The industry plays a key role in the drive for decarbonization
Carbon emissions are the leading cause of climate change, creating an imperative to reduce them drastically all over the world. Industry plays a key role in the drive for decarbonization, because industrial companies have the third largest carbon footprint in the world after the energy sector and farming. Despite using modern manufacturing techniques, the production of goods and machinery still accounts for around 5.2 percent of global CO2 and atmospheric pollutant emissions.
Political climate targets
Politics has increased the pressure on businesses across the globe to reduce their carbon footprint. Almost all countries participating in the 2015 UN Climate Change Conference signed the Paris Agreement to make the global economy more climate neutral, with the aim of limiting global warming to 1.5 °C where possible. To help achieve this limit, the European Union aims to make Europe climate neutral by 2050, partly by reducing its CO2 emissions. The U.S. is attempting to reduce its emissions by 50 percent by 2030 compared to 2005 figures and wants to achieve climate neutrality by 2050 as well. China has set a target of 2060 to be fully climate neutral.
What is decarbonization?
When talking about climate neutrality from a business perspective, we often use the word “decarbonization.” Decarbonization means changing a company’s energy use by consuming and producing less and less carbon. The aim here is to create an economy that completely stops emitting CO2 in the long run.
When is a company climate neutral?
Climate neutrality is a state where CO2 emissions and their absorption from the atmosphere are completely balanced. Carbon dioxide is absorbed by what is known as carbon “sinks,” like trees and marshlands that take in carbon as they grow. A company is considered climate neutral when the overall sum of all its processes, manufacturing and services no longer adds more CO2 to the atmosphere.
Even though we often talk about “CO2,” we mean more than just carbon dioxide. Emissions include other greenhouse gases as well, like nitrous oxide and methane. The impact of these other gases is converted into a “CO2 equivalent” (CO2e) for comparison.
What emissions are we talking about here? Well, a distinction is made between three different scopes:
- Scope 1:
Direct emissions (greenhouse gases), i.e., emissions released directly by the company itself, for example by burning fossil fuels (coal, gas and oil) or by a company’s carpool.
- Scope 2:
Indirect emissions released outside of the company but “imported” into it (such as electricity, heating and cooling).
- Scope 3:
Other indirect emissions of greenhouse gases outside of the company itself or those explained in Scope 2. They include different upstream and downstream processes, such as use of sold products, business travel and transportation.
Climate neutrality and company responsibility
The economy now recognizes the need for carbon-neutral production, but it isn’t just climate change and political pressure that’s making companies act; customers and workers also expect manufacturers and employers to increase environmental and climate protection measures in their companies nowadays. In fact, most businesses have set their own targets for when they want to be climate neutral, and many of them have implemented decarbonization measures already. Voith set a target for 2022 and has already achieved it; all of the Voith’s sites around the world have had a carbon footprint of zero since January 2022.
“Net zero” or “gross zero” CO2 compensation in companies
Even if businesses manage to significantly reduce their carbon emissions, there are still some areas where emissions cannot be prevented. These are known as “unavoidable emissions” because they are impossible, or almost impossible, to prevent, as we don’t have the technical or economic means yet.
To become climate neutral, companies can compensate for their CO2 emissions by supporting recognized climate protection projects to be “net zero.” The idea behind it is simple: As long as CO2 emissions and CO2 uptake are balanced, a company can call itself climate neutral.
There are a range of different officially recognized climate protection projects that can be used to offset carbon emissions, including the Gold Standard or Verified Carbon Standard schemes. But at the end of the day, the aim is to keep CO2 compensation to a minimum and achieve climate neutrality on a long-term basis through prevention and reduction. We talk about achieving “net zero” when companies can balance their residual emissions using climate protection projects. This is exactly what the EU’s climate goals are aiming to do; by 2030, the net emissions of greenhouse gases from member countries should be at least 55 percent lower than 1990 levels. In contrast, “gross zero” would mean achieving zero emissions without having to use any compensation at all to achieve a carbon balance.
- We talk about achieving “net zero” when companies can balance their residual emissions using climate protection projects.
- In contrast, “gross zero” would mean achieving zero emissions without having to use any compensation at all to achieve a carbon balance.
Green finance – financial institutions rewarding climate protection measures
Climate protection and sustainability are now even being looked at by banks when they decide where to extend credit. This is the idea behind “green finance,” which involves the financial system channeling funds toward investments that protect the environment and help our climate. Banks have a range of different instruments at their disposal: green bonds, green promissory notes, ESG-linked promissory notes and ESG-linked loans.
Voith took out an ESG-linked loan in 2019 with a large regional German bank called Landesbank Baden-Württemberg, or LBBW. Finance experts call this form of credit a “positive incentive loan” or “sustainability-linked loan,” and the terms and conditions of the credit agreement are linked to how well the company achieves its sustainability goals. This is evaluated by independent bodies (rating agencies) on evidence such as the company’s annual sustainability report. They assess the enterprise value for shareholders and society in general and make it transparent.
The ISS Ecological Social Governance (ESG) rating is the most important indicator of how effective Voith’s sustainability efforts are. The rating agency grants “prime” status to the top 20 percent of companies in each sector. In 2021, Voith was awarded a “B-” rating by the agency for the first time, which makes it one of the three best companies in the plant and mechanical engineering sector worldwide. This goes to show that investment in environmental and climate protection can have concrete financial advantages. This result was confirmed in 2022.
Voith as an example of a climate neutral company
Since January 2022, Voith has been operating net-climate neutrally across all its locations worldwide. Neutral here refers to all CO2 emissions that arise directly and indirectly in the company, i.e. fall under Scope 1 and Scope 2. Over the last five years, Voith has managed to reduce CO2 emissions at all sites by more than half, from 178,000 tons in the 2016/17 fiscal year to 86,000 tons in 2021/22.
Since fiscal year 2011/2012, Voith has been able to reduce its own energy consumption by almost one-third — equivalent to the annual requirement for a medium-sized town with 32,500 households. To achieve this, we introduced measures such as LED lighting, energy-efficient refurbishment and reusing waste heat in our manufacturing processes. We intend to save even more energy in future by aiming to reduce our consumption by at least 2.5 percent each year.
At the moment, solar and water power facilities installed at various Voith locations across the globe can produce a total of around 6 GWh of electricity per year. The plan is to increase our own energy production to 16 GWh a year by fiscal year 2026/27, around three times the current amount.
In fiscal year 2021/22, Voith was able to almost double the renewable part of its electricity mix, rising from 44 percent in the previous year to 90 percent. Our goal is to increase this to 100 percent over the coming years.
We voluntarily compensate for all our unavoidable CO2 emissions with a range of different measures. Voith only acquires certificates that reflect the highest of international standards, i.e., Gold Standard and Verified Carbon Standard.
In the future, Voith will reduce its carbon emissions — and the compensation measures needed — to a minimum. By the end of fiscal year 2049/50, we hope to have achieved a reduction of 90 percent. We are working on the very latest in technical and economic solutions to reach this goal.
Voith uses its environmental expertise to help its own customers
Being a provider of technologies to key branches of industry, Voith is also able to provide support to other companies working in the same field on their way to climate neutrality (and to society as a whole). Its full-service provider for hydropower engineering, Voith Hydro, contributes significantly to the exploitation and use of hydroelectric power. Voith Paper is considered a pioneer in the paper and packaging industry as well as in the fields of renewable resources and the circular economy. And Voith Turbo is a specialist in intelligent drive systems and solutions, with its products providing alternative drives that are environmentally friendly.
By choosing a Voith product, customers already save more carbon emissions than they produce. This has been confirmed in a verified analysis of Voith products brought to market and their potential use carried out by TÜV, the German product testing agency, for the 2019/20 fiscal year. According to the report, using Voith products saves almost 3 million tons of CO2 compared to around 2.2 million tons of CO2 emissions released.
Thus, for Voith the greatest potential in reducing greenhouse gas emissions lies in the service life of Voith products (Scope 3). To compare, the joint savings potential for Scope 1 and Scope 2 emissions accounts for 86,000 tons of CO2.
Sustainable technologies are a business opportunity
Climate neutrality and decarbonization in the industry are an essential part of how companies can act sustainably, and developing sustainable technologies for future generations is in Voith’s DNA. Sustainability is always at the heart of any innovation at Voith.
50 Leaders of Change
In fighting global climate change, the media outlet Reuters showcased technology companies that provide the world with the products and services that make an impact and improve people’s lives and communities. Voith is meeting the challenges of sustainability across the three markets of Hydropower, Papermaking and Drive Technology.
As a family-owned company we are committed to environmentally friendly, fair, long-term business practices. Furthermore, we intend to create measurable added value for the sustainable development of our company, society, and the environment. The goal we set ourselves regarding the way we conduct business is also correspondingly high: We want to make Voith the benchmark in sustainability issues.Explore now