Even as states are coming together for climate negotiations in Poland to implement the Paris Agreement objectives, manufacturers also have a "major role to play in meeting the challenge of climate change," says Benoît Potier, CEO of Air Liquide. The industrial gas giant has announced a 30% reduction objective of its carbon intensity between 2015 and 2025. The approach is very comprehensive by including customers and the entire Air Liquide ecosystem.
"The definition of this objective is part of our overall strategy for 2016-2020, which makes sustainable development one of the axes of our competitiveness," said David Meneses, Group Vice-President Sustainability for Air Liquide. To establish and implement this objective, a working group collaborated for months to bridge several business lines (Sustainable Development, R & D, investor relations, communication, etc.). "We had strong expectations from investors and our customers in particular", said Meneses.
A 30% reduction in carbon intensity from direct production
Air Liquide's climate plan is divided into three areas. The first concerns the company's assets: this is where carbon intensity, calculated in kilograms of CO2 per euro of EBITDA, must be reduced by 30% between 2015 and 2025. If the objective has not been developed in absolute terms, as advocated by experts, it is because Air Liquide’s business model is based on the internal production of industrial gases for its consumers.
By allowing its customers to emit less CO2, Air Liquide must take responsibility for this added energy production, and thereby increase its own emissions. "By taking responsibility for its customers’ production, Air Liquide also adds to its own emissions. However, on a global scale the effect is positive, since we produce more efficiently," said Meneses.
To reduce the carbon intensity of its assets, the group plans to increase its purchases of renewable electricity, by investing directly in solar and wind farms. Air Liquide also plans to work on the energy efficiency of its production units through the optimisation of production and transport. Finally, the group plans to reduce emissions related to product transportation, such as gas cylinders.
Customers and ecosystems as strategic partners
With its customers, the Group is also committed to supplying low carbon solutions, such as hydrogen production, cogeneration, on-site custom production and oxyfuel combustion. By managing these activities on behalf of its customers (mainly industrial and health), Air Liquide estimates that it can avoid 5 million tonnes of CO2 equivalent emissions, a reduction of 15% to 20% for its customers.
The company is also working on more disruptive technologies, which still require a regulatory or fiscal boost to be able to be deployed at a larger scale. For example, the replacement of oxygen with hydrogen in blast furnaces or the collection of CO2 for reuse in agriculture, food and chemical industries.
Lastly, Air Liquide wants to involve its entire ecosystem by engaging with public authorities, industrial partners and NGOs, notably by promoting hydrogen for mobility, energy and industry. According to the group, the use of hydrogen would reduce greenhouse gas emissions by 10 gigatons (or 10 of the 34 gigatons needed remain on a 2°C trajectory) by 2050 and represent a $2.5 billion market.
A long road ahead, despite the effort
Air Liquide is betting on innovation. 30% of its Research & Development budget, or €100 million, are spent annually to reduce their carbon footprint. In 2018, 40% of investment decisions integrated environmental and climate objectives. As a result, green solutions now account for 40% of Air Liquide's sales.
This is a necessary effort as, according to the Climate Action 100+initiative, Air Liquide was identified as one of 61 new important greenhouse gas emitting companies but also one with significant opportunities to advance the clean energy transition. The initiative brings together close to 300 institutional investors, representing more than $30 trillion in assets, and are committed to pushing the 161 companies with the largest emissions to continue their efforts and achieve the objectives of the Paris Agreement.
Béatrice Héraud @beatriceheraud