There are arguably few companies better placed than Bayer to benefit from the drive to combat climate change with CO2 emission reduction, as Achim Ilzhöfer, the manager for the Bayer climate programme, explains.
The challenges posed by carbon emissions and the solutions that will tackle them are "all about chemistry", says Achim Ilzhöfer, and chemistry is what Bayer does.
Ilzhöfer, the company's climate programme manager, points out that Bayer is not only cutting its energy bills but also using innovation to boosts its efficiency.
In addition, by being an early corporate mover in disclosing and targeting its own emissions, Bayer has earned considerable kudos and boosted its reputation with its level of disclosure and its espousal of targeted carbon gas reduction. However, no less significantly, Bayer is active in key businesses that seem destined to provide some of the solutions that will be needed worldwide to mitigate climate change. These range from plastic polyurethane insulation to innovations such as oxygen depolarised cathode (ODC) technology, which cuts almost a third of the power use in chlorine production.
Bayer says it spends around €3 billion annually on research and development, equivalent to 8% of 2011 sales, and has some 13,300 employees engaged full-time on R&D.
In 2007, the company launched what it described as an "ambitious" climate change protection programme, the targets for which it upgraded in 2011, because in the first four years, most had already been hit or indeed exceeded. The ultimate plan is that, globally by 2020, Bayer will have cut its greenhouse gas emissions, both direct and indirect, by 35%, from a 2005 baseline.
In terms of its fleet management, along with the group's business travel initiative and the greening of its data centre, Ilzhöfer says all the targets were hit ahead of time.
"First of all, we were astonished by the awareness and, I would say, the acceptance of the programmes by our employees. This was a good thing. But we were also faced with some challenges in different countries, different cultures where climate change and climate protection were seen in a different light, as in for instance the United States."
However, from Ilzhöfer's explanations, it seems clear that even those who did not initially come onboard with the climate-change-mitigation agenda definitely bought into the cost savings, greater efficiencies and sales opportunities for new technologies that have arisen from Bayer's climate programme.
An uneven playing field
The company's main responsibility being to its shareholders, "it is very important that we are able to use these opportunities to create business," says Ilzhöfer. "It is our main task, really, to combine the ecological and the economical, as well as the societal behaviour, to increase the sustainability in our company."
Driving the programme through the company has been relatively easy, compared with persuading partners in the supply chain to sign up. In 2012, Bayer bought goods and services worth €15.7 billion from some 98,000 suppliers in 115 countries.
Ilzhöfer points out: "The challenges we face for the future are naturally energy efficiency and efficiency in general, and we have to work with our suppliers upon whom we are dependant.Because, for instance, we do not produce the cars on our own, we depend on what the automotive industry is able to deliver to us, such as downsizing or other ecological options that are useful for us. On the other hand, we deliver a lot of materials in lightweight plastics to these same automotive industries. So we are connected directly as a customer, but also as a supplier."
Bayer runs a Green Supply Chain programme which, Ilzhöfer says, is designed to reduce emissions, starting with air freight.
"This is not as easy as it seems," he explains. "You need a real contract management process behind it, and you have to find the right provider in terms of economic and ecological balance." It is necessary, he adds, not simply to look at packaging and handling but also to be prepared to analyse and move to a completely different mode of transport.
Bayer was an early advocate of carbon credit trading and shared in the disappointment at the failure of the 2009 Copenhagen climate change summit to agree, among other things, a global system of carbon credits and trading.
"We asked before Copenhagen for there to be a level playing field, for a single carbon-emission-trading system," says Ilzhöfer, "but it did not happen. Not all governments are looking for emission targets. The world is not equal. We only have an emissions trading system in Europe. In Australia, they have just started one, and China is running a pilot project. We are therefore a long way from the level playing field, with different taxation systems, for instance, on energy-efficient systems in China and the US."
However, the uneven playing field is actually providing a strong incentive to European companies to embrace the lower costs and greater efficiencies inherent in cutting their carbon emissions.
"There is a big discussion in Europe about how, with our high energy prices, we can remain competitive," says Ilzhöfer, "in relation to the US and Asian countries. And the answer is that we need the right energy-efficient technology to give us lower costs."
In the end, all companies, including Bayer, are responsible to their shareholders. Carbon-emission-mitigation programmes are not 'nice to have' initiatives to be trumpeted in corporate advertising. They are essential for shareholder value.
Invest in innovation
Nor, explains Ilzhöfer, is the challenge actually confined to Europe: "We have the climate control regulations in Europe, which do not exist elsewhere, but the corporate world in general is facing the same resource scarcity and the same increasing prices. It is my belief that these factors will increase innovation."
The crisis may not yet have manifested itself fully, but the challenge is already clear, with China's strongly growing economy slated to be producing more greenhouse gases than the combined output of Europe and the US. "So we need to be starting to balance our consumption now, and part of this balance needs to take into account the growing emerging markets."
In Bayer's analysis, the world will need to feed an extra two billion mouths when the population hits nine billion by 2050, while consumer demand in fast-emerging markets will add a further challenge. "Look at India," says Ilzhöfer, "and all these people who also want to be able to drive a car."
The response has to be a lot more innovation. "We need a lot more money to invest in innovation to really create a low-carbon economy. We are not yet in this world."
There is also, he explains, a balance to be struck by companies' keeping innovation in-house to preserve their competitive edge and licensing it to allow competitors to reduce their own carbon footprints.
"Plastic production is the most emission-prone part of our company," says Ilzhöfer. "We have an excellent example in our chlorine-production process: ODC technology, which we sell and license out to other PVC producers. This means that, with a single step, they are able to save more than 30% of energy expenditure." However, he points out, the investment cycles in the PVC industry are 20-30 years.