Riding the Green Wave German Companies Discover the Environment
In the name of increasing profits, of all things, more and more German companies are discovering climate protection. With increasingly stringent emissions laws and energy prices higher than they've been in years, sustainability has suddenly become a factor in economic growth. But can the new trend last?
Environmentalists usually devote most of their attention to such garden-variety endangered species as the brooding corncrake. But Winfried Häser, an environmental strategist with Germany's postal service, Deutsche Post, focuses his attention on another, equally sensitive species: the pin-striped financial analyst.
Häser regularly meets with the professional financial investors of international banks like Credit Agricole and HSBC to tell them about all the things his Bonn-based, internationally active logistics organization is doing for the environment. Once they've heard Häser's presentation, the investors usually fire back with questions about Deutsche Post's progress on reducing its CO2 emissions and how many of the company's 130,000 vehicles are already running on biofuels. The financial world suddenly has a burning interest in the answers to these and other questions about preserving the environment.
This is quite a sea change. In the past, no more than a handful of concerned shareholders would demand answers to their questions about the environment at annual company meetings. Critics of poor corporate environmental records were usually minor shareholders -- the kinds of troublemakers financial executives and CEOs rarely took seriously.
But nowadays the people asking the environmentally tough questions often control investments that run into the billions. They work for banks and mutual funds, and they look for attractive investment opportunities for the capital they manage.
Far from being driven by some noble-minded aim of saving the world, these masters of our money are mainly looking for one thing: profit, and as crisis-proof as possible.
Companies in all sectors of the economy are suddenly examining their businesses to determine how sustainable and environmentally conscious they are in fact doing business. They are not doing this out of pure altruism. Instead, companies find themselves forced to adjust to new realities, including stricter environmental laws and the ever-rising cost of coal, natural gas, oil and electricity. In the process, some are even discovering ways to develop entirely new businesses.
Climate protection is becoming an important competitive factor. For this reason, companies are looking for strategies on how to address the issue in the future.
Major German corporations like Allianz, Deutsche Telekom, Bayer and BASF are establishing concrete goals, expressed in tons, for reducing their CO2 emissions. They are establishing sustainability departments and issuing mandatory environmental guidelines. They are forming new industry associations like the 2 Degree Initiative, which has set itself the goal of limiting global warming to a temperature increase of no more than 2 degrees Celsius (3.6 degrees Fahrenheit) compared to the pre-industrial age.
Graphic: The Industry Sector of the Future
DaimlerChrysler touts its tiny Smart car as a "CO2 Champion," all the while raking in most of its revenues with larger vehicles, many of which emit three times as much carbon dioxide as the Smart. German energy utility company RWE seems to think that "Less CO2 through Innovations" is "An RWE Idea" -- and one that the company has only recently come up with. And yet no other German company is a bigger emitter of carbon dioxide.
Good Deeds or Bluffing?
One could almost be forgiven for suspecting that these and other companies are more interested in green labels than good deeds. Are they serious about their new environmental consciousness or is it all a bluff?
One thing is clear, and that is that the issue is more than just a trend. "Sustainability is developing into a central element of corporate strategy," says Martin Koehler, a senior partner at the Boston Consulting Group (BCG). "There is so much demand that we have brought together our experts worldwide to form a separate division."
BCG's clients want to be prepared to deal with the fundamental changes in the conditions under which they do business.
For utilities that will be required to purchase emissions credits in the future, the CO2 emissions of their power plants will be the most decisive factor in determining their costs in the future. The automobile and aviation industry will have to adjust to increasingly stringent environmental regulations, and the chemical industry will face much higher electricity costs in the future. Even food manufacturers will see rising costs in raw materials like corn and wheat, which will also be used to generate energy. The Organization for Economic Cooperation and Development (OECD) predicts a 20 to 50-percent rise in the prices of agricultural products within the next 10 years.
According to a study by investment bank Lehman Brothers, global warming is a "tectonic force that, like globalization and the aging of society, will gradually but powerfully change the economic landscape."
Studying Environmental Impacts to Save Costs
The green wave has long been underway in the United States. Companies like General Electric (GE), DuPont and Wal-Mart are analyzing the environmental compatibility of their procedures and process chains, with far-reaching consequences. "If Wal-Mart 'asks' its 60,000 suppliers to reduce packaging, this affects product and packaging design worldwide," explains US consultant Andrew Winston.
More and more German companies are looking into ways to improve the sustainability of their business operations. Hamburg-based coffee and consumer goods retailer Tschibo, for example, has set up a team to analyze the company's global flows of goods. The group reconstructs the path taken by items like shower curtains, towels and hair brushes, from production site to retail outlet, and analyzes the emissions generated in the process. The company is preparing this environmental impact study to determine how it can best save on shipping costs.
"It's incredibly grueling work," says Kay Middendorf, head of logistics at Tschibo. But the effort is also worthwhile, says Middendorf, who expects a 50-percent increase in shipping costs in the next decade. One of Middendorf's ideas is to reduce the speed at which container ships carrying his company's good travel, which would cut emissions in half. But shippers have been reluctant to cooperate so far.
Of course, for some industries adjusting to climate change doesn't always translate into cutting back in one way or another.
Steel producer ThyssenKrupp, for example, suffers from high energy prices but is benefiting from the boom in wind energy. Its Dortmund-based subsidiary Rothe Erde (Red Earth) is the world market leader in the production of slewing ring bearings.
Electronics giant Bosch is another case in point. The Stuttgart-based company already spends 40 percent of its R&D budget on products designed to help users preserve the environment and save resources -- products in the geo and solar power markets, for example. Bosch CEO Franz Fehrenbach is currently developing a new division in which he plans consolidate the company's efficiency-oriented business. Fehrenbach says he wants to "provide technological answers to ecological questions," adding that "the days are gone when there were only niche markets for regenerative sources of energy."
Siemens, another leader in the electronics business, has much to offer in the field of renewable energy. Indeed, energy and efficiency have been part of the company's core business since it was founded. Munich-based Siemens is a leader in such diverse fields as power plant construction, rail vehicles and lighting technology, and yet the public is hardly aware of its role in these sectors.
While US rival GE has been conducting its "Ecomagination" campaign for years and CEO Jeffrey Immelt never misses an opportunity to tout his company as a green giant, Siemens is just beginning to see itself as a problem solver when it comes to climate change. Klaus Kleinfeld, who resigned as the company's CEO, had already launched Siemens's strategic reorientation, and his successor Peter Löscher, a former GE executive, apparently plans to continue the effort. Climate change, Löscher recently said, is one of the company's most important challenges.
- Part 1: German Companies Discover the Environment
- Part 2: Eco-Friendly Companies Promise Handsome Profits