Let me spend a few minutes on the drivers of that past five years of margin expansion, as we expect a number of these to continue to fuel our margin journey in the future.
Of course, our structural shift in growth rates from around flat from 2012 to 2016 to around 4% since is a driver. At the level of gross margin, we moved from 38% at year-end 2016 to 40.4% in 2020, with continued improvement through H1 of 2021. This was driven primarily through consistent delivery on industrial productivity, positive net pricing, and consistent improvement on our systems margin, as well as the structural changes in our portfolio towards more software, both through acquisitions as well as higher organic growth, positively impacting our mix.
We also drove structural savings in SFC over that same time period, both for reinvestment in R&D and sales, and with an acceleration since 2019, resulting in an organic improvement in our SFC to sales ratio of 70 basis points at year-end 2020, and again with some further improvement in H1 of 2021. With organic improvement annually since 2016, except during 2020, where the limited deterioration we see in that year reflects our strong tactical and structural SFC actions to respond to the coronavirus crisis. What do we expect for our future adjusted EBITDA margins? We've mentioned to you previously that 17% was not the end of the journey, and indeed, that journey continues.
We've set a target of +30 to +70 basis points organic expansion annually in our adjusted EBITDA margins between 2022 and 2024, resulting in around one to two points additional organic EBITDA margin expansion over the next three years. I'll speak through the drivers of that. Additionally, beyond 2024, we expect further opportunities to expand our profitability based on the same key drivers we see from 2022 to 2024. Moving to the specific factors behind our margin expansion, of course, sustainable growth is an element in our continued margin progression, but not the only factor. Starting with some key drivers of gross margin, industrial productivity has been a key driver for us in the past. We've driven around EUR 3.3 billion in productivity in the past 10 years, and we see further opportunity to drive industrial productivity in the future.
We had prior set a target of around EUR 1 billion in industrial productivity from 2020 to 2022, linked with our around 17% margin ambition. Although we're realizing our 17% ambition in advance of finalizing this productivity target, we expect the around EUR 1 billion to largely remain on track, excluding extraordinary impacts from the ongoing global supply chain crisis, and I'll speak to those impacts in my next slide about pricing. Going forward, we're not gonna give a specific numerical target beyond 2022, but we do expect a good level of industrial productivity to continue, driven by continued benefits from scaling our primarily regional platform and our continued ability to negotiate with suppliers.
Second, on pricing, we've been able to drive strong net positive pricing over the past decade, and that's comparing absolute euros of additional price versus absolute euros of additional costs due to increases in our raw materials index. Since 2020, a number of factors, largely due to the coronavirus crisis, have resulted in additional costs or cost increases that don't impact our RMI, like plastics, electronics, freight, additional personal protective equipment, and other costs. We've had a key focus on ensuring we price accordingly, and you can see here around EUR 500 million in net price we've driven above RMI over the past five years.
Going forward, we would expect our innovation and differentiated value proposition will allow us to maintain strong pricing power, and we expect to continue to execute on our ambition of flat to positive pricing across the cycle, including incremental cost inflation not captured in our RMI. The last point I'll make specific to gross margin is on our mix. We've seen a consistent trending of our mix towards less negative impact due to a focus on selectivity and transactionalization in our systems business and transformation of our portfolio, organically and inorganically, toward more software and services. Obviously, there are many elements that can impact mix positively or negatively in any given quarter, including geography, business cycle, and positioning in the market.
However, over time, we would expect that flattening trend to continue based on our strategic growth drivers of more products, more services, more software, and more sustainability, and the overall evolution of our revenues, which I'll speak to on the next slide. As Jean-Pascal detailed, we have a big evolution of our revenues underway towards more digital and more resilient. First, we're driving another step change in our path toward a hybrid digital company by moving towards around 60% of our group revenues in our Digital Flywheel of connectable products, edge control, and software and services by 2025 from around 50% today. Part of this increase is due to the growth rate of the Digital Flywheel itself, and part of this is driven by planned R&D investments to shift key product lines to native connectivity and into the Digital Flywheel.
Our continued strong strategic focus on more software and services drives an expected increase there from around 18% of group revenues today to around 23% by 2025, an increase of five points. These numbers are based mainly on organic growth but do factor in recently closed acquisitions and our disposal program. Software and services is a very resilient and sticky part of our revenues, as we saw in 2020, driven in part by its exposure to recurring revenues.
We expect a step up in our recurring revenues as a percentage of software and services by 15 points to 45% by 2025, another key revenue evolution, driven by our shift to software as a service at AVEVA and in our energy management software portfolio, and with more digital services and multi-year contracts in services. We also expect to begin reporting our ARR, or annual recurring revenues, in software and services by year-end 2022. The other key component to our adjusted EBITDA margin and scalable growth is management of our fixed costs, or SFC. If you recall, last year we extended and increased our target for total structural savings to around EUR 1 billion between 2020 and 2022.
Through H1 2021, we've delivered around EUR 560 million, and we're on track for the remaining EUR 440 million, including more efficiency from more digitization and standardization across our organization. After 2022, we expect to shift our focus from driving structural savings to ensuring operating leverage, and therefore we expect a continued reduction in SFC to sales ratio over the longer term, partly mitigated in the medium term by our step-up in R&D. This leads me to items below our adjusted EBITDA line and to restructuring in particular. We've made a lot of efforts over the past 18 months to ensure that everything we book into restructuring is identified and tracked within our structural savings program or our long-term industrial plan.
Based on this and our shift in focus away from structural savings and towards operating leverage, we would expect to reduce our restructuring costs to around EUR 100 million per year starting in 2023. Turning now to cash flows, we've made a step up in our cash from around EUR 2 billion on average from 2012 to 2016 to around EUR 3 billion on average, driven by our improved top line and profitability, as well as our focus on pragmatic working capital management. These same drivers will project us towards a company of around EUR 4 billion in free cash flow by end of 2024, with cash conversion expected to continue at around 100% across the cycle. We also expect to continue to be a CapEx-light company with across-the-cycle investments in tangible CapEx, including supply chain of around 2% of sales.
In the near term, we would expect this around 2% to increase by around 10-30 basis points to support our already discussed focus on resiliency in our supply chain. Behind all of these financial targets is a focus on adding value through our strategic choices and our operational execution. One of the key metrics we focus on to track that value is ROCE in our core business and also to track the value add of our acquisitions over time. Based on the ambitions we've shared here today, we expect to drive our ROCE towards 15% in the next years, including already closed acquisitions. Turning now to capital allocation, our priorities remain unchanged. We're focused on disciplined capital allocation with an emphasis on shareholder returns over the short, medium, and long term, and I'll go through some detail on each of the boxes in the next slide.
First, as a priority, we remain committed to strong investment-grade credit ratings to ensure reliable access to capital markets, even during times of economic uncertainty. This allows us the flexibility to maintain and even accelerate our strategic plans at times when other companies might not be able to do so. Of course, it supports our low cost of debt. Second, we've maintained a progressive dividend for the past 11 years, even in the challenging environment of H1 2020, and return to shareholders in the form of reliable dividends remains a priority for us going forward. Moving to portfolio optimization, we have two aspects to cover here. First, in terms of acquisitions, we continue to be focused on integration and realizing the value from our recent acquisitions, particularly L&T and the acquisitions we've made toward building our unified asset lifecycle management software portfolio.
Overall, we're happy with the integrated, focused, and differentiated portfolio we've built across hardware and software. In the near term, therefore, we would expect any acquisitions to be bolt-on in nature and tied to our incremental growth drivers for today or for the future. For any acquisitions, our key focus is our ability to create value, starting with an in-depth understanding of the target business and our plan to drive future cash flows and ROCE from that business. We also continue working on our disposal program and expect to meet our ambition of EUR 1.5 billion-EUR 2 billion in revenue sold by year-end 2022. We're not setting a target for future disposals. However, we consistently review our portfolio to ensure that all of these pieces are a good strategic fit and are adding value to our customers and shareholders.
Lastly, on share buyback, we reopened our program at end of July, and we're on track to purchase EUR 1.5 billion-EUR 2 billion in shares between now and year-end 2022. As you know, we have a price cap on share buyback set at EUR 150 at the moment, so we'll propose to raise that to EUR 250 at our next annual general meeting. I've talked a lot about value during this presentation, and I think our key focus is on sustainable growth through our strategic portfolio positioning and incremental growth drivers, a translation of that growth into our margin expansion and cash flows, and our disciplined capital allocation all translate to total shareholder returns.
You can see here we've driven +180% in total shareholder returns since the end of 2016, when we started our journey of growth and profitability, and that journey continues. I'll finish by reiterating the targets I've discussed throughout my presentation, as presented earlier by Jean-Pascal. First, between 2022 and 2024, we expect strong growth of +5%-8% on average, and a continued expansion of our margin between +30 and +70 basis points annually. We expect that growth and margin expansion to translate into a step up in our free cash flows over time, with free cash flows of around EUR 4 billion expected by end 2024.
We upgraded our longer-term targets to an ambition of 5%+ organic growth in revenues across the entirety of the economic cycle, with further opportunity to expand our margins and cash flows in the future. An ambition we're using internally to guide our strategic planning and decision-making, and we'd like to share with you today, is to strive toward a consistent company of 25%. That's as a sum of our organic growth and adjusted EBITDA margin across the cycle. This is a big goal, but one we feel is worth striving for. With that, I'll close my presentation, and we'll rejoin you in a few minutes for the Q&A.
We know buildings. They must become more digital, more electric, and powered by renewable energies, with end-to-end solutions for all life cycle stages. At Schneider Electric, we pledge to become net carbon zero by 2030. In Grenoble, France, IntenCity, our newest building of the future, is a great example of this vision. We consolidated 13 sites into four to reduce our energy footprint, create smart buildings that support innovation, and prioritize the well-being of 5,000 Schneider employees. With 4,000 sq m of photovoltaic panels, two wind turbines, and on-site energy storage, IntenCity generates 970 MWh of energy per year and uses 10 x less energy than average European buildings. Through a unique microgrid partnership, this energy is also shared with neighboring buildings and the city of Grenoble.
Schneider's IoT-enabled EcoStruxure solutions provide an end-to-end digital architecture that captures 60,000 data points every 10 minutes, and sensors act to automatically reduce energy use in unoccupied spaces. This allows IntenCity to learn and adapt to its environments, enabling autonomous and proactive operation and maintenance and increased efficiency. Finally, IntenCity's employees enjoy open, shared workspaces equipped with flexible solutions for new ways of working, along with optimized air quality, temperature, lighting, and more. With innovation at its core, IntenCity represents our vision of the new era of an all-digital, all-electric world.
Thank you for your attention so far. We now move to the last leg, which is our Q&A session, and we have all the speakers from earlier today represented here between Europe here and Hong Kong on the other side. We're gonna kick-start the Q&A, but I might just wanna remind you, I'm sure there are a lot of questions, and to ensure that we try to get to everybody, stick to one question per analyst, and we come back to you if we have the time. With that, we'll get started, and I turn it over to the operator for the first question.
Our first question comes from Andreas Willi from JP Morgan. Your line is open. Please go ahead.
Yeah. Good morning, good afternoon to everybody. The first question I have is on the higher organic growth target. A capital goods company growing at those kind of levels we haven't really seen historically. It's relatively rare in our sector. If you look at how you manage the risks associated with this ambition, or the company needs to gear up to deliver that, how do you look at kind of addressing the risks, the concerns around that, differentiating cyclical versus structural growth? What are you using to make sure that we don't end up in a situation where, for cyclical reasons, you then kind of get called out in a near term in terms of resilience and profitability, which always has been a strong point of Schneider historically?
Thank you, Andreas. Hilary, do you want to take that question?
Sure, Andreas, I think you're probably referring to the across the economic cycle growth. I think we went into some detail on our markets on the next three years. We did upgrade our across the economic cycle growth to an ambition of 5%+. I would say a couple of things there. First, we're talking about the entirety of the economic cycle, it is a step change for us, one that we've started as of 2016, as you can see. I exactly understand what you're talking about on the risks managing this.
I think we tried to go through a number of different impacts there that we have to both drive structural growth through the incremental growth drivers that we're putting in place, not just the ones that we have today, but in the future, and consistently looking at at those incremental growth. On the SFC side, we talked about some step up in R&D over time that's associated with those structural growth drivers. We intend to remain with a level of flexibility over the course of the economic cycle as well, to continue to maintain that resiliency in margins that I think has been a trademark of Schneider over the past years. I think in our modeling flexibility for ourselves to consis-
All right. Thank you, Andreas. We'll take the next question, please.
Our next question comes from Jonathan Mounsey from BNP Paribas. Your line is open. Please go ahead.
Hi, all. Thanks very much for letting me ask a question. I'm just wondering about the shape of that margin story you've laid out. Should we be just really assuming 30-70 basis points every year out to 2024? Given the level of cost base inflation versus price wage inflation right now, is it more perhaps that 2022 would be a sort of a slow start to that journey? Or can we expect significant progress in the 12 months ahead, please?
Hilary , it's a question goes back to you again.
Yeah, thanks. So a couple of things, we spoke a little bit. I would point to a couple of things about 2022. Obviously, we're not giving specific 2022 guidance at the Capital Markets Day today. As usual, we'll give a specific guidance for 2022 in February when we give our year-end results. A couple of factors, though, that we talked to in the Q3. One, we are entering 2022. We talked in the Q3 about some supply I mentioned it again today just a few minutes ago. You saw it in our Q3, and we expect that [audio distortion].
Selling synergies, and how do you expect that to evolve as more customers move into the digitize and execution phases of their decarbonization strategies and presumably pull through more of your core portfolio. Then linked to that was more a clarification, if I could. Does the target to increase the consulting revenue four-fold by 2025, which I think I spotted on your slides, what's the base for that? Is that the full EUR 500 million of sales you highlighted earlier, or is kinda consulting just a part of that? Thank you.
Olivier, can you take that question?
Yes, sure. First of all, to clarify on the consulting side, we don't have necessarily a huge ambition in value in terms of consulting, but as you have understood, for us, that's a [audio distortion] really company and moving [audio distortion]. On my own metric at 70% [audio distortion] in 50% of the cases, there is an opportunity of pull-through for Schneider Electric.
All right, we probably move to the next question.
What would be the kind of ultimate end result, end goal, of that project for you?
Peter Weckesser, can you take that on?
Yeah. Thank you very much for that, for that question. On the growth on EcoStruxure, there's one number that I would like to share, which is really the growth of our assets under management, which is about 50% this year. We are growing by the end of this year to about 6 million connected assets to EcoStruxure. All these assets deliver data into our EcoStruxure platform. Second part of your question around this openness, we have actually really built three or two business models today, and we are extending that to a third business model. First one is we have built a successful business with our advisors. Second, our advisors in EcoStruxure enable a very successful business, which we call digital services.
Now thirdly, we are taking the step of opening up EcoStruxure, which really means that we are creating an API as well as an ecosystem of partners, so that our customers and partners can build their own applications, their own advisors, and their own business models around EcoStruxure. With this openness, we are going, in addition to our advisor and digital services business model, also in a business model which is around data and also platform as a service, clearly with the ambition to build the largest data, industrial data ecosystem of the industry.
Maybe I can turn also to Philippe, if you can give us one example of what EcoStruxure is representing for you. I mean, for on the energy management side, EcoStruxure is central to our differentiation. First of all, it's the digital layer that we put on top of most of what we sell in low and medium voltage. That's really, really important. That's the power side. Very often we combo that with the process of our customer. It can be a building management, it can be EcoStruxure IT, it can be the plant and process coming from industrial automation or the grid. The combination of the two makes us really, really differentiated. I would say there is really the value, and you can find a lot of that in the Digital Flywheel, but there is the pull-through.
What we see every day is that as we drive our journey towards more efficiency and sustainability, EcoStruxure is the backbone and really the key point of entry with our customers. I remind that today EcoStruxure is roughly 40% of our business, and if you add to that the services, it makes 50% of our business. As we go to the horizon of 2024-2025, that 50% will become 60% of our turnover.
All right. Thank you, Andre. Next question, please.
Our next question comes from Phil Buller from Berenberg. Your line is open. Please go ahead.
Thank you. Thank you for taking my question. Obviously, a lot of ground covered and lots of questions, but can I ask one of you, Jean-Pascal, or perhaps it's one for Peter, on the topic of cybersecurity? It's been touched on a few times in passing, but strikes me as an increasingly important topic, especially given the growth in connectivity of everything and the fact you're involved in digital service contracts, energy as a service contracts, everything to do with EcoStruxure, essentially. It seems as though you're perhaps absorbing higher exposure to risks that may stem from cyber issues in the future. I was hoping you could elaborate a little on your own in-house capability, specifically in cyber. And is there anything you need to do more of, perhaps through the partnerships that are already in place or via M&A, please? Thanks.
I'd like Peter Weckesser and Barbara to speak about this subject.
Okay. Yeah, if I can start, cyber is certainly a key foundation of our business. We are collecting data on behalf of our customers, and certainly this is all based on a strong level of trust that we have built with our customers. In order to live up to that expectation of our customers, we have made, in the past, significant investments into the cybersecurity of our platforms. We have dedicated roles in our platform engineering teams that really take care of the cybersecurity. We have dedicated roles that take care of the operations of our cloud and on-prem based platforms. Cyber is clearly key to that.
Also internally, when it comes to the protection of our own systems, IT systems, we have a sophisticated approach of really assessing the relevant assets that we need to protect, going through a risk-based approach to identify potential risk and then identifying the measures and implementing the measures to mitigate these risks. Cyber has been a key topic for us in the past and will continue to be a key topic in the future and a topic that we are also investing in.
Yeah, of course, it's also a business for us. The new cybersecurity services agreements that we are doing, if you might remember in the capital markets day, two years ago, Peter presented to you a business plan. We are on track with this business plan, so it's a double-digit growing business, quite successfully. We started in the oil and gas business and are now moving more towards new segments like critical infrastructure, critical buildings, where we of course, and you mentioned it before, Phil, working together with partners, that's really a key here. We continuously look for opportunities also to make, share or buy share in companies or even make certain acquisitions there.
All right. Thank you, Phil, for the question. Next question, please.
Thank you. Our next question comes from Ben Uglow from Morgan Stanley. Your line is open. Please go ahead.
Oh, good afternoon, and thanks for taking the question. I guess I wanted to come back to the 5%-8% growth target, which obviously is quite ambitious. Can you calibrate a little bit between Energy Management and Industrial Automation? Is it correct for us to think that you might see higher growth on the Industrial Automation side because of software? Or is that assumption not correct? That's question number one. Question number two- [audio distortion].
And all of the strategic choices we made in the past in order to capture over the next years. We have our additional growth drivers of sustainability with its pull-through, other things that are on top of just dynamics that are going on in our end markets over that three-year period. So I gave you a bit of a breakdown there that around 4% is what we think we have in terms of opportunities just mark it in front of us. And then those additional growth drivers are what bring us the confidence again to come to that 5% to 8%.
In terms of the balance between Energy Management and Industrial Automation, I think we talked a lot today about the complementarity between those two businesses and the fact that from an end market point, we're actually addressing a lot of customers with both Energy Management and Industrial Automation. So we're fairly balanced in terms of end markets, and we see that level of opportunity over the next three years to be not significantly differentiated, I would say, between the two businesses from an end market standpoint.
And if I may ask Peter to comment where AVEVA is selling software or Philippe, we sell software also significantly in Energy Management. Peter, if you want to comment on...
The whole portfolio that AVEVA has goes into industrial and infrastructure markets, and some that follow us have looked at kind of announcements we made at the Capital Markets Day the AVEVA that's fully supportive of the target that Hilary has put out earlier. And we see that over the cycle because there is secular growth in the market in respect to digitization, I guess that goes into what's in there on top of the 4%, and it goes to a variety of end customers.
All right. We'll move to the next question, please.
Our next question comes from Martin Wilkie from Citi.
Yes. Just coming back to the growth in software. And also, we can see some of the software revenues in AVEVA, but not necessarily so much across the rest of the portfolio. It sounds that we are going to get some disclosure on annual recurring revenues in software, but only from the end of next year. Just to ask why we have to wait. Is there a change in business model, either unbundling software from other parts of revenues or perhaps a shift to software-as-a-service? Or is it just purely because you've made some acquisitions recently, and therefore, there's some integration to do? But just to wonder why we can't see the ARR numbers as they are today.
Well, I can. There would be many people who could speak around that around the table because all of us are taking care of software nowadays but I would say you said it. It's established a clean baseline after the integration of everything we are putting together. From there, we feel we want to report figures on a very strong baseline, and we feel we're going to be able to.
Thank you, Martin. Next question, please.
Thank you. Our next question comes from Gael de-Bray from Deutsche Bank. Your line is open. Please go ahead.
Thanks very much. Good afternoon, everybody. I have actually two questions, please. The first one is on the financials, and the second one is the strategy. The first one for Hilary. If I take the midpoint of your growth and margin targets, by 2024, it implies an adjusted EBITDA CAGR of about 10%. But your free cash flow target of EUR 4 billion implies a free cash flow CAGR of only about 5%, so how do you reconcile the two? The second question. From a strategy perspective, why do you have a different approach to software, between Energy Management and Industrial Automation? I mean, for Industrial Automation, you obviously use AVEVA as a listed, independently run entity focused on industrial software, and you don't have the same setup in Energy Management.
Is it because you haven't yet found the right target in the market? Or is there a more fundamental reason behind the different approach?
Hilary, for the first one.
Sure. On the question about free cash flow, you'll see that. Actually, I think just paired with what we've done historically, unlike the targets that we gave in terms of revenues, the targets that we gave in terms of adjusted EBITDA, we chose not to give a specific range in terms of free cash flow. We just said that we're stepping up to around EUR 4 billion. One could infer that there's a specific range around that as well. What I would say is, you know, I spoke to quite a few elements, I think, above and below the line, both in growth, both in terms of the expansion in margin, in terms of our below-the-line items, which we expect to decrease, as well as our cash conversion ratio.
What I would say is from the guidance, you shouldn't take away that we wouldn't expect our cash flows to generally move along the same trend as our P&L. Of course, we have working capital. We talked to them on the Q3, things like some inventory buildup associated with the supply chain. That's purely as of today, so in the near term, we wouldn't expect anything special around the working capital either. I let you make your own viewpoints and guidance around that. We just specifically didn't choose to give a range around free cash flow, the same with the others.
Philippe, can you speak about energy management?
Sure. On the second one, [audio distortion] earlier today, Jean-Pascal and then Peter explained that on the software side, we are really building a portfolio [audio distortion] industry, and that piece is in AVEVA and pretty close with close synergies with Industrial Automation. We have two other threads, one on power, one on building. Those two, let's say in the short term, have a lot of synergy with the rest of the portfolio of Energy Management, hence the positioning today with Energy Management. I would say regardless, we are working very closely with Barbara, with Peter and Peter.
I would say Peter Weckesser on the platform side and Peter Herweck on the AVEVA side to make sure that when we have to combo and when we have the opportunity to combo those offers together, we can also drive the seamless integration for our customers. As Jean-Pascal said, it's a lot of work that's keeping us pretty busy. Peter on the AVEVA side, on my side, on the power portfolio and the building portfolio. We are obsessed by driving this, let's say, integration and bringing those entities together, but also driving some transversalities across those three threads for our customers.
It's indeed a lot of teamwork.
Mm-hmm. Indeed.
All right. Thank you, Gael. We move to the next question now.
Thank you. Our next question comes from James Moore from Redburn. Your line is open. Please go ahead.
Yes, good afternoon, everyone. Thanks for taking my question. It surrounds your impressive margin ambition. Could I clarify three things really? Your R&D ambition, are we talking 5.5% or 6%? And secondly, does the transition to more recurring revenue or SaaS drive any margin compression? And if so, when and how much? And finally, should we interpret the 25% internal ambition as 5% organic + 20% adjusted EBITDA from 25%?
Hilary?
On the margin ambition, we talked about the 30-70 basis points over the next three years with further opportunity thereafter. On the R&D ambition, which for me is a really important part of ensuring that we continue to create those growth accelerators in the future, again driving us to that longer-term growth target that we put out, we haven't given any specific numbers. What I would say in terms of guidance there, of course, we have a little bit of flexibility. We do our resource planning on an annual but also a cycle basis, right? R&D can't just be planned on a year-to-year basis, and we don't want stop and start.
We look at things beyond budget in R&D also to focus priorities, what the teams wanna work on, what they think they can work on all at the same time. In terms of financials, I would say, over the next years, you can expect that step up could be in the one to two points in terms of R&D, all taken into account in the margin guidance that we've given. Recurring revenues, the ARR and the journey to SaaS, in particular on the software side of the business, is primarily tied to less margin tied, primarily tied to a de-emphasis in shorter-term revenue growth. Something that AVEVA talks about quite a bit.
In their Capital Markets Day, they talked around 10% CAGR in revenues over five years, but with some slowness at the beginning associated with that transition to software as a service. We would see the same in the consolidation of Schneider and the same with our energy management software businesses. That's taken into account. It's not really a margin issue as opposed to being taken into account in the top line guidance that we've given. In terms of the company of 25%, the way that we like to think about it really is sort of an internal North Star for decision making.
Business can ask a lot of questions like, "Do you want growth or do you want profitability?" In fact, we really want that internal North Star to make sure that we're balancing both margin and growth over time, and particularly across the economic cycle. Each and every year, it won't be an exact equation, like you've said, but that's really a consistent ambition that we want to achieve or that we wanna think about when we're making our internal decisions.
All right. Thanks, James. Next question, please.
Thank you. Our next question comes from Guillermo Peigneux-Lojo from UBS. Your line is open. Please go ahead.
Thank you for taking my question. It's Guillermo from UBS. Good evening. My question is with regards to the 5%-8% growth target. Again, I wanted to ask whether there is any granularity around how much of it is actually coming from volume, how much of it is coming from price, and how much is coming from mix. I guess, you know, obviously the mix is referred as one part of the equation that is, you know, benefiting you. I wanna get some granularity around that, if possible. Thank you.
Hilary, again.
On the 5%-8% growth, the way that you can see that we've planned our business on the pricing side, that will be at least neutral or positive over the cycle. When we're looking at the long-term revenues, we generally think in that way too. The 5%-8% is going to be primarily volume driven in our mind, starting with that 4% market that we looked at. Of course, we're still pricing over the cycle, and so year to year things can be different. As we're doing our planning, we're generally looking at being pricing neutral over the cycle. The way that we're modeling that is more that we're looking at the volume side of revenues.
In terms of mix, I think what you're referring to on the top line is probably the Digital Flywheel and the top line ambitions we have really in the growth accelerators. We talked about the fact we expect the Digital Flywheel, which is today around 50% of our business, to grow to around 60% of our business. Within that, software and services being a real accelerator for us. We talked about services growing at 2x growth. You can infer that being, you know, probably double-digit. AVEVA, I'd already mentioned, they've given in their Capital Markets Day a target of around 10% growth. All combined, that will grow our software and services by about five points. We're around 18% of the group today to around 23% in the future.
That's really the big evolution in our revenues that I would talk to that's tied to the 5%-8% growth.
All right. Thank you, Guillermo. We take the next question, please.
Thank you. Our next question comes from Eric Lemarié from Bryan, Garnier. Please go ahead. Your line is open.
Yes. Thanks for taking my question. Actually, my first question is on ESG and on the governance. When should we expect the separation of the chairman and CEO position, and why didn't you change the situation at the last AGM in April 2021? Does it mean we should wait four years before a change here or maybe no change at all in the future?
I will take that one, I think. What the board said is that we wanted this transition to happen with the necessary time, and we said four years. Nothing has changed since the last AGM. Now, I remind you for the governance of the company, that we have a lead independent director. We have five committees. On that governance is very solid. We test it every year, we assess it every year, and it's been retained as a performing governance. We've given a timeline, and we stick to that timeline.
All right. Thank you, Eric, for that question. I believe we've taken at least one question from each of the analysts. Of course, mindful of time, it's past midnight, well past midnight, I believe now, for our colleagues in Asia. We are going to be in a couple of conferences this week, so lots more opportunity to speak to all of you. I think before we close, I would like to give the floor back to you, Jean-Pascal, for your concluding remarks from our Capital Markets Day.
Yeah. Thank you, Amit, and thanks to all the team who prepared the whole session today. Thanks to all of you who are spending time with us and time to understand on sharing of those problems. We see a market in inflection and acceleration. We see additional layers of growth that we have built methodically over time. We want to deliver to you that mix of growth and profitability that go together and be very selective on our business so that we combine both in how we drive our operation. Thank you for being with us today. Thank you for supporting us, and thank you for having that dialogue with us, and we look forward to seeing you in the next coming month to speak about the deployment of what we explained today.
Thank you all.