Key Visual DF 2022
© Munich Re Foundation

Green Economy - Climate protection as business model

Dialogue Forum on 08 February 2022, 19:00
Online

A sustainable economy that conserves resources and puts less strain on the environment is the goal of the "Green Economy". The way to get there is through a process of change that affects the whole of society. What does the economy have to do? What business opportunities are there? And how can climate protection be used as a growth engine? These questions were the focus of the 2nd Dialogue Forum in the series "Smart Solutions for Climate Protection".

For a long time, companies and industry saw climate protection as a risk factor for their economic success because of the associated costs. But for some years now, a rethink has been taking place. Opportunities associated with a climate-neutral economy are increasingly highlighted. "72% of companies assume that they will be able to successfully adapt their business model to the green economy in the next five years," explained Dr Adriana Neligan, Senior Economist for Green Economy and Resources at the German Economic Institute (IW). She referred to a survey of German companies by the IW Future Panel.

According to the survey, two-fifths of the companies see new sales opportunities for their climate-friendly products and services, but about the same number fear that cost increases will jeopardise their business model. Around 25% of the respondents expect their products to become less competitive. 

Preventing the exodus of companies

The KlimaWirtschaft Foundation wants to drive the transformation to climate neutrality. It is an alliance of companies that are committed to climate protection and want to set the right framework for it together with politicians, as executive director Sabine Nallinger explained: "Our goal is a cross-sectoral approach that covers the entire economy. We want to prevent companies from migrating to places with lower environmental standards in the course of so-called "carbon leakage" (shifting of CO2 emissions through production abroad)." More and more companies are calling for a political framework that makes it possible to turn "climate neutrality made in Germany" into an export hit on international markets. 

Ralf Pfitzner, head of sustainability at the Volkswagen Group, has a sense of this. He left no doubt that the car producer will successfully adapt its business model to the Green Economy: "The transport sector is responsible for around 14 to 20% of CO2 emissions and is therefore both part of the problem and part of the solution." The key to this lies in the electric drive. For efficiency reasons, hydrogen is less suitable for roads than for ships or aircraft. 

DF22 Feb Ralf Pfitzner
© VW AG / Ralf Pfitzner
The transport sector is responsible for around 14 to 20% of CO2 emissions and is therefore both part of the problem and part of the solution.
Ralf Pfitzner
Head of Group Sustainability, Volkswagen AG, Wolfsburg
"With falling costs for batteries, we have enormous leverage. Sales of electric vehicles doubled last year," he said happily. However, he said, the VW Group does not only want to sell cars, but to establish itself as a provider of mobility solutions. "Digitalisation and new combinations of scooters, bicycles, trains and public transport will open up completely new potential here," Pfitzner is convinced. Especially since the need for mobility is not likely to decrease significantly. In retrospect, it was a mistake for VW to have been so late in the game of e-mobility. "I don't want to excuse the history, but we know from many discussions that the role of the automotive industry in closing ranks with politics was not the most progressive," he admitted. However, the diesel scandal had proved to be a wake-up call for VW to fundamentally change its course. 

Green Economy requires societal transformation

DF22 Feb Wolfram Günther
© Tom Schulze
The economy has taken the lead in the expansion of renewable energies and is often already much further ahead than politics.
Wolfram Günther
Minister for Energy, Climate Protection, Environment and Agriculture of the State of Saxony, Dresden

Wolfram Günther, Minister of State at the Saxon State Ministry for Energy, Climate Protection, Environment and Agriculture, can only confirm that completely new tones are coming from the business community. "The economy has taken the lead in the expansion of renewable energies and is often already much further ahead than politics." However, the path to a green economy must encompass society as a whole. This includes factors of an environmentally compatible economy such as resource consumption and emission reduction as well as the sustainable design of products, supply systems and infrastructures. Questions about living and working conditions, consumption patterns, product life cycles and financing models also need to be answered.

"Many small start-up companies have already developed ideas that will be given a real chance by the necessary restructuring of the economy," said the minister. Politicians must promote this through favourable framework conditions. "From a company's point of view, the issue of carbon pricing is particularly important," added VW's Pfitzner. This is the only way to achieve the transformation under fair and reliable conditions and to prevent emission-intensive industries from migrating to third countries. 

Time is pressing

That it is not at all easy for politicians to define what is green and what is not is shown by the discussions about the EU taxonomy, the EU's sustainability label. "Is it the inputs? Or is it only the end products that are targeted? Who do we want to address with the green economy?" IW researcher Neligan outlined some of the important questions. She advocates industry-specific approaches to support structural change. But time is pressing because politicians have been far too hesitant in tackling the issue of transformation in recent years, as Nallinger criticised: "The big challenge is that we now have to implement everything at the same time, i.e. establish a circular economy, transform the energy sector and switch to sustainable products." Because if we want to achieve our climate protection goals, we have to save about 35 to 40 million tonnes of CO2 emissions annually in the coming years. That is about three times as much as at present. 
DF22 Feb Sabine Nallinger
© Stiftung Klimawirtschaft / Sabine Nallinger
The big challenge is that we now have to implement everything at the same time, i.e. establish a circular economy, transform the energy sector and switch to sustainable products.
Sabine Nallinger
Executive Director, Foundation KlimaWirtschaft, Berlin
The foundation's director is concerned about the high energy prices on the world markets. As a result, hardly any politicians are currently daring to consider a higher CO2 price, which is actually necessary. The speakers agreed that nuclear power is no substitute for renewable energies, even though the EU recently classified nuclear power as green. Gas, too, could at best be used for a limited time to facilitate the phase-out of coal. 

The role of consumers

The panelists were sceptical about whether consumerism can save the world from climate collapse. "It is an illusion to believe that we can stop or slow down the global economy; that would be difficult to communicate to the emerging countries with their need to catch up," Neligan said. "Everyone has to face the issue of renunciation individually and ask themselves, what values do I have, for what and what do I consume," Pfitzner added. The entrepreneurial task, he said, can only be to satisfy a need as efficiently as possible. "I hope at least that we as a society have learned from the restrictions during the pandemic that doing without travel, for example, does not necessarily mean less quality of life," said Nallinger.
DF22 Feb Dr. Adriana Neligan
© Institut Deutsche Wirtschaft
It is an illusion to believe that we can stop or slow down the global economy, that would be difficult to convey to emerging economies with their pent-up demand.
Dr. Adriana Neligan
Senior Economist for Green Economy and Resources, German Economic Institute (IW), Cologne
One thing is clear: the transition to a green economy will demand a lot from society as a whole. But we can afford even less an economy that is not climate neutral. The trick is to reconcile ecological, economic and social concerns. Or as IW expert Neligan put it: "These are challenging goals, many companies have to modernise or reposition themselves and deal with growing competition in other markets. But the German business model, with its highly skilled workforce and ability to defend niche markets and offer holistic solutions to problems, is a strength with which we can manage ecological modernisation. "

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DF22 Feb Caspar Busse
© SZ / Caspar Busse
"Green Economy - Climate protection as a business model" was moderated by Caspar Busse, Süddeutsche Zeitung. Around 100 listeners took part in the online event. The next Dialogue Forum will take place on 24 March on the topic of "Energy transition 2.0 - New impulses for a healthy climate". More information can be found on the overview page of the 2022 Dialogue Forums.