Sustainability requires a new way of thinking

Without thinking and acting "out of the box," the industry cannot master the energy crisis and achieve the desired sustainability, because: Energy prices will remain permanently high.

The war in Ukraine has permanently shaken up the sustainability debate in Germany. Due to the threat of gas and electricity shortages, among other things, many political decisions were relativized or corrected. For example, coal-fired power plants were reactivated and the operating lives of nuclear power plants were extended. And suddenly, liquefied gas obtained by fracking was no longer the "devil's work" either. Many a political maxim for action was also - at least temporarily - pushed aside, for example the question: How do the states that supply us with fossil fuels deal with human rights? With one goal in mind: our energy supply should be reasonably secure, at least in the coming winter.

Many "sacred cows" will still be slaughtered

It seems that this goal has been achieved, but only because many politicians, especially of the governing parties, thought "out of the box", they threw overboard basic convictions that had previously been "sacred cows" for them. And they will, this thesis is not daring, slaughter many a sacred cow in the near future, when their horizons broaden and the question is not just "How will we get through the coming winter?" Instead, the question might be, "How do we secure energy supplies in Germany or the EU in the medium and long term?"

For example, it is currently hard to imagine that soon violations of the Supply Chain Act, which will come into force at the beginning of 2023, will be severely punished - at least as long as the supply of energy, and also many raw materials and intermediate products, to the German economy is not secured. The overriding question is: "How do we keep the business or the economy going?"

The days of cheap energy are definitely over in Germany

At present, only one thing is certain: energy costs in Europe will no longer fall to the level they were before the outbreak of the Ukraine war. So, the question for companies is, "How do we deal with permanently increased fixed costs?"

Companies' answers to this question will vary widely depending on, among other things, their business area, their market, their structure, and the importance of energy costs in their overall calculations.

Question: How do we as a company respond to the cost explosion?

There are three possible options:

Option 1: Evasion. Many companies with energy-intensive production are currently considering relocating (further) parts of their production to countries where energy costs are significantly lower than in Germany. While this solution often makes sense from a business perspective, it is questionable from an economic point of view - not only because of the loss of jobs, but also because it further increases the dependence of the German economy and society on foreign suppliers and the smooth functioning of supply chains.

Option 2: Reduce. For months now, almost all companies have been thinking about the question of how we can make our production or infrastructure more energy-efficient; in other words, they have been looking at their organization and the processes they use for potential savings. This is a good thing, but it does have one drawback: the potential savings to be made by optimizing what already exists are usually limited. Therefore, although such efforts often reduce cost pressure in the short term, they do not lead to a sustainable solution to the problem.

Option 3: Replace. In this option, companies fundamentally question both their product range and their manufacturing processes. For example, they ask themselves:

Can we also produce the metal parts we need using 3-D printing? Or:
Can we also cold dye the technical textiles we manufacture?

The goal here is to achieve a quantum leap in energy consumption by changing the pattern of problem-solving or task-solving - and to do so in a downward direction.

This solution approach is therefore about "real innovations". Such solutions can usually only be developed by interdisciplinary teams in which all members are at least prepared to think "out of the box" - in other words, to question the patterns of thought and behavior that apply in their organization.

The goal of sustainability requires the courage to rethink many things.

To achieve this, the mindset of the team members usually needs to be broadened first, so that they get the feeling: "It might be possible to do things differently." Innovation workshops for identifying sustainable materials and production processes and developing new, sustainable products are ideal for this. Here's what sounds compelling:

Relocating production or companies abroad - partly because of the high energy costs in Germany - is not a desirable solution, at least from an economic perspective.
Optimizing the existing (production) infrastructure and processes alone cannot compensate for the exorbitant increase in energy costs at many companies.

Achieving sustainability through innovation and preserving industrial cores

So, if Germany wants to continue to be an important industrial location and a successful export nation, there is no way around the topics of innovation and transformation. In the land of poets and thinkers, which in the past has often been justifiably proud of its wealth of inventors, we should once again take this path; for no (economically) "flourishing landscapes" can be built on the service sector alone. This has been shown, among other things, by the decades since the fall of the Berlin Wall. We should therefore strive to preserve and strengthen our industrial cores.

Prof. Dr. Georg Kraus

About the author: Dr. Georg Kraus is managing partner of the management consultancy Kraus & Partner, Bruchsal (www.kraus-und-partner.de). Among other things, he is a lecturer at the University of Karlsruhe, the IAE in Aix-en-provence, the St. Gallen Business School and the Technical University of Clausthal.