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One target, two outlooks

Interview with Prof. Dr. Hans Joachim Schellnhuber

Prof. Dr. Hans Joachim Schellnhuber: “What matters most is how companies organize their core business.”

Prof. Dr. Hans Joachim Schellnhuber

Hans Joachim Schellnhuber is director of the Potsdam Institute for Climate Impact Research, which he founded in 1992. He is a professor of theoretical physics at the University of Potsdam and an external professor at Santa Fe Institute in the United States. He and Professor Dirk Messner (German Development Institute) are co-chairs of the German Advisory Council on Global Change.

Prof. Dr. Hans Joachim Schellnhuber: “What matters most is how companies organize their core business.”
Prof. Dr. Hans Joachim Schellnhuber: “What matters most is how companies organize their core business.”

Over 190 countries struck a global climate accord in 2015. What does it mean for business? Dr. Volkmar Denner, chairman of the board of management of Robert Bosch GmbH, in conversation with climate researcher Dr. Hans Joachim Schellnhuber.

In December 2015, the international community agreed on a new climate accord at the UN climate summit in Paris. How do you rate the agreement?

Schellnhuber: It is an historic agreement that sends a strong signal: within a few decades we must transition from fossil fuels and completely eliminate greenhouse gas emissions. The current plans of most countries — and most companies — are incompatible with this target. Everyone needs to make improvements right away.

Denner: We also welcome the Paris accord. We hope it will strengthen climate protection efforts worldwide, and that the CO₂ reduction targets will now be written into national climate programs. A binding legal framework would make the financial risks for companies that are prepared to innovate easier to shoulder, as would state support for climate and energy-related projects.

One concrete example: since 2014 we have been testing a battery developed by Bosch at a private wind farm in northern Germany. The battery stores electricity from renewable sources and feeds it safely into the existing grid. This is one of the critical requirements for a sustainable energy transition. Yet in Germany, unlike the US and Italy, there is no legal framework to help this kind of storage technology make a breakthrough. Companies that invest here do so at huge financial risk, irrespective of whether the technologies being developed are marketable or not.

The 2030 Agenda for Sustainable Development that was agreed in autumn 2015 also calls on countries to significantly step up their climate change mitigation measures. The global action plan establishes a direct link between poverty alleviation and environmental protection for the first time. Why?

Schellnhuber: Fighting poverty is only possible if we limit climate change. That is the view of the World Bank, for which my institute has produced a series of major climate studies. The bank is looking at where climate-related risks threaten the money it has invested in development projects. Man-made global warming is, essentially, a question of justice. Extreme weather, rising sea levels, failed harvests — these consequences of climate change chiefly affect people in the poor countries of the tropics, which contribute the least in terms of CO₂ emissions, profit least from the burning of fossil fuels, and lack the means to protect themselves from the effects of climate change. It is therefore right and proper for big framework agreements like Agenda 2030 to give greater consideration to climate issues. Here, too, it comes down to how fast the plan can be implemented. Within the space of a generation, we have triggered changes to the climate system that will take several generations to be brought to a halt.

How fast is a technology company like Bosch when it comes to implementing drastic cuts to CO₂ emissions?

Denner: We were quick in implementing our climate goals and have already reduced our relative emissions by 29 percent over our 2007 levels, relative to value-added. We had committed to reducing emissions by 20 percent by 2020, so we are proceeding faster than expected and have therefore re-adjusted our targets. We are now striving to achieve a 35 percent reduction by 2020.

The indirect emissions generated through the use of our products are even more important. Our Design for Environment approach ensures that our product portfolio is consistently becoming more eco-friendly. Meanwhile, our technical solutions are helping create the conditions for the transition to a more sustainable, low-carbon economy. This is particularly true in areas of innovation such as e-mobility, storing renewable energy, and the efficient management of complex supply networks, such as logistics. Of course, our success also depends on the speed with which we bring these solutions to market. We are thus constantly working on new development methods and organizational models to reduce product development times.

What should all companies do to achieve the Sustainable Development Goals set out in Agenda 2030?

Schellnhuber: What matters most is how companies organize their core business. Do they adhere only to the lowest possible legal standards, or do they demand that suppliers take a socially responsible approach to doing business? Are their material flows based on a cycle, do they minimize the use of energy, and use energy from renewable sources wherever possible? And, above all, are the products themselves sustainable? For instance, as far as I know, Bosch has attempted to achieve this throughout its supply chain, and this is a very good thing. Not only is this responsible, it makes sound business sense. Companies that, for example, ignore the research data and continue to focus on the internal combustion engine will probably not succeed for much longer.

Mr. Denner, do you share this assessment?

Denner: I completely agree with Mr. Schellnhuber that the future of driving lies in alternative drive concepts. However, we should not ignore that the joint efforts of science and the automotive industry, while producing a number of electric cars, have yet to come up with a mass-market electric mobility concept. This is in part because of an aspect that has been overlooked here, namely that sustainability must be a political strategy. The same goes for the federal government’s mobility strategy. It foresees a million electric vehicles on our streets in five years. Currently, there are only about 30,000. Politics cannot just be about imagining developments, it also has to be about action.

At Bosch, we have taken a two-track approach. We are investing nearly 400 million euros a year in order to pave the way for e-mobility. In parallel, we are investing equal efforts into making the internal combustion engine even more efficient. In this area, we still see plenty of potential for diesel engines. Given global climate protection targets, we consider low-emission diesels as indispensable. I also see synthetic fuels produced from renewable sources of energy, or so-called e-fuels, as an interesting carbon-neutral alternative to electric vehicles.

Schellnhuber: And yet large financial market players are cancelling their existing investments in fossil fuels. And Bosch, by producing entire drivetrain systems for electric cars, is continuing to put the core business of traditional carmakers under pressure. All this stimulates economic innovation, and that is precisely what we need. In its absence, the political class needs to implement stricter rules for the common good, as US President Obama did recently with coal-burning plants in his country. Sometimes it takes clear statements like that so that producers and consumers know what needs to be done – if they have not already reached those conclusions by themselves.

What requirements do the sustainable development goals entail for Bosch?

Schellnhuber: If Bosch is to meet its own goals, the company must make an even greater contribution to climate protection. By 2014, CO₂ emissions had fallen by only 3.3 percent in absolute terms compared to 2007 — despite the fact that the company’s total energy needs shrank by nine percent. I am convinced that Bosch can do much better.

It is important for Bosch to place even greater emphasis on products that are useful in the transition to sustainable systems, as it is already doing with energy storage and connected cities. I would also recommend that the company bring its influence to bear in Germany and around the world, to show other companies and politicians that if we continue to operate as before, we risk finding ourselves in an uncontrollable crisis of civilization. If, however, we have the courage to transform, we can achieve sustainable growth. Bosch should not shy away from the limelight. The company can be a real pioneer, if it dares.

Denner: Courage is an important keyword at Bosch. The company’s ability to change has not emerged out of thin air. It comes from a corporate culture that values and promotes good ideas and puts them on the path to innovation. That is the culture we promote at Bosch. For us, sustainable business is essentially about finding technical answers to environmental questions. Because then climate protection pays off. At our sites, for example, we systematically use environmentally friendly Bosch technologies that saved us about EUR 530 million in energy costs between 2007 and 2014 alone. This is perhaps what makes companies like Bosch exemplary. For us, sustainability is not only an agreement, it is an obligation.

(Interview with Prof. Dr. Hans Joachim Schellnhuber and Dr. Volkmar Denner in March 2016)