Corporate strategies for sustainability: Overall, it’s not about cost, it’s about innovation!

Revolutionizing Sustainability in German Boardrooms: More Than Just a Cost Issue, It’s an Innovation Movement! Discover how German companies are transforming the landscape of corporate sustainability. From HypoVereinsbank’s study revealing that 67% of SMEs are prioritizing sustainable business models, to the impending sustainability reporting requirements, the business world is at a pivotal crossroads. Professor Rupert Felder cautions, “Finance is the sharpest sword. Without sustainability, companies risk vanishing.” This isn’t just about reducing costs – it’s about strategic investments in a company’s future, where sustainability and digitalization intertwine, creating new value. Revolutionizing Sustainability in German Boardrooms: More Than Just a Cost Issue, It’s an Innovation Movement! Discover how German companies are transforming the landscape of corporate sustainability. From HypoVereinsbank’s study revealing that 67% of SMEs are prioritizing sustainable business models, to the impending sustainability reporting requirements, the business world is at a pivotal crossroads. Professor Rupert Felder cautions, “Finance is the sharpest sword. Without sustainability, companies risk vanishing.” This isn’t just about reducing costs – it’s about strategic investments in a company’s future, where sustainability and digitalization intertwine, creating new value. Sustainability is currently one of the top issues in German boardrooms. According to a study by HypoVereinsbank, 67 percent of SMEs see the development of sustainable business models as an important challenge. This also includes the sustainability reporting requirements for companies with more than 250 employees that will apply from 2023. Most important driver: the capital market!  “The sharpest sword is finance. If they don’t invest in sustainability, companies will no longer get capital, loans or good rankings. Companies become sustainable or they disappear,” warns Professor Rupert Felder. The primary issue is not to look at costs, but to look at strategic investments in a company’s future viability. Our thesis is that sustainability and digitization go hand in hand. Sustainability can be accelerated with responsible digitization, and both topics together open up new sources of value creation. Social change in awareness leads to change in behavior 7 out of 10 consumers are specifically looking for sustainable products and expect transparency about the CO2 balance. Sustainable investments are developing dynamically. Three quarters of investors prefer funds with a better carbon footprint and hope for better returns. The demand for more sustainability is also coming from the companies themselves. It is often the younger employees and applicants who demand mobility concepts, for example. Regulation creates immediate need for action in companies The “EU Corporate Sustainability Directive” extends the reporting obligations of companies with 250 or more employees to include information on environmental, social and employee issues as well as respect for human rights and the fight against corruption and bribery. Failure to comply with the law could result in fines of up to 10 million euros. The Supply Chain Act also imposes severe fines of 100,000 to 800,000 euros. With the EU taxonomy, capital market access may become more difficult for non-compliant companies. An important innovation: The sustainability report must be part of the general management report and may not be published separately. Furthermore, publication as a PDF or printed work is not sufficient; it must be made available to the authorities in digital form in the ESEF data format. In its content, the report must follow a double materiality perspective. Companies must therefore firstly record the impact of sustainability aspects on the economic situation and secondly clarify the impact of business operations on sustainability aspects. In addition, the new guideline requires information on sustainability goals, the role of the management board and supervisory board, adverse effects of the company, and unaccounted intangible resources. Existing technologies can only reduce about 65 percent of the emissions required for the net-zero target. German CleanTech startups and “twin transformers” are making an important contribution. They link sustainability and digitalization. Sustainability will become mandatory from 2023. This necessitates a strategy update to anchor sustainability in KPIs, achieve transparency and compliance. Smart analytics identifies emission sources, fulfills reporting obligations and provides guidance on reduction strategies. Smart resource management and transparent supply chains only exist with digital technologies. Challenges: “In ten to 15 years, there will be no more mechanical engineering in Germany if companies do not switch to service-oriented, digital business models. These business models are the real innovation. But digital thinking in as-a-service models is not yet everywhere,” says Professor Michael Braungart. The CO2 savings potential varies in individual sectors. There is high potential in industrial production, mobility and logistics, and commercial buildings. One exemplary finding from the Bitkom study: the savings potential through digitization of manufacturing is 64 megatons of CO2 equivalent – around 17 percent of the total target. The use of digital twins is particularly effective. Digital twins simulate products, machines and plants, making planning and control easier. They improve production quality, reduce lead times and cut the use of resources. Optimizations with their results systematically reduce CO2 emissions, energy and water consumption, the use of chemicals and the amount of waste. Remote design and digital product development increase resource efficiency. An important trend is remote design, in which prototypes and pre-production products are first simulated on the computer. This form of design reduces the material consumption of development. In the automotive industry, remote design is common and even crash testing is only implemented in reality at the very end of development due to legal requirements; most testing happens in the computer. The use of 3D printers is one of the important sustainability trends throughout the industry. Fast and customized manufacturing generates higher customer loyalty and satisfaction. Since materials are less, there is less waste and rework. If the devices are used as spare parts printers, defective machine parts can be replaced and a longer service life achieved – with the corresponding effects on sustainability. As a digital warehouse or in on-demand production, 3D printers ensure that warehouse space is saved. Partnership models and value networks increase resource efficiency. The aim of new business models is to share customers and their data with partners. This creates synergy effects that lead to innovations. The resource efficiency of a company’s own business model increases when suppliers and business partners are included in the sustainability strategy. The Sustainable Twin extends the idea of the digital twin to aspects of sustainability. Like the digital twin, the Sustainable Twin is the virtual image of a physical product. Both objects, the original and the twin, are connected via data and information links. The Sustainable Twin collects information on the product throughout the entire production cycle and accompanies its physical counterpart throughout the value creation process. Digitization brings about dematerialization and thus reduces resource consumption. Remote services eliminate some business trips, digital twins save material already in the design stage and simplify training as well as sales. Overall, it’s not about cost, it’s about innovation!