The source of a saving grace

By now, there’s hardly a country that doesn’t drive the expansion of renewable energies. These efforts have been effective: between 2014 and 2020, the wind power capacity installed worldwide has doubled, according to the WWF, and that of photovoltaics has nearly quadrupled. In 2020, 70 percent of the new investments in power generation systems went to those using renewable energy sources. While the fossil age isn’t over yet all indications clearly point to a departure from it. Companies around the globe have long come to recognize that – not just for the purpose of polishing their image. Numerous automakers have established green factories using green electricity. For instance, Volvo’s automotive plant in Chengdu, China, operates with 100 percent renewable energies. BMW even covers its worldwide demand with green electricity at a level of 100 percent and at Schaeffler, all European production sites have been obtaining 100 percent of their purchased electricity from renewable sources since 2021. By 2024, that’s planned to be the case for all production sites worldwide. The world’s tech giants have begun to embark on the same journey. More and more companies in Silicon Valley are entering into power purchase agreements (PPAs) providing for long-term purchases of green electricity for an agreed fixed price. For renewable energy sources, PPAs pave the way for long-awaited profitability and for corporations like Amazon they pave the way for a green conscience. So, what are the giant petroleum corporations doing in view of these developments? They’re rethinking their business as well. BP is planning to increase its investments in renewable energies to five billion dollars annually by 2030 and its production of renewable energies to 50 GW, while the production of oil is supposed to decrease by 40 percent in the next ten years.

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Klaus Rosenfeld, Chief Executive Officer at Schaeffler: “By 2040, we intend to become a climate-neutral company. That applies to the reduction of the emissions generated within our supply chain as well as to the electricity we purchase from renewable power providers. Since 2021, Schaeffler has been purchasing 100 percent of the electricity at its European production sites from renewable sources. As part of our energy efficiency program, we have implemented more than 200 actions since 2020 that, starting in 2022, will result in cumulative annual savings of around 47 gigawatt hours. This amount of energy roughly corresponds to the annual electricity requirement of 15,000 two-person households in Germany.”

This is where green electricity is produced in-house

For Schaeffler, the new e-mobility plant in Szombathely, Hungary, marks a milestone achievement in terms of a sustainable manufacturing facility that’s fit for the future.

• CO₂ neutral factory in an area of 15,000 square meters (3,7 acres)
• Purchasing of solar energy results in annual reductions of around 2,700 metric tons (3,000 short tons) of CO₂ when the plant operates at full capacity
• An in-house photovoltaic system on the factory’s rooftop reduces CO₂ emissions by 179 metric tons (197 short tons) per year
• Recycling of purified waste water
• Rain water retention basin irrigates green and outdoor areas
• High energy efficiency due to use of heat pumps and heat recovery, plus smart heating and cooling management
• Low electric power consumption due to intelligently coordinated LED lighting

Who, where and how much?

Green supply chains are a complex subject in view of global, interconnected value chains and networks. Of what benefit to the climate are green factories in environmentally optimized, highly developed economies if the purchased parts they use are produced with electric energy from brown coal power plants? CO₂ emissions are generated in all upstream and downstream production stages. Experts classify these by Scopes: Scope 1 encompasses the direct emissions from a company’s activities, Scope 2 the indirect emissions generated in the production of the energies used by the company (e.g., in coal-fired power plants), Scope 3 includes all other emissions of the upstream and downstream supply chains. According to the “Net-Zero Challenge: The supply chain opportunity” study of the Boston Consulting Group and the World Economic Forum, around 80 percent of the CO₂ emissions – depending on the sector – fall within the responsibility of the supply chain and therefore belong to Scope 3. In the automotive industry, that’s even 87 percent, so there’s massive savings potential in this sector. Since climate protection is increasingly ­driven by a holistic approach the pressure exerted on suppliers along the supply chains has been increasing. Sustainability and compliance ratings are becoming equally important selection criteria as price or quality. When a mandatory reduction of the carbon footprint or even carbon neutrality become a standard requirement the selection of potential suppliers might drop dramatically. However, practically all the key players are faced with the same problem of obtaining valid data that tells them how much CO₂ is contained in which component. At the most recent World Climate Conference, the open network Catena-X (previously the Automotive Alliance) presented a proposal of how such data exchange could work. At the push of a button, manufacturers might soon be able to determine not only the costs of a screw but also the CO₂ emissions caused during the lifecycle of this part.

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Achim Döll, Purchasing & Supply Chain Management Sustainability at Schaeffler: "The consequences of our actions and the effects on our planet they entail were known as far back as in the 1980s. However, the resulting pressure to take action promoting sustainability across all value chains was not recognized or acutely perceived. Consequently, the best time for action would have been 40 years ago, the second-best time is now – which makes the challenge all the greater. Beyond the emission hotspots that have been identified in the supply chain in conjunction with the purchase of steel, aluminum and plastics, suppliers of all commodity groups have to contribute to CO₂ reductions. To emphasize that requirement, the CO₂ emissions are included in our procurement policies based on reliable CO₂ data and calculations of our suppliers that we insist on receiving. That puts us in a position to quantify and control the CO₂ impact of our value chains. In addition, we’re already calling on our suppliers today to implement CO₂ reduction measures and to provide related data. Moreover, the communication of valid CO₂ data is already taken into account in our procurement decisions. That’s the lynchpin and the expectation of our customers as well as our own standard. A successful transformation toward greater sustainability can only be achieved by working together in a spirit of partnership across the entire value chain."

2040 ...

... is the year that Schaeffler has targeted for achieving climate neutrality along the company’s entire supply chain (Scopes 1 to 3, upstream). The company intends to implement this goal in all of its own production sites by 2030 (Scopes 1 and 2). By 2025, three quarters of the in-house production emissions are planned to be reduced and by 2030, 25 percent of the emissions emanating from upstream products and raw materials in the supply chain. 

© Mario Tama (Getty)

Desirable repeat performance

The future belongs to a circular economy and does so with good reason. The growth of the world economy in the past 50 years has led to a massive increase in global resource consumption from 25 to more than 100 billion metric tons (28 to more than 110 billion short tons) per year. In view of climate change, this number alone illustrates that the days of unbridled consumption are over. Even before production starts, it must be clear what’s supposed to happen at the end of a product’s lifecycle other than just disposing of it on a sanitary landfill. Although a few things are already happening in terms of a circular economy, which in recent years has grown faster than the world market as a whole, there’s still massive untapped potential. In 2021, only 8.6 percent of the materials utilized worldwide were recycled for use as secondary raw materials, according to the “Circularity Gap Report.” The Netherlands is aiming to prove that clearly more is possible. The kingdom, which is in position eleven of the international per capita GDP ranking, is planning to fully convert its economy to reusable materials by 2050. Automaker BMW recently presented a good example showing that even complex products can be created based on a circular economy: 100 percent of the iVision Circular concept car was produced from recycled material and renewable raw materials. Swedish battery manufacturer Northvolt is developing a recycling method for EV traction batteries that, according to the company, enables up to 95 percent of the metals (nickel, manganese, cobalt and lithium) contained in a battery to be recovered at a level of purity equaling that of new materials. Statistics in a study of Fraunhofer Institute for Environmental, Safety and Energy Technology commissioned by Alba, one of the ten global leaders in the recycling sector, illustrate what positive effects consistent recycling can have on the environment. By recycling 4.8 million metric tons (5.3 million short tons) of reusable materials in 2020 Alba reduced harmful greenhouse gas emissions by around 3.5 million metric tons (3.9 million short tons, notably, the climate-compatible annual budget of 1.5 million people) and 28.8 million metric tons (31.7 short tons) of raw materials such as crude oil and iron ore. 

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Michael Lehanka, Sustainability & Projects Specialist at Schaeffler: “Circular economy instruments provide Schaeffler with opportunities to support a sustainable and future-proof transformation effort in the spirit of active climate protection. With a long history of rebuilding and reconditioning industrial bearings, Schaeffler in recent years has developed a business segment that’s consistently being expanded. In 2021, the 100-percent return service for axlebox bearings was recognized with the Railsponsible Supplier Award in the ‘Climate Change and Circular Economy’ category. However, a circular economy has clearly been gaining importance at Schaeffler in other areas as well: Schaeffler, for instance, minimizes risks on the supply side relating to secondary materials, recyclable design and refurbishing/remanufacturing and additionally develops new business segments or expands existing ones. With regard to growing resource requirements and more extensive legal frameworks, Schaeffler pursues the aim of driving a circular economy with strong partnerships.” 

Global material

A modern world without steel? That’s hardly conceivable. Almost 1.9 billion metric tons (2.1 million short tons) of new steel were produced worldwide just in 2021 – enough for erecting 260,000 Eiffel towers. This entails a major problem: even though the required production energy has been cut in half in the past 50 years CO₂ emissions per ton of produced steel still amount to two metric tons (2.2 short tons). In total, iron and steel production currently still account for eleven percent of worldwide CO₂ emissions. That has to and is intended to change: the Paris Climate Agreement provides for an 80-percent reduction of sector-related CO₂ emissions by 2050 compared to 1990. At the same time, experts expect another 60-percent increase of the global demand for steel by 2050. Consequently, these emission goals are more than ambitious and can be achieved only by fundamental changes in the steel production processes. Clearly, this issue will not be resolved by a single solution but requires a combination of new ideas to tackle this mammoth task. Relevant approaches exist in the areas of CO₂ storage and use, the utilization of biomass, electrolysis or hydrogen in the oxygen reduction process of iron ore, in the transformation toward renewable energies for process heat or in the consistent increase of the recycling rate that’s already high at this point in time. Swedish startup H2 Green Steel (H2GS) is planning to build an all-new greenfield steel mill in the north of the country by 2025 – the first one in Europe in about 40 years – in which many ideas for the production of “green” steel will be implemented, including integrated and digital manufacturing. Above all, H2GS intends to operate without fossil sources altogether. Instead, the young company relies on wind and hydropower, both of which are abundant in northern Sweden, to produce electricity and hydrogen for manufacturing steel. By 2030, H2GS is planning to produce five million metric tons (5.5 million short tons) of nearly CO₂-neutral steel per year for buyers such as various automakers and other corporations in the automotive environment, including the Schaeffler Group. In addition to newcomers like H2GS, incumbent corporations such as German steel giants Salzgitter and Thyssenkrupp as well as world market leader ArcelorMittal have launched pioneering green steel projects, not least because customers insist on receiving green steel enabling them to decarbonize their own products. 

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Martin Santer, Head of Production Material Purchasing at Schaeffler: “Starting in 2025, Schaeffler is going to purchase 100,000 metric tons (110,000 short tons) of strip steel from H2GS in Sweden. This purchasing agreement will enable us to reduce our annual CO₂ emissions by 200,000 metric tons (220,000 short tons). However, availability will be one of the main challenges on the road toward climate-neutral steel. Schaeffler currently requires 1.8 million metric tons (2 million short tons) per year, while the demand for and requirements made on steel keep increasing. At the end of 2020, we established a Task Force Green Steel that addresses the challenges in the company in a focused manner. We’re looking at green steel on several levels, including market analyses, strategy determination, reporting and communication. With strategic partnerships, we contribute to the transformation in steel production. Here’s a case in point: we return our 600,000 metric tons (660,000 short tons) of annual steel scrap into the scrap loop and make them available to the steel mills for the recycling process.”

630 ...

... million metric tons (695 million short tons) of steel are recycled per year, which makes steel the material with the highest recycling rate in the world.

Source: Worldsteel Association

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Read more

From gray to green

Starting in 2025, Schaeffler will be buying 100,000 metric tons (110,000 short tons) of “green” steel per year from a Swedish startup. The steel will be produced with hydrogen. Read more

Climate neutrality: Schaeffler sets the pace

Schaeffler aims to operate in a climate-neutral manner by 2040 - not only in its own production facilities, but along the entire supply chain. Read more

Less is increasingly turning into more

Every year, Earth Overshoot Day serves as a warning. It’s the day of the year on which the usable resources of our planet have been used up and we start living at the expense of future generations for the rest of that year. In 1970, Earth Overshoot Day was December 29; in 2000, it was September 23; and in 2022, it’s an even earlier date in the summer. This trend clearly shows that it’s high time we did a better job of managing our resources. Conventional business models have to be reimagined to prevent that reduced consumption leads to inferior products or impaired quality of life. That’s what the Association of German Engineers (VDI) says too. Good examples of reimagining conventional business models can be found in the mobility sharing sector, where a large number of users share vehicles, be it cars, scooters or bicycles. In the tools and recreational products markets, rental offerings are spreading as well. In the United States, the number of rental product users nearly doubled from 44.8 to 86.5 million between 2016 and 2021. The smartphone as a case in point emphasizes that there’s huge potential for resource conversation in the manufacturing sector as well. According to an analysis by Avfall Sverige, the Swedish waste management and recycling association, almost 86 kilograms (190 lbs.) of waste are generated in the production of an average smartphone weighing 200 grams (7.1 oz). This example of inefficient resource utilization illustrates the urgency of further optimizing design and manufacturing processes using digitalization and technological innovations such as additive manufacturing (3D printing). The utilization of materials delivering higher performance helps conserve resources too – for instance due to longer lifecycles. In addition to reduced material consumption, the reconditioning instead of the replacement of wearing parts – as Schaeffler knows from experience in the field of axlebox bearings in the rail sector – can also reduce CO₂ emissions as well as energy and water consumption by far more than 90 percent. The list of other resource conservation actions is long and covers all sectors and all stations of the supply chain. This nurtures the hope that future generations won’t have to worry about an Earth Overshoot Day anymore. 

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Roland Kuhla, Head of Energy Management at Schaeffler: “At Schaeffler, we’ve defined eight central sustainability goals for us to achieve the Paris climate goals. The implementation of energy efficiency actions by 2024 is one of our sustainability goals: from 2025 on, we plan to realize cumulative annual energy efficiency gains of 100 gigawatt hours (GWh) in this way. This energy efficiency program is based on our worldwide ISO50001 energy management system that has been in place for many years and ensures the continuous optimization of the energy consumption at Schaeffler’s sites. To achieve a sustainable enhancement of energy efficiency, we use a wide variety of technologies: from optimized application of cooling lubricants in machining processes to heat recovery and efficient cooling systems through to smart facility and process control technologies. All plants of the Schaeffler Group develop innovative solutions locally that are scaled to specific conditions in the global network of our locations.” 

The bill, please!

Energy transition is a great thing. While a global majority shares this view, the pace and means of pursuing this transformation are equally debated as its economic consequences. On the latter issue, a study, the first joint one conducted by the International Renewable Energy Agency (IRENA) and the International Energy Agency (IEA), analyzed the financial effort that achievement of the Paris climate goals by 2050 would take. The analysis came up with a required investment of around 29 trillion U.S. dollars to transform the worldwide energy sector within that period of time. On the one hand, that’s a huge sum but on the other hand it accounts for only 0.4 percent of the total global economic output, according to IRENA. Furthermore, the capital expenditures in the renewable energies sector would be contrasted by a growth impulse of 0.8 percent to the global economy. The study concludes that energy transition is affordable, especially since the construction of new solar power and wind power systems is becoming increasingly cheaper. In the solar power sector, costs dropped by 80 percent between 2010 and 2020, according to IRENA, and in the wind power sector by roughly 30 percent. In many markets today, the study says, the electricity from renewable sources is already cheaper than the one from fossil sources. Moreover, the World Economic Forum in its “Global Risks Report 2022” emphasized that failure to achieve the climate goals would cause enormous costs in the range of 4 to 18 percent of the gross domestic product, depending on the region. In view of these numbers, it’s hardly surprising that the financial markets’ response to energy transition has been positive too: while the “S&P 500 Energy Index” dropped by four percent between May 2016 and May 2021, the “S&P Global Clean Energy Index” went up by 22 percent. However, the above percentages are based on a global view. In individual countries and regions, energy transition may definitely leave painful incisions, especially where the extracting industries such as oil, gas and coal account for a major share in economic output. In this context, the German Institute for International and Security Affairs (SWP) says, “To the extent that energy supply increasingly becomes a technology- and innovation-driven process, it causes a shift in the participation of countries in the world trade and energy system. Gains in economic welfare are thus recalibrated, which has fundamental consequences for the world economic system.” How do affected countries cope with the fact that their fossil resources will have to remain in the ground in the wake of decarbonization? How will the community of nations respond to these changing conditions? Questions like these have to be answered as well. Moreover, it must be prevented that individual countries, segments of the population or sectors suffer a disproportionately high burden due to energy transition or that energy, at least in the short term, becomes unaffordable.

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Marcus Hoffmann, Head of Sustainability Strategy and Projects at Schaeffler: “The transformation toward sustainable resource management will be successful when ecology, social affairs and economy are harmonized. That’s how we define sustainable action at Schaeffler. We believe that the sustainable alignment of our own value chain – that is our supply chain, our in-house production and our product portfolio – is essential to ensuring our economic success going forward. With our expertise and products, for instance in electric mobility and wind power, we’re already supporting the energy and mobility transition effort today. They’re important pillars on the pathway toward achieving the Paris climate goals. We make processes more efficient and ultimately more competitive and support our customers in achieving their goals and global transformation as a whole in this way. These processes require end-to-end and, preferably, circular thinking – and those are points of engagement for Schaeffler’s sustainability roadmap as well: areas like a circular economy, energy efficiency and in-house generation of renewable energies are just some of the building blocks that clearly enhance our sustainability performance along the value chain while making economic sense as well.” 

Talking about sustainability

About highlights of the reporting year, current challenges, and how the Schaeffler Group is responding to them: Corinna Schittenhelm, Member of the Executive Board responsible for Human Resources and responsible for sustainability, and Thomas Fußhöller, Head of Sustainability, in conversation. Click here for the video.