E3: A new management model in a world in permacrisis
E3 is a management model developed by Nexans that combines Economy, Environment and Engagement in order to:
- break down silos;
- reduce complexity to generate greater performance;
- better contribute to the ecological transition;
- make a choice to support collective action.
By reducing complexity, E3 transforms simplicity into a performance driver and builds the company’s profitability without choosing growth.
This systemic model combines the Environment, Engagement and Economy dimensions instead of pitting them against each other. It is a unique way of breaking down silos. The E3 tool focuses on measuring performance based on three KPIs, what we call ROCE 3: Return on Capital Employed, Return on Carbon Employed, and Return on Competence Engaged.
Then, the model categorizes the company’s manufacturing facilities according to the entire range of financial performance criteria, environmental impact and level of employee commitment. An action plan is then developed for each plant based on their unique situation.
Each site is required to adhere to the E3 model, which emphasizes the importance of the three above-mentioned dimensions.
And this methodology can be applied to all companies, both in the manufacturing and the service sectors.
ECONOMY: Simplify to amplify
The “Economy” part of the E3 model is focused on optimizing financial performance while also taking into account the other two dimensions of the model (environment and engagement). The economic segment of E3 includes key performance indicators (KPIs) such as Return on Invested Capital (ROIC), which measures how effectively a company is using its capital to generate profits.
In addition to ROIC, the E3 model also includes KPIs related to cost management and operational efficiency, such as cost per unit produced and asset utilization. By monitoring these KPIs and striving to improve them, companies using the E3 model can optimize their financial performance while also reducing their environmental impact and improving their social engagement.
One of the key advantages of the E3 model is that it allows to identify which of their operations are "value burners" - i.e., those that are not generating sufficient profits or that have a high carbon footprint - and to take action to address these issues. For example, a company might decide to divest from a low-performing operation or invest in new technologies to reduce the carbon footprint of a high-emissions operation.
By focusing on financial performance within the context of the larger E3 framework, companies can achieve a more holistic approach to sustainability that balances the needs of the environment, society, and the economy.
Volume is no longer our focus. Bringing value to our services and solutions is our top priority. To increase the value we are bringing to our customers, we have reduced our portfolio from 17,000 to 4,500 strategic customers, to better serve them, to build partnerships that drive value.
“ Fewer customers, fewer products, generate more profit. We have already demonstrated this reality on all the units that have gone through the SHIFT program, which have seen their return on capital employed increased from 6% on average to 28% in 3 years. ”
Christopher GuérinNexans CEO
ENVIRONMENT: From greenwashing to green acting
The “Environment” part of the E3 performance model focuses on measuring the environmental impact of Nexans' operations and promoting sustainable practices across the company. The environmental segment is measured by the Environmental Return on Carbon Employed (ERCE) KPI, which measures the carbon emissions associated with the production process of a product and its use by the customer.
Nexans aims to reduce its carbon footprint and promote sustainable practices by setting targets for reducing its greenhouse gas emissions and increasing the use of renewable energy sources. The company has committed to reducing its carbon intensity by 30% by 2025 and achieving carbon neutrality by 2050.
To achieve these goals, Nexans has implemented several initiatives to reduce its environmental impact, including:
- Increasing the use of renewable energy sources in its operations, such as wind and solar power.
- Developing products and solutions that are more energy-efficient and have a lower carbon footprint.
- Implementing sustainable practices across the entire value chain, from raw material sourcing to end-of-life product.
- Reducing waste and promoting recycling and circular economy practices.
The E3 performance model also takes into account other environmental factors such as water usage, waste generation, and air pollution, and encourages the adoption of sustainable practices in these areas as well.
“ We are going to set up carbon quotas for units that do not meet the current environmental standards. The goal is not to sanction, but to force the unit with a carbon constraint associated with its profitability objectives to rethink its economic model. ”
Christopher GuérinNexans CEO
By integrating the environment piece into its overall performance model, Nexans aims to promote sustainable practices and reduce its environmental impact while still maintaining its economic and human performance.
ENGAGEMENT: Switch from the simple KPI to the collective passion project
The "Engagement" dimension of the E3 model relates to the human part of the company's performance. Giving our employees collective and individual meanings is a powerful way to increase Nexans’ individuals' commitment. This dimension emphasizes the importance of employee well-being, as well as the company's social responsibility to the communities in which it operates. The E3 model recognizes that a company's employees are a critical factor in achieving success, and therefore, their engagement and involvement are key to ensuring the company's sustainability.
To measure the engagement dimension, Nexans uses the "Return on Competence Engaged" KPI, which evaluates the company's ability to attract, retain, and develop talented employees. The company believes that employee well-being is crucial to its success and, therefore, provides employees with a safe and healthy work environment, as well as opportunities for personal and professional development.
Additionally, Nexans believes in its social responsibility to the communities it operates in. The company has a commitment to ethical practices and works to build relationships with local communities to ensure their needs are met. This commitment to engagement and social responsibility is not only important for the well-being of employees and communities but is also essential to ensuring the long-term success and sustainability of the company.
“ Engagement stands as the primary driver of productivity within the company. ”
Christopher GuérinNexans CEO
Our conviction is that the company of tomorrow is one in which the notions of economy, environment and employee commitment converge towards the general interest. This is the goal of E3 that can be applied to many sectors and companies, as it is a universal way of thinking.
This is why Nexans, HEC Paris and the HEC Foundation have launched the “Orchestrating sustainable business transformation” chair to enable companies and their managers to rethink their business model, to understand, apprehend and implement the E3 model.
E3: “Finding our way again, a new management model in a world in permacrisis”, Christopher Guerin’s book, Cherche-midi Editions
"We have to move quickly." "It's going to end poorly." There are many popular expressions to comment on political news, climate issues or the supposed fate of large groups in difficulty.
At a time when we are looking for answers to everything, when the world is experiencing a structural transformation, the management models that we teach to the younger generations, the very ones on which today's leaders rely today, are quickly becoming obsolete, locked into the obsession with measurement by the dictatorship of the indicator.
The world changes. The world is now in permacrisis. No management model offers a solution to face the new challenges of the 21st century.
None? Not quite. Here is one: the E3 of Christopher Guérin, CEO of the Nexans group since July 2018. This new model for a world in permacrisis, praise of profitability through sobriety, makes it possible to reconcile paradoxical injunctions - growth / environment / social - to ensure profits without growth.
E3, for Economy, Environment and Commitment, is the model that finally manages to bring together all these still compartmentalized notions. It has enabled Nexans to place the climate issue at the heart of its strategy to encourage the race to create value and to once again make this group a flagship of French industry that shines throughout the world. In four years, Nexans has quadrupled its market capitalization and doubled its profitability, without relying on volume growth or a social plan, while reducing its carbon footprint by -28%.
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