Sustainable industrial SMEs - Interview with Lars Baumgürtel, Zinq

Lars Baumgürtel: "No, in our economy all sectors are closely interlinked. Focusing on individual sectors is therefore not enough. We are more resilient than other economies due to our diverse economic structure. Our value chains extend from the raw materials industry to the end consumer. That is why we need all sectors - energy and raw material-intensive industry as well as services and trade. The ability to restructure our industry sustainably and competitively at the same time is crucial to maintaining our prosperity. In short: "Business as usual" is not an option. The Federal Government must shape the framework conditions in such a way that entrepreneurial creative power unleashes innovation and investment. Optimal location conditions are a necessary prerequisite for stopping the massive outflow of capital from Germany. There is little time left for this."

Lars Baumgürtel: "We need decision-makers who can respond to the complex interrelationships that characterize the economy and who are willing to seek dialogue with entrepreneurs on an equal footing. There must be no policy that is based on theoretical models and therefore ignores reality. Instead, practical approaches should be pursued that are proportionate and do not promote misallocations or so-called "green lock-ins".

For example, we are currently subsidizing electricity generation from renewables to the tune of EUR 20 billion per year in order to then divert surplus electricity into the ground because generation and consumption cannot be synchronized and the transmission and distribution infrastructure is lacking. So on the one hand, we are spending huge sums on the electricity transition, while on the other hand, only €3 billion will be available for the energy transformation of the entire industrial SME sector by 2030. A new balance must be found here."

Lars Baumgürtel: "We have to afford the transformation, because it is the only chance to maintain a competitive and sustainable industry in Germany and Europe. And that is a central task. Economic growth forms the basis for financing social tasks. Over 60% of total tax revenue, which is currently at an all-time high, comes from transfers from employers to employees, either through income tax or sales tax on consumption. Maintaining this level of tax revenue is only possible through an economy that creates jobs and grows. However, in order to maintain and increase this growth, more funds must be invested in infrastructure and in promoting the transformation of the economy. The newly elected federal government has no more than the next parliamentary term to change course here. New priorities must be set in the budget and sufficient funds made available to support the industrial transformation and thus secure the important jobs in Germany that maintain prosperity.

Climate neutrality is the right goal, but we must make the path to it affordable. Not through bans, regulations and controls - everywhere and at all times. We need more pragmatic approaches for rapid implementation and the revival of entrepreneurial sovereignty. Mistakes will certainly be made on the road to climate neutrality; we therefore also need a new risk culture - both in companies and in the authorities. Transformation does not take place at desks in Berlin or Brussels, but on the ground. A smart framework gives companies the opportunity to optimize their individual transformation path through innovation and investment.

One example: a successful transformation requires CO2-neutral energy - the more, the better. This also includes hydrogen, but the market ramp-up is not progressing fast enough. While we in Germany are still in discussions and oracles about how expensive or cheap hydrogen could be in 10 years, the first Zinq sites in Belgium will be connected to the hydrogen network under construction as early as 2029. In Germany, it is completely unclear whether and when medium-sized industrial companies will be connected to the hydrogen network. That shows our problem: too much theory, too many models, too many think tanks. Too little action."

Lars Baumgürtel: "Anyone who develops circular products must also be given the opportunity to assert themselves on the market. When it comes to setting the framework for markets in which circular quality is given the appropriate value, it is first and foremost up to politicians. It must create a level playing field in which the externalized costs are taken into account. These costs are caused by products outside the production process, i.e. primarily during use and after use at the end of life. The product that is worse for the environment must no longer be cheaper than the variant that causes significantly less environmental impact over its entire life cycle. In order to change the current approach to pricing products on the markets and include the environmental benefits of products in pricing, all data on the environmental impact of products must be collected, evaluated and fully disclosed. This is already provided for in the Digital Product Passport in accordance with the EU Ecodesign Directive. Product passports are a huge opportunity to give products with circular quality a chance to assert themselves on the market.

We have a concrete example of how far we have already come here: Together with suppliers and our customers, we have developed a circular product passport in which the life cycle footprint is calculated and documented for both the green steel used and the circular zinc surface in accordance with the EU standards for environmental product decalarizations already in force. Our customers receive third-party validated CO2 credits based on existing norms and standards. What is still missing are circular lead markets so that the decision in favor of circular products also pays off economically. It would make sense to have certificate trading and a CO2 price that, on the one hand, burdens more environmentally harmful products and, on the other hand, relieves the burden on products of circular quality. Such emissions trading under market economy conditions already exists in Europe, but CO2 pricing in the so-called EU ETS is currently limited to emissions during production and does not cover the total emissions of a product. However, this could be changed in order to make sustainable products competitive on circular lead markets."

Lars Baumgürtel: "It is important to have a strategic objective for the implementation of the circular economy. The National Circular Economy Strategy provides a framework for this in Germany. However, it focuses primarily on quantitative quotas for recyclates and continues to rely on waste incineration and landfill. It does nothing to change the classification of valuable secondary raw materials as waste and thus continues the prevailing waste management mindset in Germany. The German circular economy strategy thus contradicts, at least in part, the EU Ecodesign Regulation, which is already in force and takes precedence over the national framework and focuses primarily on product quality. The national circular economy strategy must therefore be adapted. After all, a genuine circular economy requires a circular product design in the sense of cradle-to-cradle and taking into account the so-called R-strategies. In addition to repair, reuse, repurpose and refurbish, these include above all redesign and replace, i.e. the further development of products and the substitution of raw materials that are not materially sound. The circular economy only develops its full potential when products have a long useful life and raw materials are saved at the end of their life cycle. We therefore need to focus on "slow the loop" and "close the loop" in order to use raw materials in products efficiently and effectively and to be able to reuse them in new products of the same quality at the end of a product's life."

Lars Baumgürtel: "Germany has a structural energy problem, namely in domestic electricity generation: electricity from wind and sun is volatile, but industry needs a reliable energy supply. On the one hand, we have to import electricity when we have dark doldrums or fire up coal-fired power plants - with catastrophic consequences for the carbon footprint of our electricity system. On the other hand, we generate massive electricity surpluses when wind and sun flood the grids - despite the rather mediocre meteorological conditions in Europe. In addition, generation is not evenly distributed regionally: Too much electricity is generated in the north of Germany, for example, which cannot be transported away due to a lack of sufficient line capacity. We then switch off generation or discharge the excess electricity into the ground. This electricity is also remunerated as phantom power, which cost us over €20 billion in electricity subsidies last year. The truth is that this volatility will increase proportionally as the expansion of wind and solar power in Germany increases. According to studies, the targeted expansion to more than 800 TWh of electricity generation will result in over 400 TWh of surplus electricity. All of this makes electricity expensive for industry. Electricity is only cheap when it is "consumed as produced". For industry, the volatile generation of electricity means price fluctuations without planning security and an electricity price level that massively jeopardizes the competitiveness of energy-intensive industry regardless of size and sector. We therefore certainly need more flexibility on the consumer side, but above all: more investment in infrastructure, intelligent load management and better location planning for energy generation in coordination with large industrial consumers. All of this means massive investments that will make electricity more expensive in the short and medium term and entail the risk of misallocations and green lock-ins. Although the political approach for the further development of the volatile electricity market "use instead of curtailment" is correct in principle, this cannot mean that the demand side alone is given the responsibility for providing the necessary flexibility. It is simply not affordable for industry to take responsibility for the inadequacies of German electricity generation. We therefore need an energy transition with a sense of proportion and honesty when it comes to costs and economic efficiency. We must take advantage of all opportunities to make our energy system sustainable and economically viable for the future. This includes sector coupling, but is not limited to it. If we want to achieve the energy transition and not overburden our industry, we must not forget that more than two thirds of our energy is still generated from gas, oil and coal. Our energy system needs molecules. For good reason: energy in the form of molecules means that the energy is stored directly in the energy carrier and the energy can also be transported to any location at low cost - preferably as gas by pipeline. Nobody has a pipeline network and cavern storage facilities for gases as large as those in Germany. So, in addition to sector coupling, we should focus primarily on energy carrier coupling in order to unleash the corresponding flexibility potential in industry with the aim of competitiveness."