A closer look at the climate strategy

What’s the latest on emissions in our supply chain? Where are we with our products and the Krones sustainability strategy? And what has priority if it comes to the crunch: hitting sales targets or reaching climate goals? A conversation with Martina Birk, Head of Sustainability, Dr Sven Fischer, Head of Research and Development and Caroline Herbst, Head of Sales Marketing.

Krones wants to reduce emissions in the upstream and downstream supply chain by 25 percent by the year 2030. Where are we at the moment?

Birk: In 2022 we had a huge increase in sales, which meant that product-related emissions also turned out higher. Nevertheless, the increase in emissions was only six percent compared with the 34 percent growth in orders received. That's a positive trend, but we’re not yet satisfied with that.

Fischer: The big challenge is that we have committed ourselves to absolute targets in the climate strategy: By 2030 we must be producing 25 percent fewer emissions than we did in 2019 – whatever the growth in sales may be until then. We’re definitely moving in the right direction when it comes to sustainability and have already achieved a great deal. Given the rise in sales, though, that is not enough. We must do much better.

Bringing more products onto the market but producing fewer emissions overall – how can that circle be squared?

Herbst: That's probably one of the questions of the age. At first glance, it is difficult to reconcile further growth and a reduction in greenhouse gas emissions. One of the challenges is that any company can only have a direct influence on a small proportion of total emissions. Krones, for instance, cannot oblige its customers to use green electricity, even though this would have the biggest impact on our Scope 3 emissions. This is something the public need to be aware of.

Birk: Yes, that's a conflict. They can only be reconciled if we improve the energy efficiency of our machines even further – and by more than our growth. I am convinced that we can actually manage this, particularly if we can also factor in the positive variables to a greater extent in the future.

What did you mean by that?

Birk: At the moment many of the improvements that we are making do not get considered in our carbon footprint. That's because we calculate the upstream emissions using what is known as the spend-based method. This multiplies the spending for each material group by the associated emissions factor.

The method has the advantage that it offers a relatively easy way in, since every company produces financial data. For those which are more advanced in their climate strategy, though, it becomes too inaccurate after a while because it uses industry averages, so may not reflect the actual reductions at all.

Fischer: Put very simply, it means that we believe our actual emissions are lower than those we have been reporting to date. That’s why we now need to improve the way we obtain data.

Birk: Yes, and then we will also be able to demonstrate the good things that we are doing. In particular, it means we can also work with our suppliers on more targeted ways to continue bringing emissions down.

*Martina Birk and her team are working on improving the methods used for collecting data, to make sure they reflect all reductions actually achieved.*

Speaking of suppliers, where is there more to do – in the upstream or the downstream supply chain?

Birk: That depends on what you mean by “more to do”. It’s very obvious that the greater savings potential is with downstream emissions – those that are produced when the customer uses our products. Simply because they are much higher than those produced in the upstream supply chain.

Although the great potential is with the customer, though, we are really trying hard on the upstream emissions. That’s partly because we use huge quantities of steel for our products. The Krones Group has undertaken the task of reaching the net-zero emissions target. If that is to be achieved, we will have to buy green steel, but this doesn’t really exist at the moment. That the steel industry is still lagging so far behind with green production is obviously causing us a real headache.

Herbst: There are still few sustainably produced alternatives to our traditional raw materials such as iron and steel, unfortunately. This is where politicians and the industry really need to get their act together.

What is green steel?

The steel industry is one of the world’s biggest emitters of greenhouse gases. Every ton of steel produces about 1.5 tons of CO₂, because in nature iron only occurs in oxidized form. To obtain pure iron, iron ore is mixed with coal dust and heated in a blast furnace. At high temperatures the carbon combines with the oxygen from the iron ore, producing CO₂.

In the production of green steel, hydrogen is used instead of carbon. The reduction of oxygen produces water rather than CO₂. That sounds perfect, but there are two sticking points: For one thing, the technology is still in the experimental stage. It will be a few years yet before it can be applied on an industrial scale. For another, there will not be enough hydrogen in the foreseeable future to meet the needs of steel production. That is because the technology for obtaining hydrogen is also still in its infancy.

How far back in time does Scope 3 actually go? Do lines that were installed ten years ago also affect our current footprint?

Birk: No, the carbon footprint relates to the downstream emissions for machines sold during the financial year – although we want to change that for 2023 – and upstream to sales. Our aim isn’t to have as “good” a footprint as possible in any case, though. We’re more concerned with reducing the actual emissions in our industry on a permanent basis. That’s why, of course, we also need to advise our customers on how they can cut the CO₂ emissions produced by the existing lines, such as by installing upgrades or moving to renewable energy sources. Reducing the emissions of our customers is one of our main concerns – even if this does little for our own reporting.

Reducing the emissions of our customers is one of our main concerns – even if this does little for our own reporting. Erwin Hächl Martina BirkHead of Sustainability

What about new products: Will there be a shift in the focus of our portfolio? From energy-intensive lines to consulting and digitalization, for instance?

Herbst: Digital products and services are gaining in importance quite regardless of the sustainability issue. And if they are cleverly designed with sustainability in mind, they can also make an important contribution towards reducing emissions in the industry.

Fischer: That’s precisely the point: Digitalization is the most important enabler for making the industry more sustainable – because it gives us the opportunity to solve problems more intelligently and efficiently.

Birk: Of course, it's also clear that before we can offer the relevant digital products and services, we have to be able to sell the machine in the first place. That's where I see a huge opportunity for our energy consulting. I believe that energy concepts will become part and parcel of every line that we supply in the future. Sooner or later we will also bring the issue of energy generation into our line concepts. That means, for example, that we produce refrigeration in advance when there are renewable energy sources such as wind and solar available. These are all new business fields that are really cool from a sustainability point of view and have plenty to offer.

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Angelika Krempl

28. August 2023

11:10 min.

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