Hello everyone and welcome to ASSA ABLOY's Sustainability Seminar in 2025. My name is Björn Tibell and I'm heading Investor Relations.
My name is Christiane Belfrage. I'm heading Corporate Communications. Björn and I will guide you through this sustainability seminar today. Yesterday we announced our financial outcome for 2024. Today our focus will be on the preliminary sustainability results for 2024. We will also walk you through how we're working with sustainability right now and going forward.
This will actually be our 14th sustainability seminar. The first one took place back in 2010, starting here in Stockholm as an informal roundtable discussion. Today we obviously host this in a digital format and it's to allow as many as possible to participate, but, as always, feel welcome to engage in the discussions and we have facilitated that there will be a number of Q&As during the afternoon.
Yes, but before we look into the agenda, I want to encourage you all to make sure you know where you have the closest emergency exit in case something unexpected would happen. Also, we want to note that this seminar is being recorded and will be made afterwards on our webpage. Now let's have a look on our agenda. Firstly, our CEO, Nico Delvaux, will talk us through how we see sustainability. Then Massimo Grassi, Head of Entrance Systems, will talk about the commercial opportunities with sustainability before we get to see how the Americas Division is working with sustainability. And then Nico will round up the seminar and open for your questions.
And after that Q&A session, we will then provide you with an update of our 2025 sustainability program. And we will start with that, Allan Cooper, our Chief Human Resources Officer, will talk about how we are working with our people and reducing our injury rates. Before Charles Robinson, our Head of Sustainability, will walk us through the more operational aspects of the sustainability program. And he'll do that together with Anna-Eva Sparv, who is our Procurement and Sustainability Director. And she also leads the coordination efforts of our procurement between our divisions. And so she will cover the supplier side. And after that, we will have a Q&A session and a break.
After the break, we'll move into the long-term perspective of our sustainability work, meaning the Science Based Targets commitment with particular focus on our Scope 3 reductions. This will be done by Charles Robinson and Anders Forslind, Head of Global Product Sustainability and Compliance. Anna-Eva Sparv will also talk about how we are working with our suppliers to reduce the Scope 3 emissions. Also, this piece will be rounded up with a Q&A.
And after that Q&A, our CFO, Erik Pieder, will provide us with a sneak peek into our CSRD report that we will publish in the middle of March and then wrap up the day. And talking about the sneak peek, I think we should notice that the sustainability numbers that you will see today, they have not yet been signed off by our auditors. It's a process that's going on as we speak. But I also think it's fair to say that we don't expect any important changes coming out of that process. So again, if you would like to participate and ask questions, there are two ways of doing that. Either you press on the raise hand button in the Teams app or you type in a question in the chat function. And we'll start with those of you who raised their hands.
We simply think it's nice to see who we're speaking to and it's a bit more interactive.
Yes, and with that, we're ready to start this seminar. And I would like to hand over to our CEO, Nico Delvaux. Welcome. Please go ahead.
Thank you, Christiane, and thanks, Björn. Also, good afternoon from my side. Sustainability, definitely a subject close to my heart. Sustainability also is a subject close to the hearts of ASSA ABLOY. Why is sustainability important for us? In the first place, because we see sustainability as a driver for profitable growth. We're absolutely convinced if we can make our operations more sustainable, that our operations will also be more cost-efficient and therefore will create a competitive advantage for us. And we're also convinced if we can make more sustainable products and solutions and offer them to our customers around the globe, that we will also be able to further improve our relative position in the market and that we also will be able to sell those products at a better price and a better margin. So sustainability from a business perspective helps us top line-wise and bottom line-wise.
Then, of course, if we put priority on sustainability from a business perspective, it has of course also the nice additional effect that all the actions we do will create also a better world. And that's of course important for us, but definitely also for the next generation. How do we approach sustainability? Well, each division is responsible for managing their own sustainable agenda. You know that we are a decentralized organization and yeah, we set a little bit the guidelines and the direction on group level, but it's really up to the local entities, even in the individual divisions, to set and work on their individual agendas. And all those sustainability activities that we deploy locally then are consolidated back up on group level. Sustainability is for us really a journey of continuous improvement, a journey that is customer-driven and compliance-driven.
We were quite early, I would say, focusing already on sustainability. We are today in our fourth sustainability program, but we started the first program back in 2017. Already a long time we are working actively on sustainability in ASSA ABLOY. Our fourth program started in 2020 and will end at the end of this year. We can say that we are making very good progress, I would say, on almost all parameters and targets and goals in that program. That for many of them we are ahead of our target. As you know, we also committed to the Paris Agreement, halving our CO2 emission by 2030 and then being carbon neutral by 2050. You see here also the targets that we set for Scope 1 and 2 and then also for Scope 3.
It's also important for you to know that all executive management team members have sustainability as a target in their STI, in their bonus programs every year. So to make sure that we also put enough attention on sustainability. You might remember this slide from 2023 when we had the other sustainability seminar where we summarized five main topics. You see a lot of green on the slide. That means normally good news. Green is a good color. It means that we are in line or ahead of our ambitions for all the priorities that we set back in 2023. We are completing the 2025 sustainability program and are ahead of our ambitions there. We have rectified our Science Based Targets and are working actively on Scope 1, 2, and 3.
Obviously, people being our most important asset, we put a lot of effort, a lot of energy in developing those people and keeping those people also safe at work. Then we follow, sometimes I would say, very complex regulation and make sure that we are compliant and also there try to be ahead of the curve. Then clearly sustainability gives us the possibility to realize business opportunities. If we zoom in a little bit more, like I said, we are ahead of our targets or most of the targets for the 2025 sustainability program. You see there on the slide a couple of them: energy intensity, water intensity, and so on. Injury rate is one where I think we have to do better, where we can do much better. It's also to do with our track record.
It's also to do with the fact that we buy a lot of companies, and what we have seen and learned is that often the companies we buy have a worse safety record than ourselves, so it's really then to integrate those companies into the organization, putting them on our safety standards, giving them training, embracing the culture, and then over time also their safety numbers will improve. If we look at our progress towards Science Based Targets, you see also here very good progress. You see on Scope 1 and 2, a reduction already of 36% towards the 50% reduction, so very confident on that trajectory there, and then on Scope 3, a 10% reduction. Clearly for us, Scope 3 is more challenging than 1 and 2 and is also in a way more important because I think 92% or 93% of our target lies with Scope 3.
So very close collaboration there also with our suppliers and getting them into our sustainability story. But there we have the ambition to reduce by 28% by 2030. Sustainability, like I mentioned, is really embedded in everything what we do. It's really in our DNA and it's also part of our overall strategy house. You can see there in the middle somewhere, sustainability crossing all the activities that we do. And like we mentioned, people are most important asset. Last year was an important year for us. We celebrated our 30th birthday. We have a lot of celebrations all around the world, showing our global strength and of course also discussing sustainability in those celebrations. Like I mentioned, sustainability is integrated in our organization. How do we do the governance of this sustainability? It's really in a way top down and bottom up. We have coordination meetings.
We have boards starting at my level and my management team, and then it's really cascaded down into the different divisions. And like I said, then we have all the local initiatives around sustainability in the local entities, and then that is again consolidated up. Also, our board is involved in an active way, and sustainability is also high on the agenda for our board. It's a topic that we also regularly discuss in our board meetings. And also, I think our chairman, Johan Hjertonsson, is passionate about sustainability. And perhaps I propose we take a look at a short video where our chairman, Johan Hjertonsson, explains how he sees sustainability.
Hi, my name is Johan Hjertonsson. I'm the Chairman of the ASSA ABLOY Board. In my day job, I'm the CEO and President of Investment AB Latour, the main owner of ASSA ABLOY. First and foremost, we place a lot of interest in the sustainability issues at the ASSA ABLOY Board. Twice a year, we review the progress of the sustainability topics in the Board. And the reason we place so much focus and have a high interest in this question is twofold. First of all, it makes a lot of business sense. This will create a lot of business opportunities going forward. For instance, ASSA ABLOY has come far in implementing the Science Based Targets initiative, which are now also confirmed. And now many of the ASSA ABLOY's customers will also start to record Scope 3 emissions.
And being ready already in ASSA ABLOY, we are nicely positioned for more business with our customers in the future. So it just makes, that's an example, it just makes a lot of business sense working with this. But I think equally important, it's the right thing to do. If you think with the heart, we want to do this, right? We want to leave something good behind to the future generations and our grandchildren going forward. So I think both thinking with the head and the heart, this is the right thing to do, right? I've traveled a lot within the ASSA ABLOY organization internationally. I've visited all the divisions. I've been in many of the factories, and it's fantastic to see the work and the engagement and the commitment that is out there among all of our team members in ASSA ABLOY to work with sustainability.
For example, it can be pride of implementing solar panels on our factory roofs, but it can also be how we strongly address the safety issue. We always put safety first within ASSA ABLOY. It gives me a lot of energy and pride to see the great work being done in our organization. Not really, actually, because we think it's so important so the whole board is involved in addressing and following the sustainability progress within ASSA ABLOY. At least twice a year, we monitor the progress and we review different aspects of the sustainability work within ASSA ABLOY. Quite a lot. It's quite important. First of all, I would like to say there we use the audit committee with Susanne Pahlén Åklundh, who is Head of the Audit Committee. The audit committee is looking into this and driving this agenda quite thoroughly.
We're one year ahead, actually, before the legislation. So we have a good timing and we're doing good inroads on that question. As a long-term investment company in Latour, we actually, on an annual basis, we create the Sustainability Day with all our holdings where we actually get together and share best practices in between all of our companies. And I'd really like to highlight that ASSA ABLOY has really contributed immensely to this Sustainability Day in best practice sharing through Charles Robinson that has done a fantastic job in sharing great examples from ASSA ABLOY . So that's been really valuable. As an owner of great businesses such as ASSA ABLOY , we think sustainability is extremely important. Also for the reasons that I lined out, it makes a lot of business sense.
Actually, we're not interested to own companies that do not take sustainability seriously because there is a large risk if you don't work with this question, you will become a stranded asset long-term in the future.
Like Johan said, it's the right thing to do. It's the right thing to do from a business perspective because sustainability helps us top line and bottom line-wise. It's also the right thing to do as us playing our role in society and making sure that we contribute in making this world a better world for us, but also definitely for the next generation. Recent and new regulation, I must say it's quite complex. It's also sometimes difficult for me to follow, and we definitely could profit from a little bit more harmonization around the regulation and also perhaps more stability and clarity. But clearly, we intend to comply and report on all existing and coming regulations. Like Johan said, for instance, if we take CSRD, we are a year ahead in reporting already on CSRD. We do that already this year.
So we also want to take a leader position when it comes to reporting. And by proactively complying with regulation, we, of course, try to stay ahead of all the risks that come to us. If we summarize a little bit, sustainability leads to commercial opportunities. If we develop, first of all, we see in the market a higher demand for sustainable access solutions that's driven by regulations, but it's also driven by the customer's own sustainability agendas. They push us like we push our suppliers. So if we make those new sustainable products, it gives us the possibility to further strengthen our relative position in the market. We will be able to sell those products at a higher price and with a better margin. We get a premium for it. And then we work hard on sustainability in our own factories, in our own operations.
There again, we are convinced and we have also proven that if we invest in sustainability and make our operations more sustainable, they will also become more cost-effective, giving us again a competitive advantage. Then, key in all this is, of course, sustainable innovation. As sustainability drives also standards and technology up, it's something we really like because we are a company that wants to make the difference through innovation. Through sustainability, we can also push some of the more commodity competitors out of the market. With that, I would like to give the word now to Massimo Grassi, who will join us online. He will give you some examples on how we commercialize sustainability in Entrance Systems. Massimo Grassi is Head of the Entrance Systems division.
Thank you, Nico.
Thank you, Nico, and the word is yours.
Thank you, Nico, for the introduction. I would say that sustainability is really crucial in today's business landscape. New regulation, new market demand, and emerging trends are key drivers for a new commercial opportunity. We believe that a major opportunity lies in retrofit solutions and circularity as more and more customers look to recycle, repair, or replace old doors in existing buildings. At the same time, green building certification has become a fundamental requirement for major construction projects. This shift has created a growing demand for certified and sustainable solutions in the automated door industry. As a result, our priority is to provide doors that fully comply with environmental and regulatory standards, helping our customers uphold their commitment to sustainability. At the same time, energy efficiency is becoming more and more important.
Our doors must meet high thermal performance and minimize air leakage to comply with the new regulations. Safety, as usual, is a top priority for us. With evolving safety regulations, we must ensure that our automated door meets the latest standards for secure and reliable operations, and this not only protects our customers, but also enhances the overall integrity of their buildings, and finally, the rapid growth of connectivity and IoT in the building industry is transforming customer expectations. Our automated door solution must integrate seamlessly with building management systems, including access and inside systems. This smart connected solution and automated processes improve energy efficiency and allow for remote monitoring and maintenance, adding significant value for our customers, so the construction market, as you can see from this graph, is experiencing steady growth, but there is an even more exciting trend emerging with green building.
So the rapid expansion of the green construction market, as you can see, is much bigger than the classic construction market. So this growth is being driven by an increasing demand for eco-friendly solutions as both regulations and the market expectation for more sustainable practices. So for businesses like ours, this shift, as Nico mentioned, presents a significant opportunity. By offering products and solutions that prioritize sustainability and energy efficiency, we can not only meet this demand, but also position ourselves as expert leaders in this expanding market. But sustainability is no longer just about materials and energy. It's also about embracing digitalization and smart connectivity. And this is needed to shape the future of our industry. Being the best in thermal isolation or in energy consumption today is not enough. To evolve to the next level, we must look at the door as a part of a system.
This integration happens via digitalization, data, and AI. To stay ahead, we are focusing on integrating innovative features into our automated door solutions. These features meet regulatory requirements and provide long-term value for our customers. By leveraging artificial intelligence and connectivity, we provide products that enhance operational performance and help customers to stay competitive in the changing market. A great example of this is our recently launched artificial intelligence-powered smart system called EcoLogic. EcoLogic manages door behaviors to save energy and reduce costs for our customers. With this innovation, we are setting a new standard for sustainable connected solutions in modern building management, transforming the way automated doors contribute to efficiency and environmental responsibility. Let me share what our newly launched solution, EcoLogic, is all about.
Store owners want their door, let me say, open to create a welcoming environment and staying open to invite customers to enter as much as they can. But there is an issue with that. On average, sliding doors stay open longer than necessary. When this happens, especially in extreme weather conditions, it leads to significant energy losses. And the gap in the building allows warm or cold air to flow in and out, forcing the store heating or cooling system to work harder to maintain a comfortable indoor temperature. The results of this is that we have unnecessary energy consumption with a higher operational cost and a larger carbon footprint, obviously. So this challenge inspired us to create a solution focused on adjusting door behavior to minimize energy loss, providing our customers with a more efficient and sustainable solution.
By addressing this issue, we are helping store owners to reduce costs, improve sustainability, and enhance the overall customer experience. EcoLogic is an innovative artificial intelligence-powered smart system designed to optimize door behavior intelligently. It automatically adjusts door settings to minimize how long they stay open and takes real-time weather conditions into account. This system doesn't just save energy and reduce costs, but also helps customers lower their carbon footprint. By rationalizing the number of doors opening and the speed of opening, EcoLogic can cut door cycles by 2%-7%, extending the lifespan of the door and reducing maintenance needs. Now let's have a look at the short video that showcases how EcoLogic works and the value it brings to our customers. Please play the video.
Did you know an average sliding door stays open needlessly for 288 hours a year? Depending on the outside temperature, this creates significant energy losses due to the hole in the building. Warm or cold air flows in and out, causing higher than necessary energy consumption as the store's heating and cooling system works harder to balance the indoor temperature, leaving unnecessary carbon footprints behind. Now consider a street-facing retailer that typically averages 360,000 door cycles per year, and you'll understand that every second counts when it comes to energy loss from needlessly opened doors. This is exactly what our innovative AI solution, EcoLogic, is designed to understand and resolve. Introducing an algorithm that constantly adapts door behavior to real-time weather data and customer flow, tweaking door speeds and hold-open times without compromising the customer experience. EcoLogic will help you realize significant energy savings.
For just one medium-sized retail store, you could potentially save up to 14,000 kilowatt-hours annually. Depending on your energy costs, this can translate into savings ranging between EUR 1,000-EUR 2,000 per year per store. So no matter if you have one store or many, the EcoLogic algorithm will make a difference. And best of all, by activating EcoLogic, your doors will immediately start contributing to a more sustainable future, creating energy savings that leave beautifully green and eco-friendly footprints behind. Meet EcoLogic, the new AI solution from ASSA ABLOY, welcoming both customers and energy savings at the door.
I think it's a really exciting solution. And to conclude, the EcoLogic solution empowers our customers to achieve remarkable energy and cost savings while supporting their sustainability goals. As highlighted in the video, a single medium-sized retail store could save up to 14,000 kilowatt-hours annually. And depending on energy costs, this translates into EUR 1,000-EUR 2,000 per year per store. So now you can picture the impact for a retail chain with multiple stores across the country. So we are talking about really a big contribution to our energy savings and sustainability goals. Currently, we have customers already in Germany, in Belgium, and in France with several promising pilots underway. And there is a huge potential as we are ready to connect a couple of thousand more doors to our system. And the opportunity is just beginning to unfold. So we are very excited about it.
Now I would like to invite you to share a bit more about what we are doing on the other side of the ocean, our sustainability efforts in the Americas. I'm delighted to hand it over to my colleague, Amy Musanti. If you can, please play the video.
Hi everyone. My name is Amy Musanti. I am the Director of Sustainability for ASSA ABLOY Opening Solutions, located in Connecticut in the United States. I am pleased to provide you with an update of our program's commercialization efforts in the Americas division. Together, we will review industry trends, our contributions, growth and forecasts, examples of leadership, and our plan for 2025 and beyond. Our customers make incredibly deliberate buying decisions for sustainable products. They're driven by four key areas. Number one, state and local regulations that require integration of low-carbon and non-toxic materials. Number two, green building certification programs like LEED, which place a focus on chemical avoidance practices, ethical sourcing, and embodied carbon information, which can be found in our EPDs. Number three, occupier demands. Tenants and employees want to live and work in spaces that offer healthy, low-carbon materials.
Number four, building owners want to increase their property's value by designing their project with sustainability as a priority. Our strategy and contributions for 2025 and beyond reflect the demands of these industry drivers and our customers. Areas of importance include an increased focus on carbon, human health and resilience, and social health and equity. We answer the call with a commitment to sustainability at the core of what we do, never sacrificing safety or security. We continue to develop transparency documents like EPDs, and we have close to 200 in our Americas portfolio. Our innovative products use less energy for access control solutions and help prevent the transmission of heat and cold around door openings. Using less energy helps to realize a cost savings for our customers.
As Massimo mentioned, the global green construction market is forecasted to grow faster than the standard construction market over the next five years. Our steady growth of sustainable products in the Americas with a compound annual growth rate of 8.6% is attributed to the preference given to our products by our end users and architects who write specifications inclusive of our sustainable products. Advanced solutions like the energy-efficient EcoFlex Electrified Mortise Lock and the QMAX Hollow Metal Door differentiate us from our competitors and increase value for architects, engineers, and owners. Here is an example where Gensler, a global architecture leader in our sector, sought our input for their sustainable product standards. As shown in the image to the right, you'll see important impact areas that our industry is focused on and the corresponding documentation efforts that reflect advancements by manufacturers in these areas.
Our documentation not only exceeds their standard listed in the center column, but meets most of their market differentiator qualifications shown to the right. We were invited to collaborate because of our leadership position, ambition, and aligned sustainability goals. Our documents and initiatives will become a standard across their entire organization globally, with the potential to be adopted by other national firms. Developing rapport with architects and providing required sustainability documentation helps us to achieve wins like this one shown here from Colorado in the United States. This incredible project is valued at over $400 million, includes a full ASSA ABLOY product package, and will be certified for both LEED and the WELL Building Standard. Products with sustainable attributes make up the core of projects like this and offer scalable opportunities for future wins.
As we plan for 2025 and beyond to 2030, we continue to anticipate customer demands and requirements of this advanced industry. We will encourage stakeholders' buying decisions by making information readily available. We will take steps to prepare for a major version change to LEED, our most requested green building certification program. Lastly, we will drive the development of sustainable and responsible products and processes, providing solutions that go above and beyond to support the aforementioned focused areas of carbon, human health, resilience, and equity. Thank you.
Thanks, Amy. And thanks, Massimo, for showing us how we use sustainability in our organization. Also to show us how we see plenty of business opportunities with sustainability. I wanted to come back quickly on this EcoLogic from Massimo. I think for the Swedes living in Stockholm, we have all walked into the pedestrian shopping street in the center of Stockholm where you walk by H&M and Zara and so on. And then the doors of H&M and all the other shops go open if you don't have the intention to go in, if you just walk down the street. Obviously, it's a lot of energy that is lost there. I was myself at BAU in Munich. It's the biggest exhibition in our industry in Europe.
There we also showcased our new product ranges where we have a more sophisticated sensor on the door that then also can see if you have the intention just to walk by H&M or you have the intention to go into the shop of H&M. Based on your intention, the door will obviously open or just stay closed, saving energy and giving more comfort to the people in the street and the people in the stores. I think a very good example. On this slide, I think if you should remember one slide of the whole afternoon, I would say it's really this slide where we show what a lot of people believe is impossible. You see that we can decouple CO2 emission and growth. You see here over the last, what is it, eight or nine or ten years, our growth, which has been a significant growth.
You see our CO2 emissions that went significantly down, so a very good example of that: it is possible to decouple the two. As a summary, our key priorities going forward, we obviously will complete our 2025 sustainability program. We are there in a good position. We are ahead for most of our targets and we are confident we will reach our targets by the end of this year, and then obviously we are already developing now the next sustainability program with, again, more ambitious targets. We will continue to deliver on our Science Based Targets , Scope 1 , 2, and 3. We comply with regulations and also here we want to be ahead of our industry when it comes to anticipating regulations, and then people are our most important asset. We continue to invest heavily in our people development and make sure that they are safe at work.
Then obviously sustainability gives us plenty of opportunities to grow our business and increase our relative position in the market. So really making sure that we realize those business opportunities. With that, I would like to give the word back to Christiane and Björn for the first Q&A session.
Thank you very much, Nico. Well, as you just heard, it's time to open up for questions. So we'll have now Nico available here and Massimo is available online. And Charles Robinson is also joining us here in the studio, our head of sustainability. And after this Q&A session, Nico will leave us. So take the opportunity now if you have questions to Nico to ask them to him. At the moment, I don't see that we have any raised hands or chat questions, but we did receive a few questions beforehand. And so I'll start with one that I think is for you, Nico. Does the new government in the U.S., including them leaving the Paris Agreement, change your approach to sustainability?
No, not at all, Björn, because I think that's also the beauty of our strategy. We see sustainability in the first place as a business opportunity. And like I explained earlier, we see sustainability as a way to increase our top line and improve our margins and our bottom line. And that's our first priority. And then obviously we want to make this world a better world. So irrespective of what political views are around the world, those two arguments remain valid. And it's also very easy to understand for our people why we focus on sustainability.
Thank you, and then we did receive a raised hand now, so Jessica Marker, could you please unmute yourself and yeah, ask your question?
Thank you. Thank you very much. Jessica Marker from Generation Investment Management. I was wondering if you could describe how you determine which of your products should be categorized as sustainable?
Yep, yep. Yeah, very, very relevant. Great question. I think that the key thing to factor in here is that we don't have a binary definition of this is a sustainable product and this is not a more sustainable product. Really, it's about throughout our innovation process, can we design our products with sustainability in mind, factoring in lifecycle thinking, circularity principles, etc.? So whether that's reducing the embodied carbon by having low carbon materials in place for our electromechanical, electronic access control solutions, can we make them more energy efficient over the course of the life or of the course of useful life? But as well as Massimo showed there as well, when we introduced AI solutions like EcoLogic, that can even further improve the environmental footprint or energy in use. And then at end of life, can it be disassembled, can it be upcycled, recycled at a minimum?
I wouldn't say that we have a binary definition. Really, it's trying to optimize the sustainability attributes of our products at each stage of the lifecycle process. Of course, we have an incredibly varied and complex product range. It doesn't mean that what applies to doors is necessarily going to apply to access control, for example.
Perhaps if I add, you will see later in the afternoon how we embed sustainability in our innovation process through the Sustainability Compass , and that most probably will make it a little bit more clear how we define sustainability on new product development, and then I think we have our. I'm always confused with the letter word EPDs, the energy certificates.
EPDs.
EPDs, right? So we have most of our product families also certified through EPDs. And then it's clear that it's a sustainable product range. And we see more and more ask for new builds and refurbishments to have our customers using products that are certified from a sustainability perspective.
We have received a question here in the chat, Josephine Johansson. Let me read it. Josephine starts with saying, "Thank you for interesting presentations. Does the global green construction market refer to buildings with green building certifications, or are there other parameters included?" She has a follow-up also. What are the key factors behind the decrease in Scope 1 and 2 emissions in 2024? And similarly for Scope 3, we'll come to that later in the program. So perhaps start with the first piece of the question.
Yep, for sure. So when it comes to the growth of green buildings or the green building market that we're defining there, typically it's green building assessment methods. So the likes of BREEAM, HQE, DGNB, or LEED, predominantly in the U.S., but also has a very large footprint. And there are a number of other global green building assessment methods as well that are very much in place. So when we refer to the growth in specification opportunities for the green building, it typically is those green building assessment methods. But I've no doubt that there are more being developed, especially in emerging markets, because I believe that there's a solid opportunity there. So something that we will stay close to.
And we can definitely confirm that the trend, and we see that through our specification activity, where let's say five, 10 years ago, most of our specifications would not even talk about green and sustainability. Today, most of the projects are built according to one or the other sustainability standard, be it a LEED certification or something else. And if already they would then ask for a standard project, they will always ask as an option also to have, let's call it green sustainable quote. So that market graph that you see is really translated also in what we see in our business. Our sustainability specification is also by far the fastest growing specification vertical of specification segment that we see in the overall specification business.
Thank you. And I think we take the follow-up question after your next session, Charles. We had another question.
Well, it came actually just one now from Delphine here from Oddo. So let's take that one. Hello. Acquisitions are part of your DNA. Did you do any acquisitions in recent years that were driven by sustainable criteria from a technology standpoint?
Yes. I can give a good example. We have acquired, I think a year and a half ago, two years ago, a Dutch technology company, Kinetron. I think it's a very good example. Kinetron, we're also the inventors of a Swatch watch. I think it's a Swatch watch where you then just use your pulls and then it's recharged. So you don't use batteries. And so what they do is really trying to use the kinetic energy that you use to open a door handle or something else around the lock and use that kinetic energy then to generate electricity so that you don't need batteries anymore or that you can recharge the batteries on site. So really a good example of a sustainable solution. But there's many, many others like that.
Of course, when we do due diligence exercises on potential acquisition targets, sustainability is also embedded in that process.
Thank you. And here we have a follow-up question on Jessica's questions. How is the 8.6% CAGR for the U.S. sustainable products defined, shown in Amy's presentation?
To be candid, I think that's probably a question we need to ask of Amy, but certainly something that we can follow up on. But I think we can go back on it, but obviously it's just market data that we get and statistics that we don't know. But we can come back on it offline. Yeah. It's a market study.
I think we have time for one more that we actually had received beforehand to you, Massimo. So I hope you're ready online there. Are there differences in terms of demand for more sustainable products between markets?
Yeah, definitely today is different. We see a much bigger demand in Europe compared to North America, for example, and even within Europe, we see more demand in the Nordic countries compared to Southern Europe, so the short answer is yes. It's a different level of demand depending upon the geography.
Excellent.
Great. Thank you. So with that, we move on in the program and we'll go to how we're tracking on the 2025 sustainability program. Thank you very much, Nico. And I would like to welcome Allan Cooper, our Chief Human Resources Officer, who will be talking about how we're tracking on the people side of the 2025 sustainability program in the context of our HR strategy. When Allan is finished, Charles will come back on and speak about how we operationally are tracking on the 2025 sustainability program. Allan, please. Welcome.
Thank you so much.
Good morning and good afternoon and a warm welcome to the people part of the presentation. I'm going to start off with our strategy house and just walk you through that, so our vision is to be the trusted strategic business partner contributing to the success of our ASSA ABLOY organization, and this is to be achieved through our decentralized business and empowering our employees. Now, the mission of that is to create a world-leading organization where people can succeed, and we do this through the eight strategic objectives that you can see there in front of you, and we focus in 2024 on three particular objectives, which are common culture, employee experience, and talent management, and we drive those through the organization through our divisional structure deep into the business.
And on the bottom there, we're trying to build the capability of our HR community through being more data-driven, being business-driven, and also supporting them with all the capabilities through our new and innovative HR systems, which we're constantly improving and investing in. So if we look at those three that we've really focused on in 2024, you can see we're making some strong progress. Nico mentioned about the 30-year anniversary that we were able to celebrate recently. And that was across the globe, which culminated at the end of the year in some really fantastic opportunities to express the values that we share as an ASSA ABLOY community. So we see in our Voice of Employee, which we do every year, we've got some positive feedback that we're moving in the right direction when it comes to a positive culture to work in.
Of course, people come and join the organization and we have new acquisitions. They don't know what ASSA ABLOY is about. We're continuously trying to share those values through a series of workshops. Those are available for everyone to participate in. We keep that culture being embedded continuously into the organization. When it comes to the employee experience, again, we have a very, very strong base back in 2018 and we continue to maintain that and improve it. Again, through our HR systems, we're trying to really make sure people have a fantastic experience from the very point where they engage with our organization, right the way through the employee journey. We had a focus on employee turnover. We've done a lot of analytics to really understand where we might be losing people at what stage of their career.
And then we can do the interactions to really stop that and reduce the employee turnover. And of course, talent management is extremely important. We made some key changes in our European operation where we did what's called an RPO, recruitment process outsourcing, which allows our HR business partners to have time to really focus on supporting the organization. It allows a lot of consistency in how we recruit, the way we brand ourselves, and again, the experience that people have when they join our organization. And then we embed that into very regular reviews of our talent management programs. You can see a very important metric for us here. Our internal hire rate has improved over time as well. So the more we can promote our internal talent, the more we can share the culture.
It sends a fantastic message to everyone who works for us that they have a future career. And this is a really significant reduction. So this is the output of, I guess, all our good actions that we've tried to implement and a third reduction in our voluntary turnover. You can see in the cycle there, we're really investigating the reasons why we might have turnover, getting into that kind of granularity, having the discussions with the leadership teams, having the strategies to ensure that we make the changes in the business that are necessary in order to retain what is, of course, our most valuable asset, our people. This is a very interesting trend. When we look at internal hire rates and the improvement there, we find the more we improve our internal hire rate, the longer people stay in their jobs, the more successful they tend to be.
We have, again, a positive impact on retaining our employees, and we've looked at this from an external benchmarking point of view and an internal benchmark point of view. We find it's a very, very positive cycle, so a lot of focus on our internal mobility, so looking at some of the other aspects of our strategy, when it comes to CSRD, we've been extremely proactive with our work there. We've been very diligent preparing the systems, the processes, make sure we have the workforce analytics in place to support the directive, and so far, the feedback has been very good. We met the auditors recently and we got some very positive feedback about the preparations that we're putting in place. When it comes to diversity, inclusion, and belonging, we believe this is embedded in every aspect of our organization, everything that we do.
So really from the very first touchpoints in the business, when people may see an advert, we very carefully design the adverts in order to attract, appeal to the widest community possible. And then again, obviously with the candidate base that we use, we have lots and lots of environments where people can interact and colleague communities. And we've had a big focus on building the bench strength of our talent pool, especially when it comes to gender. And we're starting to see some good movements there as well. We've built that bench strength. We now have some positive movements there in our leadership teams when it comes to gender. And then the number one priority in our organization is to ensure we create a safe environment and a healthy environment for our employees to thrive. So this is a really integral part of our culture.
We've done a lot of training across the organization and we run a whole series of specific workshops to encourage that safety culture, to encourage the positive management behavior, but also for everybody to take responsibility for the safety of their colleagues. And again, we can see the results of that, a significant reduction in the injury rate over time. So what I'd like to do now is introduce a video where I think really represents that safety journey, especially when it comes to new acquisitions. As you heard earlier, that new acquisitions tend to have a higher injury rate than ASSA ABLOY as a whole. So it's a big, big focus area for us. And in this next video, you can see some of the impact our strategies can have. Please play the video.
Hello everyone. I'm Markus Kast, Head of Business Segment Pedestrian at ASSA ABLOY Entrance Systems.
Today, I'm excited to share with you the journey of how our Record organization has significantly reduced its injury rate and developed a safety culture. Before joining the ASSA ABLOY family, the Record organization faced a challenging situation with a high injury rate. This was primarily due to the lack of a structured approach to handle health and safety and due to a lack of management attention. However, we wanted to make a change. In 2021, we took the first steps by setting up the ASSA ABLOY Health and Safety Directive. Since then, we have made significant progress by forming a safety council, identifying the top 10 countries with the highest injury rates, and collaborating closely with them to implement comprehensive action plans. These plans included various initiatives such as our Together We Are Safe workshops for all employees and the implementation of safety guidelines.
So far, 230 workshops were hosted in our segment where approximately 70% of our employees have been taking part at. Training sessions and communication materials were also developed to keep everyone informed and engaged. These efforts reflect our commitment to the well-being of our team members going beyond compliance. Through these initiatives, we have seen a significant reduction in injury rates in our Record entities. From January 2022, we have reduced the injury rate by 36%. But more importantly, we have developed a culture where safety is a shared responsibility and a core value, which recent results of our Voice of Employee survey have shown. We still have a way to go, but seeing these results so far has inspired us to work even harder and strive for a safer and healthier workplace for everyone. In that sense, stay safe and thank you for your attention.
It's really inspiring what Marcus and the team have managed to achieve. I'd like to just summarize the key takeaways from this part of the session. I think the culture, the umbrella, the environment that brings us all together, makes us feel like a part of one family. We've seen some really positive improvements over the past few years. When it comes to the employee's experience, that is the outcome of everything we do in the HR community and the business community. We're seeing really significant improvements in decreasing our turnover, and the engagement story has maintained itself at a very high level. When it comes to talents, we really want to focus on our internal talents. We believe there's so many positive aspects of promoting internally, whether it's cultural, whether it shows to other people in the organization that there's opportunities for them.
When it comes to CSRD reporting, we've done extensive preparations and we will continue to do that so that we're in very good shape for the directive. And then when it comes to diversity, we are making good progress, but there's still an awful lot to do when it comes to gender. But diversity, of course, is a far, far broader spectrum than that. And finally, and most importantly, our employees come into work in a safe and healthy environment. And we're seeing good traction when it comes to lower injury rates, especially when we're focusing on the acquisitions and taking them on that journey that you've just seen. So thank you for your attention. And I'd like to now hand over to Charles Robinson.
Thank you, Allan. Hello everyone. I'm Charles Robinson, Head of Sustainability, and I'll take you through a bit of an update on the progress of our Sustainability Program 2025. As a reminder, against our 2019 baseline, we're now into the final year of our Sustainability Program, which addresses both operations, supply management, and people. Allan has just taken us through the results from a people perspective, and Eva will join me shortly to take us through supply management. I'll unpack a little on operations. First up, we have our Scope 1, Scope 2 carbon footprint target, which is minus 25% in absolute terms by 2025. I'm glad to say we are ahead of target, currently at minus 36%. It's important to point out here that we had an improvement between 2024 and 2023 of 20%.
That's broken down into two components because we updated our methodology, whereby we updated our emission factors using the IEA, the International Energy Agency, the latest emission factors for 2024. So that means we start to see that tailwind and benefit of increased renewable energy mix in grids globally. We had 2% then came from continuous improvement, which is a result of our focus on energy efficiency. But that then leads me on to our energy intensity. Again, a 25% reduction target by 2025, and we're currently at 40%. So we've had a 10% improvement between 2023 and 2024. So this is where we continue to focus on our energy effectiveness and energy efficiency, whether that's upgrading compressors, installing LED equipment, optimizing thermal performance, etc. So it really drives reduction in our CO2 footprint, but also results in significant energy cost savings as well.
Next up, we have our water intensity, again another target of minus 25%, an incredible result from our divisions, minus 56% towards target. This has been driven largely by infrastructure upgrades where we've either identified leaks or we have antiquated infrastructure, which has then been upgraded. Also by looking at water efficiency measures, low-flow fixtures. And then in our operations, particularly surface treatment plating systems, it's installing ion exchange resins and then for our coating lines having reverse osmosis. So all of these together really driving a step change reduction in our water intensity. Hazardous waste, a solid improvement there. We're 46% down. We have a 25% target. This as well is again back to our surface treatment, plating, coating, painting. See how we can recapture, reuse a lot of the materials that are byproducts, but increasingly making those processes more efficient.
On our non-hazardous waste, we're at 29% down against the 2019 baseline. Good improvement. This is where we focus on the waste hierarchy. Ideally, we can avoid generating waste in the first place, but if we have to, is there a way that we can reuse it somehow? And then lastly, to recycle or recover the energy through incineration. Organic solvents, we had a 50% reduction target. We're over 60% now towards that, predominantly focused on using water-based paints instead of solvent-based paint, but also using less solvent-based degreaser. So using as much water-based degreaser for components where we can, but in some cases with intricate components, we may still need to use solvent-based, but quite a substantial reduction. The one challenge I think we have when it comes to our sustainability program is related to our ISO 14001.
So we have a very ambitious target to have 100% of identified relevant manufacturing sites to be covered by ISO 14001. We're currently at 77%, and I think it's fair to say that the majority of those sites still outstanding are from acquisitions within the last three years, and most bear in mind, 14001, a substantial management system takes quite some time to get all the groundwork in place, but we'll have a really strong push and really hope to achieve this target by the end of the year. So overall, in quite good shape from an operations perspective, but digging in a little bit, how are we achieving these sorts of results? So this is referring to we had a Sustainability Council face-to-face meeting at Ameristar in Tulsa, Oklahoma, in March last year. The picture of the team that you see are the Sustainability Council within ASSA ABLOY.
These guys are the superstars who are really driving the great work out in the organization. Our results are largely thankful for their hard efforts and, of course, their teams as well. There was a reason why we went to Ameristar. It's one of our largest facilities. It's certainly our most energy-intensive facility within the organization. We came together with a very common theme, which is really to share best practice. We have an old saying in ASSA ABLOY, "If only ASSA ABLOY knew what ASSA ABLOY knows," which makes sense if you think over the last 31 years, we've grown through over 300 acquisitions. The chances are a solution to a problem is buried in a silo somewhere.
The idea is to lift all of those up in a very common way and then to bring people together who have common challenges, common interests, and really to accelerate that rapid knowledge sharing. The image on the bottom right, we ran a short Kaizen workshop for half a day focusing on energy, water, and health and safety, that's what the three colors are. In that Kaizen, we generated over 150 ideas, which is incredible. I've never been part of such a productive Kaizen before, but it really just shows the power of getting people together with the relevant experience, coming on with a new set of glasses to look at problems in a different way. This is just one example of hundreds and hundreds of these initiatives that are happening across ASSA ABLOY.
They all culminate together to really drive those step change results that we've seen over the last two slides. For those who joined the sustainability seminar over the last two rounds, we had an update from Ameristar, back to the point, most energy-intensive, one of the largest factories in the organization, so we've had an update from Kristen Ruhl, Director of Environment, Health, and Safety at Ameristar. She's also representing Entrance Systems in our Sustainability Council. Kristen is doing an exceptional job driving improvements both at Entrance Systems and then locally within Ameristar, but to drive continuity and to see how they're getting on, we're going to have an update from Kristen. Please play the video.
Ameristar Perimeter Security manufactures architectural fencing for residential, corporate, and governmental applications, all in one 90,000 square meters campus. Ameristar is committed to improving our manufacturing efficiency while reducing costs, and sustainability is a key part of that puzzle. As you might remember, we started a green team in 2021, and it's still going strong with monthly sustainability walks used to identify energy, water, and waste inefficiencies. An example of a recent activity is the Blast Off project that we kicked off in 2023, which will help reduce our annual gas usage, save well over $200,000 annually, cut our gas combustion emissions by 6% per year, and our plant-wide CO2 emissions by 3% per year. This project is also slated to save 1,700 cubic meters of water per year, reduce air emissions, and improve safety.
We're currently testing the equipment with full implementation expected by the end of 2024.
Along with monthly walks, each department maintains a shutdown checklist as part of our ISO 14001 certification. These checklists ensure equipment is shut down after production, and supervisors are empowered to take charge of energy reductions in their areas. Our shutdown checklists are also used as a maintenance reporting tool where equipment issues or air leaks can be quickly identified for repair.
In Q3 of this year, we completed an air leak detection assessment and are repairing major air leaks, building redundancy in the air system, and installing valves in certain areas for quick shutoff.
We continue to focus on energy reductions with projects like energy monitoring, shutdown auditing, reprogramming thermostats, air leak detection, lighting control upgrades, and compressor optimization.
A badge of honor for Ameristar is our water consumption reduction, down 30% from our 2019 baseline. This improvement can be attributed to many things like water use tracking, process and equipment improvements, increased awareness around water usage and leak reporting, but also preventative maintenance and reducing our coating line bath overflows. In 2022, on our largest milling line, we replaced a 75 cubic meters process tank with a 19 cubic meters process tank. This line runs three shifts 24/7, and although this water is recirculated, it needs to be periodically dumped and replenished with clean water. This tank replacement saved 75% of daily water use and an estimated 227 cubic meters of water annually.
In line with the group strategy, Ameristar engages our top suppliers to understand their value chain and how that impacts our Scope 3 emissions. We track our supplier emissions by SKU to drive sustainable sourcing activities and utilize product emission tools to optimize portfolio planning. Our product is primarily made from U.S. sourced steel from electric arc furnaces, but we have VA/VE built into our process, and we will assess lower carbon raw materials as they become available. Building sustainability and Science Based Targets into our business model and becoming better stewards of our environment has made us more competitive, resilient, and profitable. Ameristar is proud to produce the highest quality perimeter security products in the world while embracing sustainability and its business benefits.
I think it's fair to say that Kristen, Joel, and the rest of the team in Ameristar are really doing a fantastic job to help us work towards our goals and targets. As we've seen, we're making very good progress. We're currently ahead on many of our targets, but as we say and communicate back to the teams, it's not where we are right now. It's where we end up at the end of 2025. We're energized and convinced that we can finish this out in a very strong way. As Nico touched on, we are also in preparation for a sustainability program 2030 where we're yet again looking to raise our ambition level, and we'll be excited to communicate that towards the end of this year. Now, to take us through supply management and our progress, I'd like to welcome Anna-Eva.
Thank you, Charles. So we, ASSA ABLOY, we cannot only work on sustainability efforts internally by ourselves. Everyone in our value chain, both upstreams and downstreams, is an extension of our business. So that is why we really need to work jointly together and engage with our suppliers and business partners. Here, I will tell you a little bit about our Code of Conduct for our suppliers and partners. It is publicly available on the internet for anyone to read. It covers ethics, social responsibility, environmental, health, and safety. And our Code of Conduct stands on a strong foundation and is based on international standards coming from United Nations, international labor organizations, OECD policies for better lives, and also ISO 14001. We expect our business partners to be compliant with all laws and regulations. However, if our code set a higher standard, that applies for that specific topic.
Our KPI measure the signed Code of Conduct for business partners as a percentage of direct and indirect material spent. We are at 86%, and we have a target to be at 95% by the end of 2025. Let us look into a few more details. Business ethics, it's about corruption, compliance with competition and antitrust laws, and also the very important protection of data and intellectual property. Next headline, human rights and labor standards is super important. We do not tolerate child labor or forced labor. All workers in our value chain shall have the freedom to get organized, and all should have fair employment conditions. We expect our suppliers to follow laws and regulations related to environmental responsibility, and health and safety is, of course, basic and very important. All in all, we in ASSA ABLOY shall not exploit people or our planet.
To check and also to help our suppliers where needed, we perform sustainability audits on site to ensure that our suppliers fulfill our Code of Conduct requirements. Being there, we monitor and we ensure that the supplier is compliant to our requirements. After the audit, the outcome and the long-term benefits are sustainable business performance over time. We identify and we solve problems to reduce future risks, and it is also a structured continuous improvement process, and I will tell you a bit more later. Also, we do have a KPI related to audits of direct material suppliers in identified risk countries. We do on-site audits only in risk countries, and a risk country is defined based on World Bank, Worldwide Governance Indicators, Human Development Index, Corruption Perceptions Index, and also U.S. State Department's trafficking reports.
Here on the left-hand side, you can see our target is 95% audited direct material suppliers in risk countries. We are at 92% today. We had a drop in coverage due to COVID travel restrictions during 2021, and today, we have had a challenge of keeping up with the many acquisitions we've done. On the right-hand side, you can also see that the number of sustainability audits we do decline over time. That is because the number of risk countries where our suppliers are located declines over time. Example, we have seen many countries in Eastern Europe develop over time, and in 2024, we did just above 700 audits. This is our sustainability audit process. First step is the pre-audit where the supplier gets access to all the questions and requirements in our audit checklist to prepare and assess themselves. Then we go and we do an on-site audit.
There we do detailed inspection and we do interviews. We have a long list of questions and requirements the supplier should be aware of in advance. We do interviews with the supplier management teams, and we also do interviews with workers in the office and on the shop floors. Any concern, of course, we document it. After the audit, we generate the report. We have feedback discussions with the suppliers, and then we get to work on corrective actions. Then we follow up that the actions are being done, and then we are in the continuous improvement process. We do continuous monitoring, and we also do re-audits according to a pre-defined schedule based on the result of the audits. And also, we do support, and we can also train the suppliers if needed for them to improve the sustainability practice in general.
On the right-hand side, you see that the audit result is rated in color. Green is the best. There we have to come back and do a re-audit in three years. Yellow, we leave the supplier alone for two years and we come back. Then orange, one year and so on. The poorest rating is the red one. And here the supplier gets six months to show improvements. Otherwise, we start to phase them out. We have one stopper, and that is child labor. If we find evidence of child labor, we stop immediately and phase out the supplier. The pie chart is a snapshot. It's a typical month sustainability audit rating where you can see the percentage of suppliers in green, yellow, orange, purple, and red status. So now, over to you, Björn.
Thank you very much, Anna-Eva. So we'll now start our next Q&A session. So if you have any questions, feel welcome to type them in in the chat forum or raise your hand. Before I look into if anyone has done that, I just would like to go back to the question raised by Osinga because I realize we probably misunderstood that question a bit. And to repeat what the question is, how is the 8.6% CAGR for US sustainable products defined? And that was showed in Amy's presentation. And we were thinking of that it was the general construction growth that you referred to, but that is actually Americas sales growth. And what that number is defined from is basically products and sales tied to that we consider products with more sustainable attributes. So basically energy savings or declarations such as EPDs. So I hope that answers the question.
Have we received any questions?
No raised hands or questions in the chat at the moment, but we have received a question beforehand, and this is one for you, Allan. What is the main focus area to improve in health and safety?
I think, Kjell, I'll say health and safety is a continuous journey, and we can never ever be complacent. So yes, we've seen some improvements over a long period of time based on our strategic intent and consistency and all the support of our employees. But we can never ever step back. So we need to continue with the training programs, pushing out the workshops across the whole organization and getting everybody involved. I think we can continue in that way. One day, maybe we can have zero injuries.
Very good. I'll continue with another one, which came in before and which I think is more for you, Anna-Eva, and it, I guess, comes to what we've shown before that we have been below our target of having 95% of our spend with suppliers who have signed our Code of Conduct for business partners.
I guess the question is, why are we, I guess, so far below?
Yeah, yeah. It's a good question, and it's also a challenge we have ahead of us. We have evolved from just measuring direct material supplies now to also include indirect material suppliers. So we have moved from like 8,000 suppliers that we have to monitor to now we are measuring over 50,000 suppliers. But however, we are also making progress. Back in 2019, we were at 68%, and today we are at 86%. So we have made significant progress in this area. But of course, it's a challenge to maybe be at 95%, but we will do whatever we can, of course.
Thank you, Anna-Eva. We have received a question here now in the chat, so let me read it to you. Thank you for a very good presentation. Could you please share your approach to utilizing carbon offsetting or incorporating carbon certifications in your decarbonization strategy? Let me scroll down a little bit here. Is that perhaps for you, Charles?
Yeah, I can take that one. Very good question, very relevant. From our perspective across Scope 1, Scope 2, and Scope 3, we have a huge amount of real reductions that we can drive, and these will have the benefit of reducing our risk exposure, reducing our cost, and perhaps something then that we can use from a commercial perspective. But fundamentally, it's truly driving down our carbon footprint. So in short, carbon offsets, carbon credits will not play a role in ASSA ABLOY's near-term targets to 2030. For us, we view carbon offsets as a potential risk. In many cases, we've seen in the media that there are examples where the offsets have been double-counted. So we see that as a brand risk or potential for greenwashing.
Looking further ahead to our 2050 goal to achieve net zero, there's no doubt that we'll be reliant on carbon offsets to achieve the residual 10% of that goal. But by then, we anticipate that there will be a global certification such as ISO, but something that makes sure that offsets are credible and can be verified, which isn't the case at the moment. So great opportunity to drive real reductions. That's our priority. But then as we get closer to net zero, no doubt that they will play an important role.
Thank you, Charles, and I think we have time for one more question that we received beforehand before we take the break, and this one is surely for you, Allan. Are there any particular sites or divisions that have higher employee turnover? You have been working on turnover, you mentioned, I guess, yeah.
Yeah. So we've done a lot of work on our analytics to be able to really get into the detail. And we've also done a lot of work on categorizing the types of reason. And that's helped a great deal to then profile that, share that with our leadership teams, work in partnership to then create strategies that support the reduction. So I'd rather not specify anywhere in particular. I think it's something that we have really set an ambition across the whole group. Of course, sometimes you have pockets of particular attrition. It could be for many reasons outside our control, big new factories being set up. And there's lots of other reasons. But I think the important thing is that we have the information, we work in partnership, we identify the issues, and we continuously improve our processes.
Thank you, Allan. And I think we received another question here in the meantime. So I'll read it out. Regarding on-site audits, could you provide some more detail on the decreasing trend? Is it only due to less suppliers being in high-risk areas? And then I'll continue with the follow-up.
Yeah, yeah, it's both. We see many countries are developing and hence they are removed from our risk countries, but also we do move suppliers from risky areas to less risky.
And you responded almost to the next second part here. I'll just read it out. If yes, is that due to us changing suppliers or countries not being defined as high-risk anymore? And the answer is yes.
Yes.
Excellent. Do we have any raised hands?
Any raised hands? Any chat questions?
Nope.
Okay. Then we thank you very much. We'll see you again in a little while here, but we're heading towards a break. And after the break, we'll continue with our Science Based Targets and how we are tracking on those with a particular focus on the Scope 3 emissions. We will meet again 20 minutes to the hour, wherever you are in the world, but here in Sweden time, that means 20 minutes to 4 o'clock. See you after the break.
Welcome back, everyone, to the second half of today's program. The plan is now to discuss how we are working and tracking on our Science Based Targets commitment and talk about the big elephant in the room being the Scope 3 emissions and how we are working with those emissions.
I'll now hand over soon to Charles, standing next to me here, and before we welcome Anders Forslind, who will discuss how sustainable product innovation can help us achieve our Science Based Targets commitment and also on the Scope 3 side. Anna-Eva will then come back and talk about how we're working with our suppliers to help us reach the Scope 3 commitment. And after those three presentations, we will then open up for a Q&A. So with that, over to you, Charles.
Thank you, Björn. So I'll give an overview of our Science Based Targets, but starting out as a reminder of our commitment. So in 2022, we had our near-term targets to 2030 ratified by the Science Based Targets Initiative. That's a 50% absolute reduction for Scope 1 and scope two, and a 28% absolute reduction for Scope 3 . As a reminder, Scope 1 and scope two emissions relate to emissions from our own operations, whereas Scope 3 is everything outside of our own operations. It's the entire value chain. Also, during 2024, we had our net zero target, no later than 2050, ratified by SBTI, where we achieve net zero across all scopes. So how are we progressing? When it comes to Scope 1 and scope two, this is linked earlier to my update on the sustainability program 2025.
We are 36% down against our 2019 baseline, so making strong progress towards that 2030 target of minus 50%. How are we achieving this? So we have a four-pronged strategic approach that we roll out across the group. It's important to note that we have a standardized approach that we roll out at plant level, which is then aggregated up to business unit, region, segment, then aggregated up to division, which is then aggregated up to group level. So starting out, we have MFP, or Manufacturing Footprint Program, where we consolidate sites with duplicated processes. It's driven for cost efficiency, also has a very strong carbon impact as well. In 2019, 2020, we used Freon as a blowing agent in our door insulation processes in China and the US, which has been phased out, driving a step change reduction. Coming on to strategic sites energy overhauls.
We operate over 1,000 sites within the group, over 200 factories of those 1,000 sites. 25 make up over 60% of our footprint. This prong is really looking at those top 25, where we roll out smart metering, a series of solar panels. By integrating smart metering, it really gives us the data to understand how can we drive a step change investment-grade energy order for these sites and then drive that substantial energy overhaul. Last, but by no means least, is our continuous improvement. Across all of our 200 factories, we have an operational excellence assessment where sustainability is one of the core pillars, and more specifically on energy and our green team playbook. This enables our organizations to generate hundreds and hundreds of smaller energy-focused projects, which then comes together to have quite a substantial impact. Moving then to Scope 3 .
So as I mentioned there, we're operating over 1,000 sites within ASSA ABLOY. Those 1,000 sites make up around about 4% of our total footprint. So a whopping 96% of ASSA ABLOY's greenhouse gas emissions comes from our Scope 3, where 75% of that is coming from purchased goods and materials. Our logistics and energy in use play an important part as well, and we could touch on a little bit later on on how we address product dematerialization and energy efficiency during the use phase. At a group level, we have our Science Based Targets core team and governance structure. So we're supported with Anna-Eva, Anders Forslind, our sustainability controller, Tomas Solak. But very importantly, we have the executive Science Based Targets steering committee with Joerg Enver, our Group CTO, Leigh Phelps, Operations Board Chair, and then our CFO, Erik Pieder, as well.
Every quarter, we have a review process with each of our divisions where we use a standardized one-pager to assess their action plan, their progress to date towards their Scope 3 . And I'll show some examples of that shortly. So what are we doing from a group center level and within the organization to define our pathway to success? We're constantly improving our data accuracy, implementing actual weights for the materials that we buy as much as we can. We held several supplier Science Based Targets summits last year, and Anna-Eva will go into a little bit more detail there. We've updated and refined our Scope 3 playbook. We've also developed a suite of Science Based Targets tools. So starting out with good, better, best. So on the bottom right-hand side of the screen, we have our good.
This is our EcoC alc, which means we can compare one material with several alternatives, so basically, if we have, say, steel and we want to compare, okay, what would be the impact if we chose brass, aluminum, zinc, etc. Very simple, but very effective. Our sustainability portfolio planning tool has been developed by Anders and his team. This is a truly excellent tool, really helps product managers and business units to understand where is their highest volume as well as the highest carbon footprint. That means they have a data-driven targeted approach to develop their Scope 3 action plans that can really scale up, and Anders will take you through this in much more detail later on, a really wonderful tool, and then even more detailed is then the compass calculator, which is a very product-specific LCA approach, and Anders will touch on that a little later on.
We're developing much more granular Scope 3 action plans. As Björn touched on, Scope 3 really is a behemoth. It's an elephant. So if we're trying to tackle or eat an elephant in one bite, it's just not going to happen. So getting more granular really helps us to achieve those reductions. In addition, we have a bi-monthly best practice sharing session within the organization. Again, back to that theme that I mentioned early on, really looking to drive rapid knowledge sharing across the organization, and that'll help us to accelerate our project pipeline and implementation. So in terms of our Scope 3 action plan and our progress, we have multiple cross-functional teams across each division. Very important to have every function at the table and involved. Our divisions have developed very detailed projects to implement and really having effective use of the tools that I just presented on.
We do need to continue to further develop the project pipeline. We do have a gap across some of our different work streams and our different levers, but it's also important that we execute on what we have already identified. Scope 3 is still fairly new to many people, so we have to continue to develop that internal competence. That's through training, education, and then ultimately from a data perspective, where we want to work towards is using supplier-specific data. So on the top right-hand side is a screenshot of the actual one-pager that we use per division, which shows a waterfall in a vertical, which then sums up together and then is transposed into the group Scope 3 waterfall on the bottom right-hand side. So how are we progressing? So overall, against our 2019 baseline, we are 10% down, which is a good improvement.
We still clearly have more work to do. An important point that I want to touch on here that some of you may notice is that we've gone through a methodology update for how we calculate our Scope 3 . So our 2023 data for Scope 3 reported just over 16 million tons. That has now come down to just over five. What's happened here? When we set our Science Based Targets, we used just 20 generic materials, so one type of steel with one emission factor. We knew this was very conservative. We were absolutely following the greenhouse gas protocol, Scope 3 carbon accounting standard, following the spend-based conversion method, which was approved by Science Based Targets. But the more we started to work with this, we understood we didn't have a granular enough understanding of our data.
So what we did is we went from 20 materials to 190 of the most widely used materials that we have across the group. In addition, we now have regional emission factors for all of those materials. So for example, the steel that we buy from China has a different carbon profile to one in Europe and the U.S. and so on. And lastly, as I touched on earlier, we're now adding actual weights instead of the spend-based conversion. So from a Greenhouse Gas Protocol perspective, we've gone from a spend-based ratio, now moving to the average data using our weight-based, and ultimately we want to get to primary data from our suppliers. Making good progress, but we certainly have more to do.
Then for our Scope 3 waterfall, made up with supply chain decarbonization, sustainable innovation, use of value analysis, value engineering, and then a focus on optimizing logistics. Anders and Anna-Eva will take you through those in a little bit more detail a little later on. Now I want to deep dive into one of our divisions, into our EMEA division. I'd like to introduce you to Olympia Dolla. She's the Head of Sustainability Program in EMEA. Olympia brings a wealth of experience to the organization and is really doing a fantastic job in EMEA. Let's see what it is that they're doing locally. Please play the video.
Hi, my name is Olympia Dolla, and I'm the head of sustainability program of EMEA division. With my presentation, I will give you a deep dive on how my division is organized in the Scope 3 topic. Let's start with the governance. In order to ensure good coordination, we have built a core divisional team with colleagues that lead the relevant work streams that play a role in our Scope 3 emissions. These are coming from procurement, product management, product engineering like innovation and VA/VE, logistics and quality. Together with these colleagues, we meet on bi-weekly basis to coordinate and brainstorm on the next steps of our Scope 3 journey. It is really important to highlight that our core team has the full support from our executive sponsors, these being the COO and the CTO of EMEA division, where we have quarterly coordination with them.
Now, how do we plan to achieve our target? We have a good overview of the areas that will drive our emissions down and which work stream will have the biggest share of effort. Let's start from procurement. We believe that procurement will have 30% of the share of our 2030 target. This will come from our suppliers' Scope 1 and 2 savings, technical changes like dematerialization, and greener materials, which will have the biggest effect and the biggest share to realize this potential. Another important work stream is innovation. They will have nearly half of the savings needed to achieve our target. This will come by far with green product development, by launching new lower carbon products, by optimizing the energy in use of the products, and by more efficient product portfolio management.
We have done the same analysis, and we have identified the areas that will contribute to the quality, logistics, and complexity reduction. Now, let me show you some real examples on how we are implementing these levers. Let's start with the technical changes under the procurement work stream. This example comes from the Yale Trojan slides, where the particular product was experiencing issues in terms of costs due to the rise in raw material prices. The approach here was to redesign the product by optimizing the weight from 75 grams to 62 grams per inch. This brought 19,000 of savings to our organization, and it also came with CO2 savings due to the reduction of material needed to produce the same product. This is a clear example that dematerialization is a win-win case.
Let's see our innovation work stream and how we apply the green product development lever in our processes. It all starts with governance, where we have divisional monthly meetings to coordinate with the product management colleagues, and these are the areas that you see in this slide. And my core team colleagues from procurement, VA/VE, and myself leading the sustainability. This group has a responsibility to cascade the strategy and the importance of Scope 3 to the regional teams. What do we prioritize? We prioritize the highest CO2 emission product per unit, where we have a very good knowledge database internally, the heaviest products, but also the products with the highest volumes in each of these product areas. How do we integrate CO2 emissions in the product development?
Since January 2024, we have implemented a flat EMEA target where each new project needs to come with 20% reduction in terms of CO2 emissions by comparing the new product with the previous version. This is a very good example of how do we do that. This is a cylinder where the engineering teams have brainstormed on the brass, stainless steel, and zinc components by changing the sourcing from Asia to EU and increasing the recycled content wherever it was possible. In total, these changes brought down the CO2 emissions of the product by 25%. Another example is this high-security door lock. This included reduction of the brass content of the product and changing the origin of the brass and the zinc components to countries with lower carbon intensity energy mixes.
These changes did not only bring 5% reduction in the weight of the product, but a significant 38% reduction in terms of CO2 emission. As a summary, what I would like to illustrate is that we ensure that all the relevant Scope 3 areas are involved in the governance structure from divisional to the regional level. Each work stream has a target, but what is really important is to ensure that we have a coordinated approach to be able to achieve our target. Innovation plays definitely a key role in the product development of new products with a thought process in place to cascade the importance of Scope 3 emissions, identifying the right hotspot areas, and to include CO2 savings as part of the product development process.
Last, we have many good examples like the one from the Yale Trojans that illustrate that it is not only possible to achieve savings, but costs too, and with this, I would like to thank you very much for your attention.
Really great insights there from EMEA. I think Olympia and the rest of the EMEA team are really doing an incredible job, and I'm very grateful for them. When it comes to our Science Based Targets, making good progress on Scope 1 and Scope 2, it's important that we continue that in a positive way, as we've said several times, Scope 3 is the big elephant in the room, and like any big task, if we try to take it in one go, it can be very, very overwhelming, so what we need to do is have a very data-driven approach, really break that elephant out into smaller pieces, pop that into an action plan, and just start to implement, and from there, then we build up our momentum and really start to accelerate, so we need to continue to accelerate that to ensure we realize our 2030 goals.
Improving our data, getting increasingly accurate with our data, is important. It really helps us to understand: are we tracking towards target, but also are we really focusing on all of the right areas? And again, with the help of Anna-Eva and Anders, they're really, really doing a good job towards that, but we need to continue to focus on that. And then last, but by no means least, is continue on education and awareness. Scope 3 and indeed Science Based Targets is still a very new concept and topic for many. So it's really helping people to understand across all functions that actually this can be a win-win, as Olympia showed in the video, many examples with rapid payback, less than a year, less than two years.
A lot of these things absolutely make business sense, reduce our cost, can also in turn be used as a value proposition to drive sales, but then as well reduces our carbon footprint. To get into a little more detail on sustainable innovation, I'd like to welcome Anders Forslind.
Thank you very much, Charles. Yes, today we are going to talk about sustainable innovation from my side. Just to set the scope first, where are we? Since we are a natural part of the buildings around the world, you can find our products from the perimeter to the core of the buildings. Our solutions could be found from your homes to all official buildings. I think you might have walked through them today. Then looking on the building industry and the building sector, it stands for 37% of the global carbon footprint. So it's a large part that we can go in and make changes to. Also that 70% of the infrastructure needed to 2050 is not yet built. Looking into the construction industry, it's being transformed towards sustainable solutions that will be for us an ever-growing business enabler.
The rest of the slides, I will go through the capabilities within innovation that we see will make us do sustainable solutions for the future. Starting with our innovation strategy and then focusing on the sustainable solutions, where our solutions are sustainable by design, enable circularity, and guide our industry customers and partners and end users to a more sustainable future. Looking on the mission, integrate sustainability and circularity into every aspect of our product portfolios, and also ensure our products deliver value to customers while minimizing environmental impact cradle to cradle. Assure commercialization of sustainability with strong value proposition, making it easy for customers to make cautious choices. Looking on our strategic objectives for 2030, really ensuring that all our products have a value proposition as well as fulfilling our Science Based Targets Scope 3.
When we are talking about the capabilities that we have in innovation to design for environment from the circularity side, going from linear to circular, and in the transparency part, using the life cycle assessments for being transparent, and in governance, talking about how are we using our tools and processes to ensure that we are reaching our Science Based Targets goals. We have been working with our Sustainability Compass since 2019.
Since 80% of the product's carbon footprint is determined during the design phase, it's super important that we start to have this holistic view over sustainable products in the beginning to set all the right parameters, selecting the right materials, looking into energy use, carbon footprint of the product, but also ensuring that the material we select are possible to recycle in the end, that we have the possibility to reuse parts as well as ensuring repairability and durability. The base thing in the Sustainability Compass is that you compare the existing product with a new product because we want to have continuous improvement and always improve sustainability. Here we're not only talking about carbon footprint, but also ensuring that we have the recyclability with us.
Then, taking a look on a specific product here because normally when you look on a product, you have a view of how could it be, what is the large carbon footprint drivers. In this case, it's actually not activating the lock that is the main energy-consuming part. It is everything around that talks directly to the end user, like the sound, like the backlight, and so on. So this was a small part of what we're doing within innovation. And then going over to circularity, then going from a linear model to a circular model, ensuring that we can do maintenance, do reuse, and in the end, also recycle our products. During last year, we started with developing a handbook to really have the first guidance of what to do within circularity.
We have a few spare part centers up and running, so we know how to do this in a small scale. During this year, we will start to work with our circularity strategy, and during next year then, start to implement and do pilots to see what we should do in the different areas since we have, as we have said before, so many different products, everything from the large doors to the smallest readers and cards. If we then go from circularity to transparency, and we are using in this case a life cycle assessment to quickly get an understanding of the product's sustainability performance, and working with LCA tools from the start of the life cycle of a product to the bitter end, so to say, gets a full coverage, a good understanding, and here we can start to evaluate the products and find hotspots.
By that, getting products with very, very low carbon footprint. When we have used the tools and get the models for this evaluation, we can continue on and use them to have environmental product declarations done. This to ensure that we have transparency out towards the customers, as well as in the end, achieving the regulatory requirements that come both from digital product passports as well as construction product regulations. As of today, we have 267 EPDs, and as we speak, we have sent our first internally developed EPD for third-party verification. We see this as a really good enabler for us since there are so many upcoming demands, as I say, both from customer side as well from the regulatory side.
And then going from the transparency side over to the governance side, and this is much to support our Science Based Targets initiative goals, where we have developed tools both on product level, portfolio level, and on aggregated portfolio level. And all these tools are to help engineers, PMs, and managers to take the right decisions on the level that they are at. So if we start on the product level, it's a lot around the material and energy use, what to select, do the feasibility studies, what comes out, are we really fulfilling the goals. If we go to the product portfolio level, it's more about we have the products and the product's carbon footprint, we know, and we forecast how much we will sell. And by that, we get a view of what do we actually need to do to fulfill the goals in the end.
So 2030, when we should be on a reduction of 28%, are we really on this path, including the increased sales that we will have over the years? And then going to the next level, where we aggregate X amount of portfolios up to a divisional level or a segment level to understand how should we, in the best way, ensure that all different segments or business areas are doing what they should, or sometimes maybe need to do less, some need to do more, but have a very, very good view of what to do and take the right strategic decisions.
We talk a lot about sustainability integrated in everything we do, and this is how we ensure that the tools are used in our development process, as from the beginning to understand how does it actually look in the portfolio where we should do new development, and then see, okay, if this is what we want to achieve in the end, the 28% reduction, we need that the new product maybe have a reduction of 50%. It comes in as a requirement to development, and then we start to see in the lower tools addressing the product level, what feasibilities can we do, what concept can we do, and then in the end, are we really reaching the targets, and then connect back to the portfolio view to see are we online or are we out of scope.
If we take a more close look on the sustainability portfolio planning tool, it can look like this. So this is an example from one of the divisions where we can see all the products stacked on top of each other. And here is the combination, as I said, the product's carbon footprint and the amount of sales. And you see somewhere in the middle something happens. They have come up with a new idea to reduce, in this case, energy use that lowers the total carbon footprint. And then to the end, we are actually lower than the target set 2030 based upon the 2019 baseline.
So this is the essence of the tool to do different scenarios and see what do we need to do, and then when we have seen what we need to do, continue over to the product level and see can we actually achieve this. Is it possible to change material or with the help of Anna-Eva actually change suppliers so we can lower the carbon footprint, or as in our case, often energy use is a major, major part of the carbon footprint, both when it comes to readers and, of course, large doors that are opening and closing all the day. But here we can have a very clear view, and you always see, I think you can see at least to the right, some lines are headed up in red, meaning here is something sticking out. Here we have a large part of carbon footprint.
We need to address, like in this case, it looks like something around the printed circuit board is really sticking out, and also in the end, energy consumption is something that we need to look into. And here we do, as we did in the Sustainability Compass , we compare the existing product that are to the left with the new product that are to the right in yellow. So this is really to understand what can we do to achieve our goals. And a very good example on this is actually the energy use optimization on SL500, a product that has been on the market for a while where we have gone in and looked into how to optimize sensors, locks, and the motor to ensure that we don't consume so much energy.
Since these products have fairly high energy use compared to the material, if we reduce energy use with close to 50%, the total product is reduced with carbon footprint close to 20%. So it has a major impact on the products. And this is what is super good with the tools because when you start to look on them, both on portfolio level and on product level, you don't directly understand what is large and what is small. But by looking on this, you directly see what is small, what is large, and if I change something, does it actually have an impact on the total result? And yeah, since we not only continuously improve the product, we also continuously improve our tools. And this is our latest add-on to the tools where we can, as I said before, look on an aggregated portfolio view.
Since we have all the data in the system, it's very easy to just take the data that you want to see in this case. So looking firstly on the top, we have just aggregated a lot of portfolios to see are we maybe in this case from a divisional level, are we reaching the goals? Yes or no? Looks very, very good in this case, and also to include the black graph that you see on top that represents sales because we really want to see that we are decoupling carbon footprint from sales volume. So you see a clear gap in between the black line and then the yellow and the blue that represents the carbon footprint in the products as such for this division. We have also color marked these ones.
So we say that yellow in this, or orange, sorry, in this case is energy use, and the blue is material. And it helps a lot to see where do we actually have the potential when we are going in and changing the products. And then going to the lower picture, we can see the 10 top most emitting products in this division. So more or less saying if we don't address these products, we will not reach the targets in the end. So by this, we can go from working more on detailed product level, ensuring portfolios are okay, to more strategic level to see where should we really do cutdowns on carbon footprint, on what segment, or on what portfolio in combination with others. So it's a very good tool and really looking forward to roll this out during the springtime.
To summarize, we are a natural part of transforming the construction industry, and sustainable solutions will be an ever-growing business enabler for us going forward. We also have three things that we work very, very hard with to ensure that we can guide everybody in the divisions to be able to develop sustainable solutions. First one, the Sustainability Compass incorporates both sustainability product development as well as circularity into every aspect of the development that we do. Also that we have the EPD development process to ensure both that we can have transparency towards customers as well as being compliant to new regulations. Then, of course, our new internal tools that help us to visualize the potential in our products, in our product portfolios, and in aggregated portfolios.
As a summary in the end, we are implementing these processes and tools to deliver sustainable solutions and enable us to reach Science Based Targets Scope 3 goals. Then I introduce Anna-Eva.
Thank you, Anders. As I said before, our suppliers is a very important extension of our business, and it becomes very evident when it comes to our carbon footprint in ASSA ABLOY. I will share with you what we are doing together. This is our Scope 3 emissions materiality profile, category 3.1 purchased goods, which is representing approximately 70% of our emissions. 70% of this pie chart is purchased goods, and another big portion of the Scope 3 is the energy and use. From the perimeter in the middle, you can see that our top three categories are steel, electronics, and aluminum. The Scope 3 reduction targets is a huge challenge.
So therefore, it's important that we include all our suppliers no matter what category they are in. So therefore, our future supply base needs to share our ambition. But in the end, we will all benefit from this and grow business together while serving our customers. So it's a win-win. So where are we on our Science Based Targets journey together with our suppliers? We kicked off in October 2022, where we had the first supplier awareness session where we informed our supply base about our ambitions. After that, we had individual supply discussion and drafted some action plans together. Last summer, as Charles also mentioned earlier, we hosted a few online events, supplier summits, where we had just below 1,000 suppliers attending worldwide. And there we shared more insights to our journey and what to expect in the future.
So now we are continuing to do supplier individual discussions and continue to engage in the field of data collection and also to have real tangible CO2 reduction activities together. So what you will see now is actually a couple of slides from that summit we had back in June. So this had been presented to our suppliers. So getting started, what you as our supplier can do to start your CO2 reduction journey. First, brainstorm any ideas there might be to reduce CO2 emissions. Come discuss with us and align on first steps. If you haven't started already, please start measuring your Scope 1 , 2, and 3 emissions. And then set your targets, develop your action plans, and please come and discuss with us, and we will work together. These are the focus areas that we in ASSA ABLOY are actually working on as we speak.
And this is also proposals for our suppliers where they can start. It is also important that our supplier raise the awareness in their supply chain because in some cases, the supply chain can be very long and many companies are involved and everybody needs to be aware. We can continue to seek greener technology with existing suppliers and also maybe new suppliers. We can source from suppliers with more sustainable practices. We can also source from suppliers using higher recycled content. We can do more nearshoring, getting suppliers closer to our plants. Also, this will reduce transportation. Also, things like process improvements, scrap reductions, just to mention a few things we can start with. So now we will listen to one of our suppliers, and here we will see a really good example of a company that is very ambitious in the sustainability area.
So now we will head over to the U.K. and a recorded video with Michael Horan, Chief Executive at Sherwood Stainless & Aluminium. Please be inspired.
My name is Michael Horan. I'm an engineer. I'm the Chief Executive of Sherwood Stainless & Aluminium. I'm passionate about sustainability, and I'm passionate about my business. I run a business of around 180 people based in Wolverhampton, near Birmingham, in the West Midlands, but also with businesses near Manchester, near Nottingham, and in Burton-on-Trent. For over 20 years, lots of different divisions and companies within ASSA ABLOY with lots of different products. So door closers, security fixtures, locks, handles, lock hardware, window fastenings. So we supply stainless steel and aluminum. So we supply aluminum to ASSA ABLOY, and it's an extruded product. We'll do complex five-axis CNC machining to give you the right product.
We'll then sometimes paint it and assemble it to give you a semi-finished product for you to finish production of your final finished product. It's something that I'm personally passionate about, and so is the company, but I think about it in the context of sustainability, and that's part of our mission statement, sustainable service and value, and sustainability means that I've got to be profitable. Otherwise, I don't exist. I've got to have good safety. I've got to abide by laws, so I've got to have good governance, so environmental sustainability is just one element of business sustainability. Of course, we should think about carbon generation, but we should also think about all the other environmental impacts. That could be wastewater pollution. It could be material to landfill. It could be airborne pollution, and carbon is super important because of its impact on global warming. We're on a journey.
Just like ASSA ABLOY, we're on a journey in terms of environmental sustainability. We will reach net zero for carbon by 2035, and that's 15 years sooner than the U.K. commitment. We will be zero to landfill by 2035. We will work with our suppliers and our customers to create sustainable supply chains because none of us can do it by ourselves. We need really engaged customers like ASSA ABLOY to work with, and we need to connect them with engaged material suppliers because the supply chain matters, not just the individual component. And my fourth commitment is I will offer my customers low-carbon choices and products. The biggest impact in the metals industry is where you buy your metal from and the processes that generate it.
95% of the carbon in the metal supply chain comes right at the front end in terms of the smelting and primary production process. ASSA ABLOY and Sherwood Stainless & Aluminium might only be the 5% in that value chain, but we've absolutely got to do our part and lead that. We're a net generator of renewable energy. Last year, we put three quarters of a megawatt of solar panels on our business. We've changed our material to landfill from over 50% two years ago to about 8% now as part of our drive to zero to landfill. We've just invested GBP 1.2 million in what I believe is Europe's lowest carbon impact powder coating paint line. We commissioned it last March. We made some big choices about sustainability. We are the first hybrid fuel curing oven in the UK on a paint line.
We can run on gas or electricity, and we can decarbonize that process almost entirely.
Okay, good. So what is the current state of our supply base in general? First, our supply base is very diversified. We have over 8,000 suppliers globally for direct material. But to summarize in very broad strokes, large global suppliers, they are normally well aware. Small, medium-sized suppliers, they vary a lot in their awareness, mostly depending on where they are located. European countries are more mature compared to North America, for example. Large raw material suppliers are ambitious, but the question is how far can they reach to 2030? However, the majority of our direct material supply base, by spend, they have similar ambitions as us, and this is also including large transport providers.
At last, I want to highlight again that we are on a journey and we are learning new things in this area every day, and we are in many ways building the boat while we are sailing. So now I hand over to you, Björn.
Thank you very much, Anna-Eva. Yeah, so it's time to open up for our next Q&A session. So we'll have Anna-Eva, Charles, and Anders here to take your questions. And we have received a couple of questions now in the chat, but before we dig into those two, we had Josephine Johansson's question from our very first Q&A session where we had a question that I think is relevant for now. So let's take that one and then we'll dig into those other questions that came in now. So Charles, I guess this is for you.
What are the key factors behind the decrease in Scope 1 and 2 emissions in 2024? And similarly then also for Scope 3.
Yeah, for sure. So if we take Scope 1 and Scope 2 together, so from our own operations, examples of Scope 1 could be where we insulate our burn-off ovens, our curing ovens, our plating lines, meaning that we need less gas usage, but still maintain that same level of temperature and don't cause any quality issues. So lots of continuous improvement projects like that. For Scope 2, very much linked with electricity and our district heat. So it's optimizing compressors. It's installing variable speed drives, optimizing air handling units, installing submetering so we can really have a heat map of where we have the majority of our electricity waste as well.
We've also continued to rapidly commission solar PV across the group, and we install our largest solar array in HID in Malaysia during the year, which is just over one megawatt-peak energy generation capacity. It's lots and lots of initiatives. From a Scope 3 perspective, obviously there's multiple levers at play here. Of course, we see benefits from some of the action plans that we presented during this session. From an energy and use perspective, if we focus on HID, their improvement and their more energy-efficient readers has had a knock-on benefit. I think it's important to be transparent as well. We have purchased slightly less material than we have in the past as well and is linked with volume. Obviously that will have a reduction in our Scope 3.
So when we touch on, we need to really focus on the actions that we can do in order to achieve our targets, and then that really takes volume difference out of the equation.
Thank you, Charles. Now the questions are coming in here, so let me read to you two questions for the Q&A. Could you speak to how sustainability goals are integrated into financial planning? Do you anticipate, let me scroll, any extraordinary CapEx or OpEx to achieve your GHG, I believe it's greenhouse gas targets? That's the first one. And then how important is renewable power procurement on site generation or PPAs to achieve scope two reductions versus regional grid decarbonization? And thank you for a good presentation. It's also here in the.
So Christiane, could you repeat the first one?
Yeah, let me go back. There's a lot one.
Could you speak to how sustainable goals are integrated in financial planning? Do you anticipate CapEx or OpEx to achieve?
Clear. Yeah, yeah, for sure. So I think it's important to lead out that Nico Delvaux, our CEO, has been very clear. When it comes to climate action and realizing our targets, all initiatives need to stand up with other investment opportunities, whether that's automation, it could be IT, upgrades of machinery, etc. We don't have a separate pot put aside that we can have 10-plus-year, 20-plus-year payback in order to realize our climate goals. But really importantly, the more we dig into this, the more we really look and try and find the carbon opportunities, we're increasingly seeing that a lot of these projects have rapid paybacks.
Olympia showed during her presentation there a number of projects that had a payback of less than a year or less than two years. So there's still a lot of opportunity that we can do. If we take, for example, upgrades of technology for if we focus on solar, for example, and we looked at 10 years ago, we were looking at a payback of 10, 15 years, obviously very unpalatable. But nowadays, quite often we're getting payback with less than four years. And in one example, we had a payback of less than two years. So then that really becomes with technology development and price parity, you really hit that sweet spot of being able to do it.
So in short, no, we don't have a separate CapEx or OpEx, but actually we see the focus on climate action really rowing in behind what we do as a business anyway.
Good. Thank you. I take a quick repetition of a second question from Sam. How important is renewable power procurement, on site generation, or PPAs to achieve your Scope 2 reductions?
Yep, for sure. I mean, as a start, what we want to do is to really prioritize our energy efficiency and effectiveness to reduce our overall energy consumption. That reduces our energy waste, and for the business then, that reduces our energy-related costs. So that's our number one priority. But then when it comes to renewable energy, it's twofold. One, it's from a to reduce our carbon footprint, but particularly over the last two years.
If we take Eastern Europe, for example, we were exposed to some energy risk due to the conflict that was happening within Ukraine. It also comes from a business risk, business continuity risk, energy risk. As well as having a favorable payback, it makes financial sense. That's where the rollout of on-site renewable energy absolutely makes sense. It enables us to be energy independent from anything from 10%-20% of the energy required. Should we experience a blackout locally, it means that we can still operate in limp mode with critical infrastructure and fulfilling critical orders. That's the second point from an on-site renewable energy. Then the third, purchased or procured renewable energy. Whether it's a PPA, a power purchase agreement.
I think it's important here to note that if we are procuring renewable energy, we want to secure the renewable energy certificates or guarantees of origin that are related to that. That means with our market-based reporting, we can carbon account for that renewable energy. We have no interest in buying unbundled renewable energy certificates. What that means is that if we have an investor who owns a series of wind turbines or a solar farm, that they sell off those certificates. And it's almost another way of carbon credit. So we want to focus on the energy behind the meter with PPAs and then secure the renewable energy certificates and guarantees of origin. Really, what we're looking to do is to have a robust framework to substantiate the reductions that we have in our Scope 1 and Scope 2 targets towards Science Based Targets.
And again, it's just focusing on transparency through integrity in what we do.
Thanks, Charles. I'll take the next question that has come in here. How does the EU Carbon Border Adjustment Mechanism impact ASSA ABLOY sourcing? Will it help reduce Scope 3 emissions while staying competitive, or are there loopholes for your type of products that could have negative impacts on competition? Is that for Anna?
Yeah, I can start to comment a little bit. Of course, the CBAM is a big challenge, and we are evaluating what it will mean for us in the future. And that's where we are today. I don't know if you can add anything to that, Charles.
Yeah, just a couple of points, and we've done a couple of scenario analyses of low, medium, high risk for CBAM to understand what our risk exposure is.
Predominantly, it's a European-based division, so EMEA, Entrance Systems, HID, and Global Solutions that are exposed to CBAM. In the short term, we don't foresee a material risk. We don't necessarily look at loopholes per se, but I think it's really important to mention that this is a very dynamic legislation. At the moment, it's just focusing on raw materials, but it could come into the equation that finished goods or semi-finished goods could be included, or electronics, an incredibly potent source of carbon emissions. So if these additional categories come into scope, then it could be a bit of a different story. But we have an ongoing review where twice a year we engage an external expert and invite all of our divisions to come and get an update on the latest and greatest from CBAM. So we're keeping abreast of the development as we go.
Thank you.
Really good questions coming in here. I continue to read from the chat. Can you provide an update on your effort to integrate acquisitions, including HHI, into your emissions reporting and Science Based Targets and align them within your decarbonization strategy?
Yep, I can take that one. Yeah, so during 2024, we onboarded HHI into our operation sustainability reporting. Needless to say, they have an incredibly material impact both on the Americas division and also on a group level. So we will disclose in our upcoming annual report the total footprint, which includes acquisitions as well, so you can see the magnitude there. And from next year then, it will become comparable. So a significant increase for the Americas and for group. But thankfully, we have Rob Alexander, Pearl Wu, Dave Hancock, and a wonderful team at HHI.
They joined us at that session in Tulsa at Ameristar in March last year, and they're just like a sponge dying for information to really learn from what it is that we do. Lucas and my team have been to their big plants in Xiaolan and Subic Bay to drive that knowledge sharing, so they're super excited. They're really keen to find out how they can start to reduce their footprint, so I mean, that's the best starting point we could wish for. It's that culture and that willingness to really accelerate their improvement, so yeah, something we've factored in. And then lastly, from a Scope 3 perspective, we're hoping to onboard their data this year.
Thank you. Let's continue on the additional, the second part of this question, so additionally, do you plan to disclose the percent of your overall capital allocation that goes towards decarbonization?
It's partly what you already have responded to, I would say.
Yeah, so I mean, that's one of the key requirements as part of CSRD coming under ESRS 2 and E1 climate change. But we very clearly state, I mean, I wrote the piece on it that we do not have a separate CapEx set aside. So it's not like we could say 8%, 12% of our capital investments are going towards climate. So they go into the mix like all other capital projects, but thankfully many of them have, they fall in line and have favorable payback. So we continue to drive progress, and we see that that should continue to be the case into 2030.
We continue, and here we're getting to the commercial aspect.
Given sustainable products are typically more expensive, how has the willingness of customers to pay a premium for those products developed in the inflationary environment? Thank you. We start there. Any meaningful differences between U.S. and the European customers? Might be something we keep to the later part with.
I think it's something that actually is for Massimo probably to respond to. So I think what Massimo responded to earlier is obvious that there are some differences between different geographies where we see more demand up in the Nordic region in Europe, for example, and a little bit more in Europe than on the other side of the Atlantic Ocean. That would be sort of the generalization I would give to that answer. We are actually running out of time now, pretty good with the end of the questions here. So I think we can continue the program maybe.
Yeah, let's do that. Thank you very much for all these very good questions. We're now getting to the end of our program, but we have one speaker left, our CFO, Erik Pieder, who will give you a sneak peek in a summary form of our CSRD report. And Erik will also wrap up the day. And I say, welcome, Erik. So
Thank you very much. So they save the best for last. We save the best for last. So I probably should flip slides as well. So thanks, everybody, and I hope that you have had a very interesting day. Last in this is, of course, I will talk a bit, which I think also Charles alluded to this with the CSRD reporting. We will sort of, our clear intention is to comply with all current and upcoming regulations. And we actually like to be ahead.
So therefore, when you sort of get our annual report, 17th of March, it will actually have an integrated CSRD report, which is actually one year ahead what is actually required. I mean, for us, and we're very proud that we actually can do, it's been a lot of efforts, but I think for us, it's good to, let's say, to do it already now. I mean, we have a good foundation with the Global Reporting Initiative, and that is sort of what we've used as the base for the, let's say, for the accounting framework. And that has as well set up, let's say, if we look at the disclosure requirements that we have for the CSRD. We have also used, and I'll come back to that a little bit later, the work that we have done within TCFD.
In this part, you will sort of say, I mean, data quality is sort of the key. And I mean, honestly, I mean, we are not perfect, but we strive to get better and better. And I think that's also the reason why we want to start a year early, because then we have a year to see, let's say, where do we have a bit the faults there and what do we need to improve in order then to sort of really improve the data that we have. I think that, I mean, we use, let's say, where we can, we use sort of on-site and utility invoices or meters. But of course, when it comes to smaller sites, when there's no data available there, of course, we need to estimate and we need to do a proxy.
On the Scope 3, you will see there is a mixture between spend and an average-based method, but we work very much to increase our data and also to improve our data and increase our accuracy by using direct weight data that we can get sort of from our supply base. I mean, this as sort of the whole, as you look on the whole CSRD, we've also, let's say, worked together with our auditors, EY, and they will sort of give a limited assurance of the 2024 annual, if I call it CSRD report. As you know, I mean, the CSRD is structured around nine different sections.
The three where you will sort of see more of a substantial increase in the information provided are the three that you will see on the screen, which is related to workforce, is related to climate change, and it's also, let's say, environmental information, and this will sort of be data that you're going to see when you sort of receive the annual report. How we have done this is also part, I mentioned before, the TCFD, where we sort of have conducted, I would say, a double materiality assessment both in 2023 as well as in 2024. I mean, it consists actually of two parts. One is where we purely look on the material assessments, and that sort of gives us an insight on the impact that we have sort of on operations on the world.
And the second, then we link that to, let's say, the financial part, which we do in the second part, where we can sort of more capture and assess both the negative as well as the positive things, because there's not only negative. There's also positive parts in this, how this can have an impact then on ASSA ABLOY . We have done this. I mean, if you look, we have actually started with a TCFD already 2021, and this actually goes in five steps. First, we have sent out stakeholder surveys to, I would say, around 500 stakeholders. That would be employees, customers, suppliers, investors, industrial associations, etc., etc. And then we would use the first workshop, as I mentioned before. First, we take, let's say, the impact of the materiality.
At the second workshop, we then look at also what financial impact will this have for us or could have, as I said, both in positive and negative data. We, of course, take all the data. We analyze sort of the survey, the workshop, other kinds of documents that we have, and then we have a third workshop where we sort of validate all the information that we have received in the work that we have done before. If we look more from, let's say, from a material relevance, in reality, if you look in total, we have seven where we think it's materially relevant for us. Out of those, six have actually also financial material impact. That could be like climate change. It could be sort of circular economy, business conduct, those kinds of things.
And then we have one, which we only say is as a material impact, but let's say to a lesser extent, financial impact, that is when we come to water and marine. I mean, what we do with this is that, and I heard Charles talk about a little bit about this before, is sort of these topics is then, let's say, included or let's say we align it into our, let's say, overall business strategy. I hope you have understood the message today that sustainability is integrated within everything we do. As an example, I mean, improve energy efficiency. In reality, there we both have the cost as well as the emission.
As you heard before by Charles, now when we sort of start also to come to that point, or we have already come to that point, so now when we look on CapEx investments, we sort of look at it from a financial viable situation where we look, I mean, we would like to have a payback, which is less than four years. Based on, let's say, the development that we have seen, we are there. That means that I consider that as a part of being integrated in what we do. If you then look on the TCFD reporting that we have done, as I mentioned before, I mean, it's reality. We do it on two different scenarios. One is that there will be an increase in the temperatures of 2.3 degrees, which is actually what is the Paris Agreement.
And then we also have what we call the Rocky Road, which means that then it goes up to, let's say, 3.7 degrees worldwide. And we look on this, as I said, both from a risk and opportunity when we look to market, technology, reputation, regulations, etc., etc., both from 2030 as well as for 2050. And I mean, the more we do, the better we get. And that is also why we sort of make sure that we can improve the process in order, let's say, if I call it to be as detailed as you can to get more details, because that impacts also the decisions that we're going to do then going forward. We also have the EU Taxonomy. And as you know, that's a part for us.
Honestly, if you look on below here, the part that is, let's say, eligible for us, I would say is a minor part of our business. And it goes more into, let's say, the door, which you would then have in a section called 3.1. Let's say for us, a bit the problem when we look on this is that in order then to, let's say, be positively seen within the EU Taxonomy, we need to have what they call then on insulation, because for insulation on the door specifically, you need to have a door which has sort of the U value, which is below 1.2. However, when we look at it and today's technology, it's technically impossible to go below four.
For us, I mean, it's a bit like if you look, I mean, if you have your window at home, I mean, the window is sort of what you have in the material. Yes, it is important, but it's even more important, let's say, the insulation or let's say the application that you have around it. That is sort of what we see more, and as you see, for instance, a revolving door that you see here on the screen. In reality, it's more important how it's operated and which environment it is, how people are using it, so therefore, for us, we think that that is sort of giving more energy reduction and, let's say, less emission to the world than, let's say, on trying to reach this level.
That's sort of why we, for us, we sort of see, yes, Taxonomy is important, but in reality, we consider then to our commitment to Science Based Targets that will have a much higher impact. If we then go to another part of this, which is, let's say, the sustainability part, where we sort of take this also very seriously so there today, we have that all employees or, let's say, non-employees that actually work in the company, they need to comply with our Code of Conduct . As an example, we have no tolerance towards child labor as well as forced labor. We also do, you know, we also have anti-corruption programs, and we also make sure that our business partners actually sign up for our Code of Conduct , and we also follow this up.
So last year, we did more than 700 supply audits on our suppliers in order then to ensure that they comply with the Code of Conduct . You've seen that we have already sort of that we work also with reducing our injuries from 2019. It's down with 17%. To also have us a check on this, we have the last year, 76 internal audits. A lot of them also includes a compliance audit, which means that we, let's say, make sure that we also take the compliance part in. And then lastly, we also have a whistle-blowing process, which is in place and it's working. Finally then, I mean, the message that I've given, first of all, I mean, is sustainability is integrated in everything we do.
I think that we have sort of, and that's the way that we're driving it, is that sustainable solutions, green buildings, green specs, and so forth, is helping to accelerate our growth at the same time as we have parts of, let's say, what we do on energy reduction helps to improve our profit level, and I think also through our R&D as well as production, I think we're also well positioned to realize our opportunities in order then to transition then to a more sustainable future. Finally, if it's one slide you should remember from the whole day, it's the one that you see here, which means that despite that our sales is going up, you can see that our CO2 emissions are going down.
I think this is sort of a part we're going to see how we integrate this and that we actually take this very seriously. That was it for me. Thank you.
Thank you, Erik. This means that we're coming to the end of today. I don't see that we have any questions, so we can round up. We hope that today has enhanced your understanding of how we are working with sustainability and also that you have learned a bit more about ASSA ABLOY. I would also like to take the opportunity to thank everyone internally who has helped us putting together today's program. Obviously, today would not have happened without you. Thanks to everyone in the room and around the world who has helped us with this. The presentation material and the recording of today will be made available on our website.
It will hopefully be there tomorrow, and the annual report that we have spoken a bit about and seen a bit of a sneak peek into will be published on the 17th of March, including the CSRD report. Should you have any feedback on today's sessions or if you have any follow-up questions, as always, feel welcome to reach out to us at Investor Relations, and with that, we wish you a great afternoon. Thank you for your participation and interest, and this concludes today's seminar. Thank you.