Reflections and roadmap: A conversation with Patrick Chalhoub, Group President, Chalhoub Group

“Expect the unexpected” was Patrick Chalhoub’s top reflection from 2023, shared during an exclusive conversation with Rupkatha Bhowmick, Editor, IMAGES RetailME.

With the conflict in Israel and Gaza raging on and being far from simple, here’s what Patrick said, “Although it has been quite a difficult topic over the past 75 years, this time it has impacted differently than we thought; it has impacted more people. Beyond business, it has made us think about human life.” On a poignant note, he added, “I hope this situation will not go on for too long and things will deescalate.”

Asked about business, Patrick said despite the Russia-Ukraine war, 2021-22 were “excellent” years for Chalhoub Group.

“We navigated 2023 with a lot of positivity. However, we are now encountering disruptions in our supply chain due to the situation at the Red Sea. Some of our supplies have been affected by the crisis. Our team is actively collaborating with various shipping companies to swiftly find solutions and ensure the security of our supply chain by facilitating the arrival of our supply.”

Sustainability at the “centre” of every decision

From supply chain, the discussion turned to sustainability as Chalhoub Group has been undertaking multidirectional ESG-centric initiatives with a goal to become a net zero entity by 2040. At this point, Patrick made an interesting observation.

“Our sustainability journey started way back in 2008. Over these 15 years, we’ve gone from being an observer to becoming an activist. Every step of the way we learnt, collaborated and finetuned our ESG roadmap,” he said.

A quick look at some of Chalhoub Group’s key ESG milestones over the past 12 months:  

• Collaborate to change: Chalhoub Group, ALDAR Properties, Emaar Malls, Majid Al Futtaim and LVMH have formed a unique alliance “Unity For Change” dedicated towards sustainability goals. The cooperation aims to enhance understanding and management of energy consumption across the entities’ properties, tenant stores and landlords’ common areas, while developing a comprehensive eco-design checklist, polling resources for clean energy purchases to optimise energy consumption, cooperating in chilled water management and air conditioning to enhance efficiency, as well as other initiatives.
• Sustainable finance: Mashreq extended its first Sustainability-Linked Working Capital Facility to Chalhoub Group. The sustainable finance product is structured around a comprehensive set of key performance indicators (KPIs) for the next three years, spanning the entire ESG spectrum, beyond achieving net-zero emissions. The facility also includes Social and Governance KPIs, emphasising women’s representation in senior leadership and the response rate for Chalhoub Group’s sustainability supplier scorecard.
• Climate action: To drive climate action in the Middle East Chalhoub Group has initiated a sustainability services agreement with Schneider Electric to transform its suppliers’ carbon footprint roadmap across the region. The agreement represents the second phase in Chalhoub Group’s journey to attaining net zero by 2040 and the Group aims to reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 50.4% by 2032 from a 2021 base year. The Group has also committed to reduce absolute Scope 3 GHG emissions from purchased goods and services, upstream transport and distribution, upstream leased assets and investments by 30% within the same timeframe. The collaboration with Schneider Electric will primarily target selected suppliers in the ‘Purchased Goods and Services’ category, who account for most of the Group’s Scope 3 emissions.

“In 2023 we reduced our Scope 1 & 2 emissions by 12% and in 2024 we are aiming to bring it down by a further 18%. Looking towards 2024, we are keen to reduce our Scope 1 & 2 emissions by over 50%,” Patrick elaborated.

“However, reducing Scope 3 emissions have been extremely challenging,” he admitted. “That’s where we are getting more active now. We are offering coaching sessions to our suppliers to help them to reduce emissions and leverage alternative energy sources. Today only 36% of our suppliers and service providers have established science-based carbon reduction targets, which we would like to see increase to 60% by 2040.”

“What are we going to leave behind for the future generations” is a key question that as a family business Chalhoub Group has been keeping at the centre of every decision, Patrick shared.  

“That’s why instead of only talking about it, we have made sustainability an integral part of our commercial strategy. We are dedicated to fostering responsible practices and driving positive environmental and social impact which lie at the core of our strategies.”

“Let me share an example. When my team presents our annual budget, the first page outlines our vision, which each business unit must bear in mind, alongside strategies and pillars to achieve outcomes. In 2024 we asked our leadership team to share their ESG commitment too for the next three years which aligns with their KPIs. A certain percentage of their incentive will be aligned with the achievement of the stated objectives and outcomes. That’s how we are integrating ESG into our commercial strategy.”

How difficult was it to get the buy in from the leadership team?

“Probably because of the level of awareness which we have built in the company over the years, we had zero resistance,” Patrick responded.

What’s in store for 2024?

Looking ahead, staying with sustainability, reducing carbon footprint will be one of Chalhoub Group’s key goals through energy efficiency, circular practices and waste & water management. Beyond environmental sustainability, Chalhoub Group has been a longstanding signatory of the United Nations Global Compact (UNGC) and is part of the Pearl Initiative advocating for human rights and minimum living wage; maintaining business ethics; undertaking anticorruption measures; and ensuring gender equality, diversity and inclusion at all levels across the workplace.

“We have to continue doing things that are good for our people and the planet while keeping our purpose for being at heart,” Patrick observed.

Talking about business, he said, Chalhoub Group had a fantastic rebound in 2021, post-Covid. Since then, the Group has continued growing at a rapid pace, perhaps even became “slightly extravagant.” Now might be a good time to “cool down” a bit, Patrick indicated.

“In 2024 we want to consolidate our position because it may not be prudent to constantly expand. Our cost of doing business has increased versus our revenue, which is not sustainable. We must ensure balancing growth and the cost of doing business. That’s why since June-July of 2023 we have mindfully focused on taking some heat off the machinery. Having said that, we will continue to grab every good growth opportunity keeping in mind our Group’s vision to always inspire our audience,” he concluded.