Sustainability and growth are not contradictory

With the Federal Climate Protection Act (KSG), climate protection goals in Germany were made binding in 2019. Climate protection is one of the greatest and actually the central challenge of our time. This is because the emission of CO₂ in electricity generation, in the heating of buildings, in transportation, and by industry significantly contributes to global warming. Germany is primarily relying on the increasing use of renewable energies and an increase in energy efficiency.

The ambitious goal of the federal government: greenhouse gas neutrality by 2045. Manufacturing companies face a whole range of challenges. These include environmental protection laws, emissions trading systems, energy efficiency standards, reporting obligations, CSR requirements (sustainability), PFAS regulation, and the CO2 border adjustment system (Carbon Border Adjustment Mechanism, CBAM), to name just a few.

According to VDMA, there is currently a very large wave of regulation in the area of sustainability, which has been adopted primarily at the European, but also at the German level, and is already affecting companies in mechanical and plant engineering. For the classification and implementation of this regulation, companies need not only the expertise, which many do not have in-house, but also enough capacity to devote to these topics. This is a major challenge, especially for an SME-heavy industry. This often leads to companies bringing in external consulting firms. “In the short term, this helps to cope with the challenges of legislation; in the medium to long term, this option is very expensive and means that you give your own company data to the outside,” says Anna Feldman, Climate Neutral Production Project Lead, VDMA European Office. “Consulting firms also often have gaps. A learning effect through collaboration with companies can only help to a certain extent in implementation.”

More VDMA members with climate goals

Anna Feldman, VDMA: “While one initially thinks of production within the company when it comes to corporate climate protection, today the considerations and activities go far beyond that.” (Image: VDMA)

The VDMA itself is experiencing a significant increase in activities related to climate protection among its members. According to a VDMA survey among members, the number of companies setting climate goals has almost tripled between 2019 and 2022. “This is naturally associated with the accounting of greenhouse gas emissions and the planning of emission reduction measures within the company,” says Anna Feldman. The pressure is increasing as both customers and the financial world, as well as the new CSRD revision, force companies to report on their impact on climate change. “Companies are taking responsibility not only for the environment but also for their own future viability,” adds Feldman.

The robot manufacturer Igus is also intensively dealing with various topics related to sustainability and climate protection. The focus is currently strongly on energy efficiency. By switching to green electricity and green gas, a large part of the emissions in Scope 1 and 2 has already been reduced. In addition, the topic of PFAS is currently being strongly driven by legislation. “The earlier you deal with it, the better prepared you are as a company for developments,” says Felix Hülder, Lean Engineer Green Production at Igus. “As a manufacturer of high-performance polymers, we use various materials. Regardless of decisions regarding PFAS, we already have many materials in our portfolio that do not contain PTFE and are PFAS-safe. We are continuously working on the development of alternative materials to always be able to offer our customers a suitable solution in the future. At the same time, for example, we use PFAS-free materials in the production of our Chainflex cables.”

Promotion of renewable energies

Sascha Eberhard from Franke GmbH also sees his company as having a duty: “As the managing director of a medium-sized company in the metal industry with around 350 employees, I face the central question of how we can effectively shape climate protection - both in the context of government regulations and out of our own responsibility. Our company has already taken significant steps to establish sustainable practices, as detailed in the sustainability report.” But it is also clear to Eberhard that the industry is subject to strict environmental protection laws, which are set by both the EU and national ministries. These laws aim to minimize environmental impacts and promote sustainable practices. “Emissions trading systems require us to acquire emission rights or reduce our emissions to limit CO2 output,” says Eberhard. For the managing director of Franke GmbH, “the promotion of renewable energies is a central concern, and investments in green energy can pay off in the long term. In addition, we are obliged to make our production processes and buildings energy efficient. Transparent reporting on our sustainability efforts is essential,” explains Eberhard.

But what are the biggest challenges on the way to a 'green industry'? According to Anna Feldman from the VDMA European Office, the complexity of the requirements is very difficult to manage. “To give an example that combines some challenges, the topic of the carbon border adjustment mechanism (CBAM). Companies that import certain preliminary products into the EU must report how many emissions were generated during the production of these preliminary products. It is currently proving almost impossible to obtain the real data from suppliers in third countries in such a short implementation time.” Either these suppliers do not feel obliged to comply with such a complicated EU regulation, or they do not know the exact emissions data of their own production. “It puts EU companies in a very difficult position, as they are forced to undertake complicated reporting without having access to the

required data,” Feldman points out. For Sascha Eberhard, the efficient transition to sustainable technologies, resource efficiency, and circular economy are the biggest challenges: companies that do not focus on sustainability could lose competitiveness in the long term. Changes at the national and EU level require clear political signals and support measures to facilitate the transition. Scandinavian countries like Sweden and Denmark, which are pioneers in sustainable business practices, serve as role models for us. We are currently working on converting Franke lightweight linear systems to secondary aluminum to conserve resources.”

Sustainability and growth in balance

According to Felix Hülder, companies are currently very concerned about reporting obligations: “Not least, the number of companies required to report will increase to 15,000 in Germany next year. There is a great need for clarification, especially in medium-sized businesses, on how to deal with reporting obligations.” Companies are also driven by the question of how to bring sustainable entrepreneurship in line with customer demands. “For example, customers increasingly expect sustainability in products, while companies often do not want to forgo opposing advantages.” This concerns, for example, delivery, where faster air freight is often still demanded instead of delivery by rail.

So, can green tech, sustainability, circular economy, and climate protection be reconciled with growth and expansion at all? For Franke Managing Director Eberhard, the balance between sustainability and growth is not a contradiction: “Investments in green tech can offer innovation and competitive advantages. The circular economy allows us to use resources efficiently and minimize waste.” Through low-emission technologies and climate-friendly products, companies can actively contribute to climate protection and get closer to Franke's self-imposed goal of being climate neutral by 2025. “We also offer circular economy to our customers. We have established refurbishing services that allow our customers to send Franke bearings for refurbishment. This saves a new purchase and protects the environment,” Eberhard continues.

For Felix Hülder, the topics of climate protection, growth, and expansion are not contradictory: "The question of how much value companies place on certain aspects of sustainability is always important. This varies from industry to industry." For the Igus engineer, there is a great opportunity in artificial intelligence, which can significantly simplify the challenges of reporting obligations. And of course, the circular economy in the plastics industry is an important topic for Igus, with a lot of potential, according to Hülder: "It's about not only avoiding waste but also creating generally more efficient processes. Green tech can help with that." For Igus, climate protection is a clear competitive advantage. For example, Igus launched its own recycling program called 'Chainge' in 2019. Through this online platform, users can recycle energy chains and other components made of technical plastics independently of the manufacturer, so that new products can be created from them. At the same time, the platform offers a digital marketplace that allows access to purchase selected recyclates. "Our offering allows us, together with our customers, to make plastic a sustainable resource," says Hülder.

Germany as a global leading provider

In line with this, the 'Alliance for Transformation' - a round initiated by the federal government with partners from business and society - agreed at their fourth summit meeting at the Federal Chancellery in January 2024 to systematically strengthen the circular economy in Germany together. This could reduce dependency on raw material deliveries and make the country an international pioneer for circular technologies and products. Another key point of the meeting: Germany has the opportunity to become the global leading provider of the circular economy and circular production processes.

Despite all the euphoria about the climate protection measures already implemented and initiated in the German industry, VDMA project manager Feldman lists two other major challenges: “Currently, the shortage of skilled workers and the bureaucratic burden are certainly vying for the infamous first place. This year alone, two new blocks are being added with the climate tariff CBAM and the reporting obligation for waste heat potentials.” But the rapid changes in the legal and economic framework for climate protection investments also worry her: “If, for example, the common energy management according to ISO 50000 is not considered in the new energy efficiency law, if funding programs are suspended overnight due to the budget crisis, or if it is still completely unclear today how the national CO2 price and the European emissions trading 2 are to be combined from 2026/7.”