Zero Live Podcast on Tech as a Force for Good

Zero Live Podcast on Tech as a Force for Good

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Welcome to this live recording of the Xero podcast. We are a weekly podcast that talks about tactics and technologies that take us to zero emissions. I'm actually already a senior reporter for Bloomberg Green, and I am joined by Jim Sanabria, who has been called Europe's top industrialist. So, Jim, you're a chairman of Siemens

and not one. We'll start with Siemens. It's a German technology company. Until recently, you had Siemens Energy as part of it, which does wind turbines and gas turbines, but it's a separate company. So we're going to focus more on the core Siemens, that is. But before we come to that company, maybe we start with your childhood, because some of what you do today is informed by your time in Greenland. Tell me more about it.

Well, that is correct. When I was two years old, my parents decided to move the family to Greenland, of all places. And my father was a helicopter pilot and we lived there for seven years. So as a child, it was a wonderful environment, a big playground full of snow. I remember Greenland as this cold place

with an incredible amount of snow and not green at all. I think it's the first example of greenwashing, actually, in history. And and, of course, that does influence your view on things. I've always had a love for that country because it's one of the most beautiful countries. If you've never been, you should go. But it's also one of the places where you can actually get a feel for climate change. Not in theory, not in numbers, but in

reality. And you visited Greenland 30 years after you first lived there and then 20 years after that. That's 22 and 2022, roughly. What were the changes that you saw and how does that affect you as a business person leading major companies in the world? Well, it does have a big effect because it's a place where you have grown, you know, a love for them. And you see the change. It influences you, no doubt.

I was back in Greenland last time in April last year, and I was uniquely invited to this expedition to northeast Greenland, where there is nothing but nature. And it was in April. So it's pretty tough nature. And I was there with a small group of people who know how to survive in environments like that with a tent and 13 dogs. And so it's is really survival.

And you get very close to nature. You first of all, you realize how nature doesn't need you. You need nature to survive. And secondly, normally in April, you will have -20 degrees in average during the day. And we had two days where the temperature was plus. Now you can almost hear the ice melting.

And it got to me and I went back to study. I knew that, you know, sea levels would rise if the inland ice would melt. But once you study that, it gets pretty scary. The ocean levels would rise 6 to 7 meters. So I think we're in an unsafe place here. And and it gives you that urgency in the way you think about your leadership.

And I have decided to now dedicate my leadership to accelerating the decarbonization of the world, because, first of all, we must. Otherwise, we will have a disaster. But I actually begin to believe that it is becoming maybe the the biggest business opportunity ever and certainly in my lifetime. So there's good reasons to very good

reasons to pursue this opportunity. And earlier this year, we met in Davos, and you told me that from a Siemens perspective, the energy transition is going well, that your role as a technology provider is going well. Do you still hold that view ten months on and where are the opportunities? Yeah, no doubt. I mean, technology technology has always been, in my mind the solution to two issues. It is when we innovate for a different pattern, that we create new opportunities and we create new, let's say, ways of looking at the world. Siemens today is not the Siemens that many know from the household appliances. It is an industrial Siemens.

We basically do the infrastructures around cities, around manufacturing and around transportation. And so you could argue we are in all of the infrastructures that consume energy. And we begin to see that the portion of our portfolio that helps companies get to zero carbon, that reduces their footprint and saves them money because they use less energy is by far the fastest growing portion of our portfolio. We recently won a huge train system in Egypt where we are delivering almost 200 trains, 54 fast speed trains. There's cargo trains, there's regional trains. We're building 2000 kilometers of rail, 60 stations. We will create employment of 40,000

people in the country. But most importantly, when this transportation system is up and running, not only will Egypt have the most modern transportation system in in the world potentially, but they also will save 70% of the CO2 emissions coming from transportation of people and goods. And so it's a good business case. It's a great business opportunity for

Siemens, but it's also a path to a decarbonized future. And I think when we marry the two, we get out of this dilemma that, you know, if we think of it as a cost, it kind of too expensive and we don't want to do it too much. We need to do it enough. When it becomes a business opportunity, you want to do as much of it as possible because you actually it's the way you make your money. And hence the transition happens at scale, the scale we need.

Now, when we talk about opportunities for Siemens to provide solutions to companies, it's also an opportunity for Siemens to look at itself and make sure its impact on the world is as small as possible. Now Siemens has a target to reach net zero by 2050. We'll talk a little bit about accounting, because we can do that without talking about business. And we're going to talk about carbon accounting. So there are three types of emissions the scope, one, two and three, the those are emissions that either you're burning natural gas in your buildings. Scope one either you're getting natural gas power from somewhere else. Scope to those are typically less than,

in your case, 10% of your total emissions scope three which is where what services you provide to your customers, the products you provide to your customers that contribute 90% of your emissions. And they actually went up last year by 2.5%. Why is that happening when you have a clear plan to get to net zero? Well, first of all, I think this is a very, very important discussion to have.

I, I still remember a shareholder meeting in 2020. It was in February just before COVID. So we actually had 6000 people in the Olympia alone in Munich. And and we were excited to go that we

had great business results. And we also were proud that we had reached a milestone in our CO2 emissions. Siemens was one of the first industrial companies to commit to net zero.

We did that in 15 and we said we'll be net zero by 30, but that was scope one and two. And in 2020 we had reached 52% reduction. So we were like, I was super proud to be in front of, you know, our shareholders and talk about 52%. And yet at that meeting we had 120 climate activists scolding us for having sold some software that controls a train that we didn't build. But the train was actually used to transport coal from a mine in Australia. And for me, that was the wakeup call. Let's go one and two is just not enough.

So with scope three, you take responsibility for how your products are being used and what they're being used for, which of course is much more complicated. And if you grow your company, your emissions in scope three could easily go up. Now what we calculated is the following interesting math. When we deliver an electric train or a hydrogen train like the deal in Egypt, one train in its lifetime, which is zero carbon train, will actually reduce CO2 emissions more than the annual combined CO2 emissions of Siemens. So the more trains we produce of that kind, the better the world becomes.

And therefore, we are now shifting our focus to scope three and trying to take responsibility for what our products do, because there's a much bigger business opportunity when you think of the problem that way than if you just think about your own emissions. And one way you could do that is to not work with industries that are high polluting. But it's the exact opposite. On the Siemens website, you advertise that you would like to work with oil and gas companies, with cement companies, with mining companies. Why is that? Yes, so I'm not aware of that sentence on the website. But if you look at our portfolio today, we estimate that 90% of our portfolio is being used to reduce carbon emissions. So we don't have a preference to work with any of those industries. In fact, we are even selling off

businesses that are too deeply involved with oil and gas. So so it's simply not the case. Now here's the dilemma. If we just scold the companies that emit a lot and don't try and help them reduced emissions, we'll get nowhere. It doesn't help that we just let someone else do it. We do need to engage with those

companies and reduce their emissions as well. And you can't go from 100 to 0 in one second. You have to have a responsible path to that future. Now, I do believe we are at a tipping point where we will stop burning fossil fuels to get energy. Well, the most recent International

Energy Agency report, the World Energy Outlook, just came out today and they agreed, They say all fossil fuels, coal, oil and gas will peak this decade and that after that, they see what they call a structural decline, which is that it's not just a cyclical economy has gone down the drain. That's why we are going to consume less fossil fuels. But there will be a decline coming through.

Now, one place where you are helping that decline happen is the other hat you wear with Northvolt, which is a battery company that is trying to build batteries for the auto industry here in Europe, which is a big employer. How does Siemens work with an old world to try and make that happen? Because that's a size of emissions reduction that can have a massive impact? Yes, I think this is a very, very important problem to solve because as you increase the share of renewable energy in an energy system, you get fluctuations in the energy system because you produce energy when there's sun and wind, and therefore you need intelligent infrastructure to transport energy. But most importantly, you need scalable, affordable storage opportunities.

And so batteries will play a role. The first revolution is in the automotive industry with the electric vehicles. And the issue is that while an electric vehicle is carbon neutral, if you don't make the battery carbon neutral, then it doesn't help much. So Northvolt was created with this vision, this dream to do it right.

Let's start a completely new green battery company that not only produces the batteries with green electricity because there's a lot of energy going into building a battery but takes the batteries back once they're done in a vehicle, crashes them too. We call it black powder and then extract the lithium, the copper, the nickel of of that battery and use that to build the next battery. We are at a stage now with our technology at Nortel, where we can reuse up to 97% of the raw materials in a battery, which means we can get away from this idea that we need to take out the raw materials in the soil and then use the battery for seven, eight or ten years and then throw it all out and create a very big disaster. In terms of waste, We actually just take them back. And it's a great illustration of the difference between the fossil world and the renewable world in that in the fossil world, when we burn the the fossil fuel, it pollutes the air and disappears in a green battery like this. With this approach, the atoms stay at our disposal.

We can use them to build a battery. We take them back and build the next battery in the next better. There's no deterioration of atoms. It's the same atoms. In fact, according to our calculations, when we get to scale, the raw materials that we get from a used battery will be cheaper than the one we mine in mine. And then, as you can see, this becomes not only good for the environment, it becomes a great business case. Now, the challenge for Northvolt and the solution you've just outlined is a necessary one, not just from an environmental perspective, which is important. If you're going to build green

technologies, you make sure they themselves are green. Of course, the avoided emissions are far greater, even if you don't. Build them green. But the challenge is really for regions

like Europe, but also North America is to have their own manufacturing of batteries in the first place. Now China has overtaken the world combined on batteries, and not just in manufacturing them, but also controlling the very materials, the processed metals that go into batteries. And so if you get recycled material, you can keep it onshore and use them, but you will still have to start somewhere where you're going to need virgin materials. So what is it that Northvolt is doing now to try and manage what is a real severe supply domination by China in an era where geopolitics is causing more rupture to happen between Europe and China and America and China? Yeah, we've seen what happened with the solar panel industry when when China went in there and basically dumped the prices, which made manufacturing elsewhere irrelevant. And therefore, China today is the by far the biggest leader in this.

Maybe there's a comeback in the horizon, I don't know, because of the, you know, generations of technology. But let's see. We should not let that happen to the battery. The battery will be a very important ingredient in the energy system as well as in the transportation system. So we must have the capacity in Europe, in North America, to do that. What what we are basically doing at Northvolt is we are sourcing the raw materials. Of course, in the ramp up phase, you do need more, but we ask our technology to recycle the batteries is not dependent on the Northvolt battery itself.

As long as it's a lithium ion battery, we can take the batteries back, crushed them to powder and extract the atoms and build the next battery. And we expect that already by 2030. And don't forget, this company is only six years old by 2030. Half of our raw materials will come from our own recycled batteries. And I think this actually, with the increased geopolitical tensions, we are going to be it's going to be strategically important for each region to be self-sufficient with the critical raw materials that are necessary to create a sustainable infrastructure of the future. And one way where we are seeing at least

a movement from governments to try and overcome what is a China challenge on batteries is the Inflation Reduction Act in the U.S. Does the European Green Deal very different kinds of policies that are being set out to enable manufacturing all of these green technologies to happen onshore? Inflation Reduction Act is very much driven at giving you lots and lots of subsidies to try and make that happen. In Europe, not quite so much. So how are you seeing as a, you know, a European company that now has announced a Canada plant and has global ambitions playing out with the policy changes across the Atlantic? So I actually see the area as a positive and it might sound, you know, strange for a European leader to think that way. For me, it's not necessarily a a barrier. It's it's an opportunity. The IRA is not limited to American companies.

Any company can apply. And it's actually an accelerator of the transition to green technologies. And I welcome any accelerator we can have. Coming back to my experience in Greenland, we exponential curves here. We cannot do linear, you know, and maybe we'll do a little bit tomorrow. We need exponential curves. We need to be courageous in our leadership to dream big about what we could do and then get on with it. And the IRA is an catalyst for that.

Europe should do something similar. It's in fact, trying. It's a little bit more complicated. But will we have the first factory in northern Sweden that was without those subsidiaries? We are now having committed a plant in Canada with IRA similar conditions, and we will also be looking for an opportunity in Europe. And would that create the necessary capacities for green batteries in Europe and in the US? So why is this important? I often say that in a joke the Stone Age didn't end because we ran out of stone.

And when you have new technologies that are better and more sustainable and maybe even cheaper, eventually you just need the incentives to put in, be put in place to accelerate that future or disincentives. If I was a policymaker, I would also put a price on CO2 and would that innovation goes in avoiding it rather than today, where we kind of accept it and hope to, you know, limit it in good faith? Yeah. Now, just the last question, sort of going back to the start, where you would call Europe's top industrialist, there's another reason you were the chairman of Maersk until 2022 giant shipping company.

Which under your chairmanship was able to create a clear roadmap for what is an industry that has done very little on reducing emissions. Now you can sit outside and look at progress and what have you achieved when you set those goals out and how are they playing out now? I think that story of zero carbon shipping is a great example of the courageous leadership that I believe business leaders need to have. I still remember the board meeting in 18 when management said, you know, why don't we commit to zero carbon shipping and, you know, mask alone, which is 20% of shipping, consumes 10 million tonnes of bunker oil. It's still the least polluting way of transporting goods, but it's a lot of CO2. And and you know, the board would say, So how are we going to do that? And management said, we don't know.

And then the board would say, what's the business case? And the management would say, We don't know. We don't even know the technology. And yet in 2018, the company committed to zero carbon shipping by 2050. Now, 2050 is a long way out in the future. But to do that, you needed the first

vessel sailing in 2030 and it felt very, very challenging. That first vessel sails now seven years ahead of that originally impossible plan. We have ordered more than 28 vessels now in total. And interestingly enough, in 2018, nobody thought zero carbon shipping would be possible in 23. We now have the first vessel sailing and the industry have now ordered 128 methanol vessels. Methanol is a green fuel.

It's produced by green electricity. You basically take it through electrolyzer, you get hydrogen and you add CO2 to hydrogen, you get methanol or you add nitrogen to hydrogen and you get ammonia. And these are fuels that will have zero carbon impacts on this world. Vessels with a new engine can sail on that.

And with this path we can solve zero carbon shipping. And my conclusion as a leader, if you can do zero carbon shipping, if you can do zero carbon in shipping, you can do zero carbon in any industry. So it's just for us to have the courage to lead that way. So in these three companies. In these three companies that you've led, have you seen when you take this step, which is bold, ambitious, risky, but then eventually pays off and people see it payoff being copied by others? Are you seeing that leadership spread out? It's beginning and it's interesting to see that.

It's almost like for 200 years, industrialization has taught us to to to specialize. But you can't redo an entire value chain for zero carbon shipping if everyone is doing their piece. It's almost like asking a symphony orchestra to play a new tune where the trumpets start with their new tune and the others play the old tune at the same time. That doesn't sound very well. I think that's the time we're in the world right now. It doesn't sound that well. So.

So you need someone to orchestrate the reinvention mask, orchestrated the reinvention for shipping. And it's working. Siemens is trying to do it in manufacturing and in urban areas and in transportation. Northwell is doing it in the battery space, and they are taking a end to end view of the industry and inviting everyone to play. I think that's the approach we need.

And when that happens, you de-risk the project and you get exponential scale. Thank you, Jim. Thank you.

2023-10-30 12:15

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