Roland Berger - COO Insights On Sustainability - 2010

ROLAND BERGER STRATEGY CONSULTANTS
BUSINESS
NOVEMBER 2010
COO INSIGHTS
Companies
have made
sustainability
a business
model
and a very
profitable one!
But that's not
the only reason
why there is
no turning back
for Bayer
Management
Board Member
Wolfgang
Plischke
Wol
MIXED PICTURE: PROGRESS TOWARDS SUSTAINABLE DEVELOPMENT IN THE EU

Of more than 100 sustainable development indicators, eleven have been identified as headline indicators.
They are intended to give an overall picture of whether the EU has achieved progress towards sustainable
development. An evaluation of progress since 2000 based on these headline indicators shows a rather
mixed picture.
EU-27
EVALUATION OF CHANGE
* EU-15

SUSTAINABLE DEVELOPMENT
THEME
HEADLINE INDICATOR
SOCIOECONOMIC DEVELOPMENT
GROWTH OF GDP PER CAPITA
CLIMATE CHANGE AND ENERGY
GREENHOUSE GAS EMISSIONS*

CONSUMPTION OF RENEWABLES
SUSTAINABLE TRANSPORT
ENERGY CONSUMPTION OF TRANSPORT

RELATIVE TO GDP
SUSTAINABLE CONSUMPTION AND

PRODUCTION
RESOURCE PRODUCTIVITY
NATURAL RESOURCES
ABUNDANCE OF COMMON BIRDS**

CONSERVATION OF FISH STOCKS***
PUBLIC HEALTH
HEALTHY LIFE YEARS****
SOCIAL INCLUSION
RISK OF POVERTY****
DEMOGRAPHIC CHANGES
EMPLOYMENT RATE OF OLDER WORKERS
GLOBAL PARTNERSHIP
OFFICIAL DEVELOPMENT ASSISTANCE*****
** Based on 19 Member States
LEGEND:
clearly favourable change/

on target path
no or moderately favourable change/
close to target path
*** In North East Atlantic

**** EU-25, from 2005
***** From 2005
moderately unfavourable change/

far from target path
clearly unfavourable change/
moving away from target path
Source: European Commission, Sustainability Report 2009
Why
ty. Sustainability is not an alternative lifestyle on a remote island, but a management

principle in the global economy. Sustainability does not mean turning our backs on
traditional entrepreneurship, but rediscovering it.
ho would have thought it:

Companies, though battered by
the global credit crunch and ensuing recession, reinforced their commitment to sustainable business, or at least did not scale back on
it. Those who believed that urgent cost-cutting plans and ambitious growth programs
would push sustainability off the management agenda or brand it an indulgent matter
have learned their lesson: Sustainability is no
longer simply a fad or marketing tool. It is
becoming part of the philosophy and operational alignment of modern companies. The
crisis that nearly led to the downfall of our
world accelerated this trend rather than slowing it down. The heated public debate about
companies' role in society and their responsibility to their stakeholders has reached a
new level. Sustainability, long viewed only
and mistakenly from an environmental perspective, is now visible in all aspects of business. Since the collapse of Lehmann Brothers
and the explosion of BP's Deepwater Horizon
oil rig, the remaining skeptics have realized
what happens when you subordinate social
responsibility and ecology to the economy
instead of harmonizing them with economic
goals in the interest of true sustainability.
Sustainability does not mean foregoing profitability, but rather is an opportunity for profitability. It is not about a future in spite of
sustainability, but by means of sustainabili-
But the question is, how? What does sustainability have to do with core business?
How can environmental and social management be integrated into conventional business management? How can we think in a
new way and inspire the whole organization
when we do so? Practical questions that are
often asked and just as often answered.
You will find a few examples in this magazine: Bayer, SAP and Volkswagen serve as blueprints for profound sustainability management in sourcing, manufacturing, logistics
and R&D. Sustainability is not just for big
business. On the contrary, small and
medium-sized enterprises are at the forefront. Scent specialist Symrise, with its white
biotechnology, will be a key to growth in the
coming decades, according to the German
government.
This second issue of think: act business is
therefore not merely a passionate defense of
sustainability management, but also a practical guide to all aspects of sustainable business showing you how this principle of
success is already gaining a foothold in companies.
I hope this will give you some valuable
insight and knowledge in the field of sustainability.
Axel Schmidt
Global Head of Operations Strategy
Order: You can also order this magazine as a PDF file in English and German at:
COO_Insights@rolandberger.com
think: act BUSINESS S u s t a i n a b i l i t y
Why
Editorial
Thought Leadership
Sustainability: From fair weather topic
to paradigm shift
Management
6 sustainability factors govern
sustainability excellence in operations
Guest commentary
Invest early: Prevention is better than cure
How
In practice
Interview with Bayer Management
Board Member Wolfgang Plischke:
"A job for marathon runners, not sprinters"
Volkswagen: Green grandeur
Symrise: White hart
SAP: Blue power
Study
The rise of sustainability as a factor
in business
3
4
10
14
20
24
28
31
Who
7 questions for Otmar Hauck, COO KION AG 32
What
36
Automotive suppliers
In the wake of the crisis
37
Working Capital
Hidden treasure
37
Cross-functional working
In their own juices
39
Kiosk
China's Management Revolution
Green Growth, Green Business
think: act CONTENT Supply chain management
think:act BUSINESS COO Insights
Publisher: Axel Schmidt
Overall responsibility: Roland Schwientek
Project management: Dr. Katherine Nlling
Layout: Roland Berger DesignTeam
Roland Berger Experts:
Marcus Berret, Sebastian Durst,
Jochen Gleisberg, Robert Grimm,
Thomas Hollmann, Florian Kaiser,
Felix Mogge, Robert Ohmayer,
Thomas Rinn, Axel Schmidt,
Roland Schwientek, Christian Steinbach
Why
Success through
sustainability:
Learn from the
champions
The majority of
companies have committed
themselves to sustainability. Nearly two
out of three companies have maintained or
even intensified their commitment to sustainability despite the crisis. Yet the value-adding potential
of sustainable business has not yet been fully tapped
The idea is not to have success and sustainability,

but rather to achieve success through
sustainability. Sustainability champions
optimize their performance in a
targeted way along the entire
value chain.
BUSINESS Sduesst iagi n atboi lvi at yl u e5

think: act BUSINESS
21
Why
Sustainability: >>
from fair weather topic
>> to paradigm shift
Still just a stylish trend for a few; for many, a paradigm shift. Sustainability is influencing
companies' business models, shifting the balance between industries and recasting
relations in supply chains. A six-point plan helps to clarify.
iemens is doing it. BASF is doing it.

Daimler is doing it too. The heavyweights in the DAX-30 stock market
index have made sustainability a
permanent part of their management structure. At the Munich electrical engineering
company, Chief Sustainability Officer Barbara
Kux is the Board member in charge of Supply
Chain and chairs the Sustainability Board.
At the chemical giant in Ludwigshafen, Board
member and Industrial Relations Director
Harald Schwager heads the Sustainability
Council. The Sustainability Board of the
Stuttgart vanguard car maker is headed by
Thomas Weber, the Board member in charge
of Group Research and Mercedes-Benz Cars
Development.
The industries they represent may be very
different, but what this prominent trio
demands from modern business management is always the same: think and act long
term. "If we don't want to meet our needs
"
"
We here at Siemens
clearly endeavor to act in
the interests of future generations financially, environ-
mentally and socially responsibly.

Sustainability means covering all three
aspects by thinking and acting long term.
If Siemens can grow profitably, we can meet
our responsibilities to the environment, our employees, our shareholders and society. Using
energy-efficient technology, for example, makes good financial sense: the potential savings mean
acquisitions soon pay for themselves. So "green" technology will be one of our major growth
drivers in the future. And our customers profit with us, by saving
considerably on CO2 emissions and costs. Ultimately,
it makes a valuable contribution to protecting the
climate and environment which is particularly
important to me.
Barbara Kux, Executive Board, Siemens AG
www.siemens.com/sustainability/report/09/pool/pdf/siemens_nb_2009.pdf
think: act BUSINESS S u s t a i n a b i l i t y 7
WE HAVE IDENTIFIED FIVE CONSUMER TYPES BASED ON THEIR

ATTITUDE TOWARD CORPORATE RESPONSIBILITY (CR)
CR consumer types [share of total population]
"I do my bit for

people and the
environment."
on the backs of future generations, we need

to act not just environmentally but also
financially and socially responsible as well,"
is what Weber tries to impress upon his
team at every opportunity. "You can't be a
successful business in the long term without
dealing with society and the environment
with care. So sustainability is a permanent
part of our strategy," announce BASF group
head Jrgen Hambrecht and his colleague
Schwager in unison. And the people from
Munich agree: "We are acting," says Barbara
Kux, "for future generations economically,
environmentally and socially responsible.
Sustainability means meeting all three
dimensions."
ow thoroughly sustainability is
actually embedded in the global
manufacturing and services
sector may depend on the industry concerned and where it is based.
Consumer goods manufacturers and business-to-consumer companies are generally
more sensitive than capital goods manufacturers and business-to-business, partly
because their customers apply pressure
directly and are quick to switch products.
European companies in Europe are further
ahead than their challengers in the emerging
economies, Brazil, Russia, India and China
(BRIC). Even progressive companies, socalled sustainability champions, vary in
terms of how mature their sustainability
"I want to know if

companies violate
ethical standards."
"Taking new approaches

to demonstrate CSR
is important to me."
"It's important to me
to help those I'm
closest to."
"I think the government
and companies should
support culture, sports and
health."
21,2% 19,5% 18,2%
21,2% 19,9%
DEDICATED
VOLUNTEERS
TRADITIONAL
SELF-CENTRICS
CRITICAL
CONSUMERS
BELIEVERS IN
HARD WORK AND
PROGRESS
RESPONSIBLE
FAMILY PEOPLE
Source: GfK; Roland Berger study
initiatives are from one department to

another; and sustainability standards as in
the electronics industry are still rare.
Regardless of how much initiatives may
vary and how serious companies may be in
pursuing their sustainability strategies;
despite underestimating how much change
being environmental means and the rapid
"greenwashing" that may dangerously fire
the imagination of some image advertisers,
Germany's businesses can agree on one
thing: Sustainability is by no means just a
fair weather topic any more. Companies are
increasingly integrating it into existing
management systems, and not just because
more stringent environmental regulations
and laws are compelling them to do so.
Business is increasingly thinking and acting
sustainably out of a sense of conviction.
Companies are coming to feel this in terms
of both earnings and costs. Investing in
sustainability initiatives is becoming investing in across-the-board brand values. Companies are minimizing their risks and setting
themselves apart from their competitors.
Operations are the key here: development,

purchasing, production and logistics.
Sustainability champions are optimizing their
sustainability performance along the whole
value chain. Consumer goods group Procter
& Gamble, for example, is working with selected research partners to develop new packaging for hair care products. Instead of using
oil, the developers are turning to sugar cane.
The first products packed in bioplastics
should be on the shelves by 2011.
any industries buy in more than

50% of their added value, so
purchasing departments play
a key role in companies' sustainability strategies. For instance, BASF's
Sustainable Procurement's standards are
gaining acceptance in China with the help of
the "1+3" project. This binds three direct
suppliers to follow group sustainable development principles and pass the rules on to
three more suppliers, who pass them on to
three more business partners and so on.
This intelligent snowball system works, and
now it is about to be launched in India.
Why
Sustainability audits are managing the supplier pools.

In production, minimizing reject levels and
maximizing resource utilization have top
priority. Even more important is how the
manufacturing footprint as a whole affects
the environmental balance sheet. Parisbased food and drink group Danone has
commissioned independent partners to analyze "how much in CO2 emissions each and
every one of our products produces from
barn to refrigerated shelf". Danone's main
drivers in improving its carbon footprint are
new production methods and optimizing the

CO2 footprint of its whole manufacturing and
logistics network. Its overall aim is to reduce
energy and water consumption and waste
by 2% p.a. on average over the next ten
years. Measurable targets for each link in the
added value chain should be ready by 2011
at the latest.
Bayer's Sustainable Supply Chain
Management also takes the CO2 emissions
of different options into account when
making major decisions. This indicator
covers all relevant processes, like transport,
filling, packing and storing products. This
meant that Bayer HealthCare was able to
open two new distribution warehouses while
"
"
Our central executive

sustainability body is our
Sustainability Board, which
effectively combines all management proces-
ses relevant to sustainability. Reporting directly to the Chairman of the Board, this body
coordinates major sustainability initiatives worldwide and assists operating divisions in implementing them. Our Sustainability Board has formulated the claim to be among the best in the
industry when it comes to sustainability. To this end, both the Board and the office that supports
it were restructured to further improve relevant central areas, established bodies and important
decision makers from all segments. The Sustainability Board analyzes and assesses how
Daimler is performing in terms of sustainability, prepares executive submissions on the
Chairman of the Board's instructions and assists the Management Board, together with the
Sustainability Office, with second opinions.
The Board also organizes and coordinates
the annual "Sustainability Dialog" event.
Thomas Weber, Executive Board, Daimler AG
http://nachhaltigkeit.daimler.com
at the same time reducing CO2 emissions by

7%, thanks mainly to eliminating airfreight.
Not only that, but consumers want socially
and environmentally responsible management, and have shown they are prepared to
pay more for it. This was revealed in a joint
study by Roland Berger Strategy Consultants
and GfK Panel Services Germany. This study
looked at what consumers think about corporate responsibility (CR) and compared it
with what they actually buy. It found highly
demanding consumers are a major target
group, which means it pays for companies to
make CR a fully integral part of their business model. Done in the right way, there's
good money to be earned here.
When asked "Do you buy environmentally
compatible products?", for example, 58% of
the "responsibly committed" group answered "Yes", as did 59% of "critical consumers",
higher than average. For both groups,
32% said they prefer to buy organic food products. This not only puts them above the
average in the population as a whole (21%),
it also means they spend more of their food
money on organic products.
The more important sustainability management is, the greater the challenges. Companies
are asking themselves how they can
Combine ever-shorter development times while at the same time spending heavily on developing sustainable
products
Meet stringent sustainability criteria
Measure sustainability performance along the value chain, taking all

relevant design parameters into account
Make the sustainability business
case pay off
within the target purchasing triangle of

cost, product quality and delivery
times/service
"
For BASF, the question is not sustainability OR financial growth. Instead,

BASF sees sustainable business
management as a way of integrating social and

environmental issues in business processes and
so succeeding financially in the long term. We
Make production and logistics net-
can grow financially only if we pursue a sustai-
works sustainable at a time when customers' demands are becoming increasingly

flexible and changeable
nable strategy, which is also how our partners,
markets and our neighbors see it.
http://www.basf.com/group/corporate/de/
sustainability/index
Harald Schwager,
Executive Board, BASF AG
There are
success factors
that govern sustainability excellence in operations
guidelines that follow a clear business logic:
1. TOP-DOWN APPROACH
Sustainability is an integral part of a company's basic strategy. This creates goals for all
operating departments which are ambitious
"
such as our customers, our staff, the financial
but realistic, such as the proportion of

recyclable materials used by Research and
Development and how much is procured from
suppliers that have passed a sustainability
audit. These departmental goals in turn give
rise to recommendations for all staff: only

then do the company's goals as a whole
become tangible.
Why
2.
EMBEDDED IN THE
ORGANIZATION
Putting a Chief Sustainability Officers at
top management level reflects a credible,
irreversible sustainability strategy.
Clear responsibilities are also required
at different operating levels: that's the
only way to overcome conflicts and
implement sustainability across all
departments and functions. Sustainability is not something you can compromise on.
3. NETWORKING
An effective sustainability strategy

doesn't depend on how convincing we
are, but on how we integrate influential
partners outside our company, such as
external developers, suppliers or political
institutions. It is just as important to
coordinate with our direct competitors
and companies in other industries when
defining and implementing supplier
standards, assessment procedures or
formulating codes of conduct, for example. Customers should be included in all
sustainability activities at all times.
Thats the only way companies can find
out if customer desires and consumption patterns are changing. Sustainability
champions communicate their successes deliberately to the market.
4.
LIFE-CYCLE-BASED
OPTIMIZATION APPROACH
Optimizing sustainability performance
can only succeed if it covers a product's
whole life cycle, much like the total cost

of ownership approach. This is about
identifying the essential sustainability
criteria to improve products in each case,
starting from a comprehensive analysis
and defining metrics to suit business
models. Optimally coordinated actions
can then be taken to improve sustainability performance over the entire life
cycle.
5.
CONSISTENT
IMPLEMENTATION
Sustainability as a corporate goal must
be implemented both continuously and
consistently. Sustainability champions
are always reviewing how close they
are getting to their ideal goals, and
penalize failures and backsliding.
This affects both their own staff and
outside partners. Incentives can give the
process wings, such as variable salary
or fee components linked to achieving
specific sustainability targets.
6.
CONTINUOUS
IMPROVEMENT
Sustainability champions want everyone
involved to be constantly improving.
They identify areas for improvement
together each year and incorporate them
in future targets. To pass on technological innovations and improved know-how
to partners in our networks, news needs
to be communicated regularly and main
partners need active support in implementing improvements.
Invest early:
Prevention
is better
than cure
Sustainable development cannot be
tacked on to the start or the end of the
production process. It must become
part of corporate DNA.
by Professor Stefan Schaltegger*
On paper, the matter seems

clear-cut. Climate change and
the depletion of natural
resources are of relevance to
the business of more than half of German
companies. Despite the financial and economic crisis, nearly two out of three firms in
Germany have refrained from rolling back
their commitment to sustainability. Onethird of them have even ramped up their
attention to the topic. Sustainability has long
since shed its image as a passing fad. Today,
it is bringing far-reaching change to the way
companies are managed.
In practice, corporate reality does not quite
live up to these appearances. Many companies still fail to translate sustainability
management into competitive advantages in
the marketplace. Large corporations are less
good at this than the medium-sized and
even small firms that often immediately feel
the consequences of any actions they take.
Products that appeal to ecological and social
emotions and ideals are unquestionably
attractive; and the reputation of companies
that actively advance the cause of sustainable development in society can only stand to
gain. But be that as it may, the potential for

sustainable development to add value is far
from exhausted. The mission statements may
be aggressive, but the strategies are all too
timid.
Companies don't just create jobs, a corporate
culture and products for themselves and their
employees. They also create employment,
cultural value and solutions to problems for
society at large. Their activities and the
services they provide enable them to set
sustainable development in motion in the
business and environmental context within
which they operate. Step by step, their vision
thus becomes reality. The outworking of this
vision nevertheless depends on decisionmakers' ability to professionally manage
sustainability issues. Some believe sustainability begins with sewage treatment and
rework, i.e. at the end of the production process. Others shoulder responsibility for
products with an acceptable environmental
and social impact by developing optimized
processes from the start. Sustainable development transcends both perspectives, however. It cannot be tacked on to the start or the
end of the production process. It must be-
come part of corporate DNA and be anchored

in every business model.
To what extent can solutions that are much

more sustainable also add more value?
But what exactly does it mean

to integrate corporate responsibility into your core business
and to practice sustainable
development? It means investing early because, as ever, prevention is
better than cure.
When a company is prospering, it often has

little incentive to develop new business
models. Dynamic growth and the pressure to
adapt accordingly are the forces that shape
their agenda. The challenge, however, is to
identify those ecological and social activities
that will also reinforce the company's economic performance in the long term.
Sustainable production and business processes are usually the point of departure. Their
aim is to substitute problematic substances
or alter certain patterns of behavior. Once
business processes have a sustainable
design, the products should naturally follow
suit. "Designing for sustainability" can optimize the social, ecological and economic impact
of new products throughout their entire lifecycle from the earliest phases of development. On the other hand, good product design
can only be realized responsibly if it is backed by sustainable supply chain management.
Social and environmental checklists for the
purchasing department, regular supplier
audits and a management focus that aligns
the entire supply chain with sustainability criteria are all part and parcel of this redesign.
The business model is the core of these
management processes, affecting all the
aspects discussed above in many different
ways. Companies keen to shoulder social and
environmental responsibility should therefore
ask themselves some fundamental questions: In what ways does our current value proposition affect sustainability? How do these
effects help make the company unique?
In other words, companies must present a

successful business case for sustainability.
Environmental and social activities go a long
way toward shoring up and improving a firm's
ability to compete. So the strategy should no
longer be business success and sustainability, but business success because of sustainability.
*PROF. DR. STEFAN SCHALTEGGER
holds the Chair of Business Management at
Leuphana University Lneburg. His research
focuses on sustainability management,
strategic management, the integration of business
studies and economics, spatial economics and
sustainability economics. He is founder of the
Sustainability Leadership Forum, a group of
forward-looking companies committed to
discussing sustainability management from a
scientific perspective and pooling their experience.
He also introduced the Sustainability Management
MBA course at Leuphana University Lneburg
the first university-based MBA program in the
world to focus on this theme in conjunction with
corporate social responsibility. Taught by
Leuphana's Professional School, this part-time
course transforms managers and other specialists
into agents of change.
http://www.leuphana.de/institute/csm.html
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13
How
"
A job for
marathon runners,
not sprinters
"
Bayer Management Board member Wolfgang Plischke on sustainability as a mentality

shift in industry, the opportunities of a new economy and why there's no turning back
RB: Dr. Plischke, Bayer has condemned

greed and the drive for quick profits as cause
of the financial crisis. Business leaders
now like to present themselves as philanthropists who are working for an economic
approach that reflects ecological and social
responsibility. Is this a change of direction
or a PR gag?
Plischke: The financial crisis has given us a
very dramatic demonstration of where we'll
end up by neglecting sustainability. But the
good news is that the deadly dynamics of
short-termism are finally giving way to a
new logic of sustainability. I consider this
trend to be not only credible but imperative.
RB: Your slogan runs "Science for a better
Life". So Bayer has had a make-over, too.
Plischke: No, this is nothing new for us.
Sustainability has a long tradition at Bayer.
Take our "Bayer: research for a clean environment" program, which was already running
back in the 1970s and 80s, or our
"Responsible Care" commitment, or our
employment guarantee agreements in
Germany. We published our first environ-
mental and social report as early as 1976.

And our guidelines for environmental protection and safety have been in place since
1986. In 2000, we were a founding member
of the UN Global Compact. In 2004, we were
the first company to join the UN Environment Program as a partner in the field of
youth and environment. What's more, we've
been taking top positions in the sustainability rankings worldwide for many years.
This is a very considerable achievement.
RB: OK, so you can now lean back and wait
for the others to catch up.
Plischke: Not at all. We see sustainability as
a corporate strategy and a permanent challenge for senior management an executive
priority, if you like. In fact, no day should go
by without us asking what we might do
better. Sustainability is a job for marathon
runners, not sprinters.

RB: What does sustainability mean to you?
Plischke: In one sentence? Acting in harmony with the goals and needs of society
because social approval is the basis for
everything we do and therefore crucial to
our success.
RB: Isn't that what they all say?
Plischke: But how many of them actually
follow through as rigorously as we do?
We make sustainability a reality at three different levels. First, Bayer is part of society
and makes important contributions through
its innovative products they are the core
of our business. At a second level, we put
sustainability into our business practices,
i.e. in the way we run our business. And
finally, there's our social commitment.
That's expressed in around 300 projects
worldwide and the numerous funding activities of our two charitable foundations.
RB: Are you driving this process or driven
by it?
Plischke: Both, actually. On the one hand,
we pursue our strategies out of conviction
and want to set standards. On the other,
we're quite certain there's no alternative.
The world has radically changed. Customers
and investors now demand responsible
corporate governance, and policymakers
are setting new frameworks. Huge changes
are taking place. Sustainability has become
the prerequisite for economic success. And
success is the basis for delivering sustainability.
RB: Changing the corporate philosophy is
one thing. Living it in practice is quite
another. There are those who say that it's
Dr. Wolfgang Plischke,

59, has been a member of Bayer AG's
Board of Management since March 1,
2006. He is in charge of Innovation,
Technology and Environment and oversees the Asia-Pacific Region.
Until his appointment to the Bayer
Board, Plischke had been on the Bayer
HealthCare Executive Committee from
July 1, 2002 and served as Head of the
Pharmaceuticals Division.
How
not so much a knowledge problem as an

implementation problem. We know everything but do too little.
Plischke: I wouldn't accept that criticism in
our case. We've steadily refined and strengthened our sustainability strategy. The integrated Bayer Sustainability Program is in
place. It centers on three main points: strong
alliances for sustainable healthcare provision, innovative partnerships to deliver more
high-quality food, and new solutions for the
problems of climate change and dwindling
resources. At present, we have eight interna-
efficiency by 10% by 2013 compared to

2008. That means saving 350,000 tons of
greenhouse gas emissions per year. In addition, we're introducing a new technology for
chlorine production that will cut emissions
by another 250,000 tons by 2020. What's
more, by selling this technology, the potential savings will rise by another 5 million tons
a year. That's quite something!
RB: What's more important, energy saving or
energy efficiency?
Plischke: Energy efficiency, clearly. Let's
take chlorine, a major substance used in the
" "
Sustainability
is far more than
climate protection
tional flagship projects that show how Bayer

can use its know-how to contribute effectively to sustainable development.
RB: Lots of people only associate sustainability with climate change ...
Plischke:: ... clearly a massive global
challenge, but not the only one ...
RB: ... while others see it as nothing but
greenwashing.
Plischke: Your words not mine!
RB: Critical shareholders, including some at
Bayer AG, argue that the chemical industry
has particular strong reasons for using
"sustainability" to polish an image tarnished
by hazardous incidents, dangerous pharmaceuticals, genetic manipulation, carbon
emissions or pesticide issues.
Plischke: Please, let's first look at the facts.
Our flagship projects can benefit millions of
people worldwide. And in terms of production, we're committed to raising our energy
the framework of our sustainability program

we have focused on neglected diseases like
sleeping sickness or tuberculosis. In Indonesia, we've launched a program designed
to improve yields for rice farmers and raise
their incomes. Under the "Food Chain
Partnership" scheme, Bayer CropScience has
built partnerships in India for sustainable
vegetable production. The explosive growth
in global population demands solutions in
the form of innovative medicines and highquality foodstuffs. And the climate issue
itself is not only about CO2 ...
RB: ... but ..
Plischke: Take one example: Our malaria
project runs under Bayer's climate program.
Experts fear that, as climate change accelerates, the number of malaria infections could
increase worldwide by 40 to 60 million
cases. The problem is likely to spread to
regions that have so far been relatively free
of malaria. We are working on this in collaboration with the Bill and Melinda Gates
Foundation and the Innovative Vector Control
Consortium. Together we want to establish a
new insecticide research platform to develop
public health drugs and new resistancebreaking pesticides.
chemical industry. It's indispensable for

making plastics, drugs and much more.
Chlorine production is one of the most energy-intensive chemical processes we have.
Around 50% of the costs of chlorine production go on electricity. We have a new process
for making chlorine based on the principle
of fuel cells. Chlorine is recycled from hydrochloric acid within a closed cycle system.
Compared to the traditional method, this
innovative oxygen-depolarized cathode
billion people are at risk
technology reduces the energy inputs, and
of getting African sleeping
also carbon emissions, by 30%. But, of
sickness, trypanosomiasis
course, sustainability is also about
or tuberculosis
much more than climate change.
RB: Namely?
Plischke: Bayer HealthCare is
working hard in more than 130
million people die
countries to create conditions in
each year from
which people can gain control over
tuberculosis
their lives and plan their families. In
3,3
HEALTH
THE DEADLY BITE

First comes the fever. The lymph nodes swell, the
skin eruptions spread, it itches. This is followed by
cramps, confusion and darkness. Then death.
Unlike malaria, unless treated, African sleeping
sickness takes everyone it touches, estimated
at 70,000 a year. The World Health Organization
(WHO) says trypanosomiasis threatens 60 million
people south of the Sahara alone. It is caused by
the protozoon Trypanosoma brucei, which is found
only in Central Africa, with its flagelli, which moves
like a corkscrew and which humans catch when
stung by the tsetse fly.
RB: Where do you see the line separating

social commitment and business?
Plischke: Your question points to a big
misunderstanding! We subject our activities
and our products to a rigorous assessment
in which we consider the ecological and social impacts, but also, of course, the economic
consequences. Sustainability is not a probono project but a business model indeed
a very profitable business model if you do it
right.
RB: Can't you share any of the doubts people
have about corporate sustainability policies?
Plischke: Some managers may see this
topic as a sort of modern version of the
medieval practice of selling indulgences. It's
simply not enough to plant a tree for every
ton of carbon dioxide. But we take a different
This disease has been curable and easily treated

since the turn of the century. The first effective
drug was developed in 1905 but widespread
treatment did not have the decisive effect hoped
for. Now a new combination therapy is finally promising success: a mix of the active agents
Nifurtimox by Bayer HealthCare and Eflornithine by
another pharmaceutical manufacturer, has proved
to be particularly promising in fighting the disease
in clinical trials. The WHO promptly put this combination therapy on the list of essential drugs in May
2009.
approach.
RB: In view of the frequency with which the
topic of sustainability comes up, one wonders when the hype will subside. This trend
has been described as a "medialization" of
sustainability. Do you think the concept now
stands for a fashion?
Plischke: That would indeed be fatal.
It would mean we've learnt absolutely nothing and that we're only playing games with
our future. But I admit, there is a danger of
puffing up the concept and paying only
lip-service to the real issues. All the more
reason for getting it right. Sustainability is
not a passing fad. It has to be integrated into
business. Every company must work on it
rigorously.
RB: The renowned US sociologist Richard

Sennett, who teaches at New York University
and the London School of Economics, has
studied the impact of capitalism on our
society. He argues that certain players in
the market have learnt nothing from the
crisis and are carrying on just where they
left off.
Plischke: I wouldn't claim to be able to judge
who has and who hasn't learnt the lessons.
But, for me, one thing is certain: "Business
as usual" is not an option. We must not
return to short-term and occasionally reckless actions. That was yesterday. The dynamic of sustainability is today.
RB: Another academic, Wilfried Mdinger
from the Institute of Sustainable Leadership
at the Steinbeis University in Berlin, speaks
of a 'stakeholder trap' in connection with
sustainability. What he means by this is that
the economic voice gets lost in the attempt
to reach a balance with other stakeholder
groups from society and ecology.
Plischke: 2009 was certainly one of the
most difficult years since World War II for
many businesses. But Bayer recorded
excellent operating results the third strongest in the company's history. A critical factor for us was aligning corporate strategy to
sustainability.
RB: What makes you so sure?
Plischke: First, a company can no longer
How
"
We have introduced a tool

at our company that assesses both the
business as well as the ecological and social
components of a product.
This means we measure its contribution
to sustainability.
"
operate successfully without social approval.

Take the current debate in Germany over an
energy consensus. It clearly shows how
much society is concerned with the question
of a safe and secure future. It also points to
CLIMATE
Take chlorine for example. Manufacturing this is one

of the most energy-intensive chemical processes anywhere. Approx. 50% of the costs incurred are for electricity. Constantly improving energy efficiency in chlorine
Worldwide, energy consumption in buildings causes
production is a top priority. A preliminary Bayer procealmost 20% of greenhouse gases. Bayer's "EcoCommerdure to produce chlorine is based on the principle of
cial-Building" initiative aims to make commercial and
public buildings more energy-efficient. Together with sup- fuel cells and recycling chlorine from hydrochloric acid
pliers, constructions companies, architects and building in a closed cycle. This method involving oxygen-depolaowners, Bayer is working to promote low-energy houses, rized cathodes reduces CO2 emissions by one-third.
The reward for all this work: The Federation of German
passive houses or zero-energy buildings. The goal:
Industry (BDI) Award for the Environment.
customized solutions.
EVERYTHING SET TO ZERO
This all started with the zero-energy company kindergarten in Monheim, where Bayer CropScience is based.
The building uses renewable energy and has optimal
insulation made from polyurethane raw materials.
A second pilot project was launched, this time close
to India's capital near New Delhi. Bayer's administration
office there is especially designed to deal with the subtropical conditions. Bayer's new office building in Belgian
Diegem promptly won the country's Energy Award.
Its energy consumption is only half that of comparable
buildings. These pilots are to now serve as the basis for
a business model. Retail chains are just one group that
has expressed keen interest in this model. Whats just
for buildings is equitable in industrial production.
Researchers are working on developing the patented

method now using salt.
This means 30% in energy savings are possible
compared to the conventional procedure. The lever for
saving energy and reducing CO2 in chlorine production
is enormous.
If 15% of all current facilities were converted to the
new technology, global CO2 reduction potential in
chlorine production could add up to five million tons
annually. This is three times as much as all the new cars
registered annually in Germany save on carbon output,
if they fulfill the EU standards for CO2 emissions.
the immense opportunities a new energy

culture can offer to German industry. The
growth in the market for sustainable investment is stronger than overall growth. The
success of our company entitles us to claim
that our strategy has put us on the right
path. Sustainability opens up new business
opportunities and we're seizing them.
RB: Can sustainability be measured?
Plischke: Yes, we measure the sustainable
value added by our products. We do this in
the firm belief that the demand for sustainably produced goods will grow along with a
growing consumer awareness of sustainability issues.
RB: What role do your employees play in all
this?
Plischke: They have a key role to play.
Without their innovative strength and motivation our strategies would be condemned to
failure. This is why it's so important for us to
do all we can to develop our human resources for example by giving employees a
stake in the company's success or making
work and family life more compatible. And,
over recent years, we've steadily increased

the proportion of women in senior management.
RB: Deutsche Telekom aims to raise the
share of women in senior and middle
management to 30% by 2015. And it's become the first Dax 30-listed company to introduce a quota system. Can you imagine anything like that happening at Bayer?
Plischke: Point taken. We're still far from
where we want to be. But I think we'll reach
our targets, even without quotas.
RB: How do you handle your suppliers with
regard to sustainability?
Plischke: Apart from our own production, our
sustainability commitment also covers the
way we behave toward business partners
and the standards we set. In recent years we
have strengthened our Compliance Program
and given it more bite by a whole range of
initiatives, including action on corruption. We
don't only choose our partners on price and
quality, but also expect them to comply with
ethical, social and ecological criteria. These
40%
of India's population
about 500 million people
are vegetarians
are laid down in a special code of conduct.

RB: Partnerships seem to be increasingly
NUTRITION
ment benefits from this too. The pre-germinated, drysown rice requires much less water.
Another effect: Methane, which is harmful to our environment and which is produced by enteric fermentation
in standing water, is reduced by 30%. The program also
The demand for food is rising but arable farmland will
includes an integrated offer of seeds, seeders, plant-proremain constant at best. The climate change is threatetection products and training programs for the farmers.
ning harvests. Almost a billion people are starving. The
The goal of Bayer CropScience's "Food-Chain-PartnerCongo ranks last among 84 countries according to the
ship" program is to ensure sustainable vegetable proGlobal Hunger Index. One in five children dies before the
duction. This partnership brings the entire food chain
age of five.
together farmers, suppliers, the food processing induIn Indonesia, more than 40 million people live on rice, but stry, retailers and exporters.
the harvests are poor.
Experts support farmers in cultivating land according
to profitable and sustainable agricultural practices.
A new farming method rolled out as part of the Bayer
More yield per hectare protects Mother Nature.
sustainability program is designed to improve the crop
yields and income situation of rice farmers. This method This is good for biodiversity, the preservation of which is
involves converting production from conventional trans- a very challenging and important task, especially in
emerging countries such as India. Food-Chainplanted to direct-seeded rice.
Partnership projects have been launched. This number
should rise to 125 by the end of 2012.
The result: yield increase of about 10%. And the environ-
THE FIGHT AGAINST HUNGER
important for Bayer.

Plischke: Absolutely right. We use partnerships in a wide variety of fields. The issues
surrounding sustainability are often so complex and far-reaching that we seek solutions
through collaborative ventures in which both
partners move ahead together.
RB: Does partnership extend to policymakers?

Plischke: We hope to get more support from
government. But we think that policymakers
often focus too narrowly on the uncertainties
and risks associated with innovations. We
need to be more aware of the opportunities.
How
Sustainability in practise: PRODUCTION
Green grandeur
BY 2018 AT THE L ATE
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T, THE VOLKSWAGEN GROUP W

AN
SUSTAIN
A high-performance sports car powered solely by electricity:

The e-tron by Audi
ABLE PRODUC
TION
TS
IS ITS RECIPE
o sooner had the mighty leader stumbled than its closest

adversary delightedly launched an all-out attack. Toyota recalled 4.5 million cars to its repair shops to mend gas pedals that
could, allegedly, have gotten stuck. Suddenly, the Japanese
firm's aura as the world's quality champion seemed to go up in
a puff of smoke. And it was at this moment that Volkswagen chief Martin
Winterkorn chose to announce the most ambitious growth project in the
German automaker's history. In three to five years, the CEO taunted his Asian
rivals early this year, the Wolfsburg-based brand conglomerate planned to
see its sales increase from a good six million to eight million vehicles. By
2018, Winterkorn targets a figure in excess of ten million. That would mean
Winterkorn's team had finally reached its goal: the summit, the very top.
Size matters; but it isn't everything. Volkswagen, a fast-tracker in both the
volume and premium segments, also aims to become "the most eco-friendly
automaker in the world." Derived from the group's Strategy 2018, the 18plus
program is its figurehead initiative in this regard, standing for "more entrepreneurial thinking, more synergies, more ecology." Volkswagen's BlueMotion
label is already the best-known environmental label in automotive engineering. The green wave that is emanating from Wolfsburg goes by the name of
"Think Blue" an expression of the overarching corporate philosophy that
ET L
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itself rests on three pillars: environmentally compatible solutions and proautos, of which some three million are sold every year). Across the group as
ducts, the behavior of the individual, and environmental initiatives.
a whole, this strategy will enable the company to launch more than 40 new
For Winterkorn, "sustainability is a fundamental principle of corporate
models in the medium term. The new Audi A3 was first off the blocks. The
management and the key to lasting success." Profitability, environmental
Golf VII the group's flagship volume model is also based on the transverprotection and social responsibility: these are the three aspects that, througse matrix. Even a sports car matrix is conceivable. If this idea is taken up,
hout the world, must be brought into harmony in the long run." For mass proPorsche too will soon be on board.
ducers like Volkswagen, that is a very tall order. True, automotive engineering
Less effort, more flexibility, greater diversity in brands and models: on paper,
is one of the main drivers of economic development in emerging markets.
Volkswagen's module strategy is already freeing up a lot of cash. One-time
But rapid growth in mobility is throwing up major challenges of its own. While
costs and unit costs can both be cut by 20%, while engineered hours per
harmful emissions must be reined in quickly, finite fossil fuels are threatevehicle can be reduced by as much as a third. Production times and the comning to run out. And then there is the problem of congested traffic in megaciplexity of production can likewise be scaled back substantially. The number
ties such as Beijing and Mumbai, which are on the verge of
grinding to a complete halt.
Volkswagen's growth strategy is rooted in a new platform
Sustainability is a fundamental principle
architecture that combines what it calls a modular transof corporate leadership and the key to
verse matrix with a modular longitudinal matrix. Winterkorn
long-term
success. Profitability, environmental
sees these matrices as the key to sustainable industrial production: "They will allow us to realize the group's ambitious
protection and social responsibility.
growth and profit targets, uphold its brands and maximize
Martin Winterkorn, CEO, Volkswagen
the diversity of brands and models while reducing complexi-
" "
ty." Every year, Volkswagen channels more than EUR 8 billion

into developing new models and innovative environmental technologies. Profits are the stuff of which dreams are made.
Take the Audi A5, Q5, A4 and the new A8, for instance. All of them are based
on the longitudinal matrix. In the medium term, the number of such models
is to be increased to around 15 throughout the group. The modular transverse matrix, by contrast, is the technological cornerstone for Volkswagen's
future vehicle fleet in the A0, A and B segments (i.e. compact and mid-range
of variants has fallen sharply by more than 70% in the case of air-conditioning systems. Above all, the company's matrices are combining with thinned-down, highly effective turbocharged gasoline and diesel engines, innovative transmissions and electric motors to expedite Volkswagen's lofty consumption and emissions targets. Models in the new small family generation
are also playing their part. Key features of this generation include compact
How
size, eco-friendly engines and a lightweight design. Right now, more than 170
of the group's model variants already give off less than 140 grams of carbon
dioxide per kilometer. (The EU prescribes a ceiling of 130 grams for new cars
as of 2015.) The highlight of the BlueMotion range is the Polo, whose 87
grams of carbon emissions make it the most environmentally friendly fivedoor model in the world.
A recent Roland Berger study affirms that German automakers are now out in
front in terms of their electromobility expertise too. This achievement is no
coincidence. Volkswagen already works with an intelligent mix of different
propulsion models: advanced combustion engines, low emissions, hybrid
engines and electric drive systems.
Production fits seamlessly into this strategy. The impact of production processes and products on all areas of life is factored into advance planning
preparations. Integrated environmental protection is the magic word. All
fields of responsibility and all processes worldwide are precisely defined
and accredited in line with both the international ISO 14001 standard and
the European EMAS (Eco-Management and Audit Scheme) eco-audit standard. In accordance with Volkswagen's sustainability strategy, the responsible use of resources safeguards "the future of the company". For Europe's
biggest automaker, eco-friendly production begins with product develop-
ment. It is here and only here that the environmental impact of subsequent production and recycling processes can be influenced by design decisions and the choice of materials, for instance. Corporate environmental protection focuses on energy efficiency and climate protection, but also homes
in on issues relating to water and air, wastewater and waste in general. The
same ecological standards are applied to all 61 Volkswagen facilities in 27
countries worldwide, including those in the fast-growing US, Chinese, Russian
and Indian markets. All existing facilities are accredited under international
environmental management standards; all new ones rapidly follow suit.
A rewarding exercise, as it turns out: In 2008, Volkswagen won the German Sustainability Prize in
the category "Most Sustainable Brands".
40%
INDIA THE NEW CHINA

China has long been a million-car market for Volkswagen
and now India is set to become one too: starting in 2018,
the Wolfsburg-based OEM plans to sell a million vehicles
a year there.
Volkswagen has high hopes for Suzuki, India's biggest
car manufacturer, in which VW has taken a 20% stake.
Volkswagen Group is securing its future and that of its
production sites worldwide with the objective of attaining
competitiveness on an economic, technological and
social scale. In its Social Charter dating from 2002,
Volkswagen undertakes to ensure that working hours,
The journey continues. Paint shops are
of Germans
one of the biggest energy guzzlers in
want to buy an electric
vehicle production. While painted bodies
vehicle in the next three are being dried, thermal afterburning
to ten years
systems inevitably generate more heat
pay and occupational health and safety provisions

meet, if not exceed, the respective national standards.
The Charter acknowledges the fundamental right of
freedom of association. No employee may be discriminated against on the grounds of ethnic origin,
gender, religion, nationality, sexual orientation, social
background or democratic political views. Volkswagen
Group is thereby working to enforce the basic principles of the UN Global Compact human rights, working
standards, environmental protection and an anticorruption stance at all of its operational sites.
than the associated dryers can absorb. Since

Volkswagen added a catalytic converter to purify
the exhaust air, however, the systems have only
produced as much heat as is genuinely needed.
Energy consumption has been slashed by 40%.
The first catalytic converters were installed in Halls
9 and 15b at the Wolfsburg paint shop. After 17
months in service, natural gas consumption for the
first top coat line to be fitted with a catalytic converter was around 40% below that of conventional
machines. Carbon emissions were reduced by the
same amount. Today, 21 catalytic converter
systems are in operation at the Wolfsburg facility.
The most powerful wind turbine in the world is the
one at Volkswagen's Emden site. The group sees
continuing to improve the environmental impact of
production and products as symbolic of "ecologically sustainable growth" and "an elementary component of Strategy 2018". For the Emden plant, the
use of biomass to produce heat since 2008 marks
yet another step along the road to becoming a carbon-neutral "blue factory".
In addition to wind power, the Volkswagen plant in
Emden home of the Passat BlueMotion also
uses solar power for energy recovery. In 2008, the
NEW DIMENSIONS OF
EFFICIENCY IMPROVEMENT
The six-generation Golf has improved
on nearly all features of the third
generation, while its fuel consumption
has been reduced by almost a quarter.
Performance
Weight
Length
Width
Height
Consumption
+ 64 %
+ 13 %
+ 4,5 %
+5%
+6%
24 %
"Volkswagen Staff Association for Renewable Energy in Emden" was set up to

operate the photovoltaic system at the plant. Then, in December 2009, a
400,000 m2 energy forest was established on the grounds of the facility.
The forest will in future supply the equivalent of some 200,000 liters of fuel
oil for heat generation per year. In 2009, the Emden plant was already able to
meet a third of its total energy requirements from renewable energy.
Whereas Emden boasts a mega-power plant, Salzgitter's engine factory is fitted with mini-power plants small powerhouses that run off a natural gasfired engine and are hooked up to an electric generator. The name of this
installation? EcoBlue. These cogeneration plants are based on the principle
of combined heat and power (CHP). The heat generated during production of
electricity is stored and can be reused locally. Large power plants too apply
the same principle, albeit with far inferior efficiency. Salzgitter's EcoBlue
power plant achieves efficiency levels of over 90%, compared with 50% at
best for conventional large-scale power plants.
No bigger than a household refrigerator, the initial
EcoBlue prototype went online to heat washing water in 2008. By the end of 2010,
25 of these systems will be in use.
Private households too will reap the
e-vehicles require about
benefits. Together with LichtBlick,
two terawatt hours
Germany's
largest provider of green
of electricity.
That's enough to power a city
electricity, Volks-wagen has develowith 40,000 people
ped the blueprint for a new "home
for a year
power plant" that will be suitable for the
mass market. The home power plant is
modeled on the EcoBlue system and has already
1Mio.
attracted 40,000 inquiries. The first of these plants is to go into service in

Hamburg at the end of 2010.
So much for electricity. The other basic ingredient in automobile production?
Water. Roughly five cubic meters of water are used in the production of a single vehicle. Since the amount by which this volume can continually be reduced is inherently limited, the issue of recycling purification and reuse is
all the more important.
The way Volkswagen repeatedly uses the same water in Wolfsburg is unique.
A water reservoir split into four separate sectors and with a total capacity of
around 1.7 million cubic meters is at the core of this innovative water for process water, it is also part of the flood protection system for the Wolfsburg
region. Cooling water (purified wastewater) from the facility's own sewage
treatment plant and rainwater both from the company premises and parts of
the city are channeled into the reservoir. After standing for a maximum of
seven days, the water is treated and fed back into the process water network. At the Wolfsburg plant, process water is used mostly for cooling during
production. Statistically, every drop of water at the Wolfsburg plant is fed into
this cycle more than six times before it is purified and returned to the drainage channel. Small numbers sometimes add up to big results.
This year, Volkswagen presented its internal Environment Award to employees for the seventh time. In the Product category, first prize went to staff of
the Attachment Parts, Glazing and Corrosion Protection department. Using
recycled materials, the team had developed underbody paneling that has
since been fitted in the Polo. The paneling reduces drag, noise and the weight
of the vehicle as well as cutting fuel consumption by about 0.05 liters per
100 kilometers.
How
Sustainability in practise: RESEARCH & DEVELOPMENT
White hart
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INTO SUSTAINABLE INDUSTRIAL PRODUCTION IN GERMANY.
SCENT SPECIALIST
SYMRISE, A PROM
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EASON TO
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ONE DEER, AT
t has no antlers, the ears of a hare and the grace of a youthful roe deer.
Yet its tusk-like canines resemble those of a wild boar. It roams the
highland regions of Central and East Asia in search of food and constantly fleeing from humans. It is the only deer that can effortlessly
scamper to the very top of inclined trees to eat their leaves, twigs and
lichen. A gland the size of a walnut, located just above its genitals, is what
makes this shy creature the object of man's desire. For the gland gives off a
very special secretion: musk, the queen of aromas and a legendary ingredient
used in traditional Chinese medicine. The gland of the male musk deer, normally used to attract mates, yields up to 30 grams of the precious substance.
But the deer pays with its life.
Musk has been the most prized animal product since ancient times. In the
Middle Ages, physicians prescribed it as a general-purpose remedy for mental
illness and nervous disorders. Worn in a pomander around the neck, it was
believed to ward off the plague. Long before the Dark Ages, however, Chinese
BE GRATEFUL.
medicine valued its effect on the nervous system, perspiration, the pulse and
the respiratory system. Crusaders were the first to bring musk to Europe as
an aphrodisiac.
Like ambergris, civet and castoreum the three other primary animal scents
musk exudes warmth and a sense of safety. It keeps perfumes on the skin
for longer and invigorates aromatic compositions. Haircare and bodycare
products use it, as do detergents and household products. Musk perfumes
emphasize the substance's potent erotic allure. Estimates put the number of
Chinese and Korean medicines that contain animal musk at over 400. The
substance is equally indispensable to the Indian natural medicine philosophies Ayurveda and Unani. In its pure form, animal musk is as costly as gold.
To make sure the supply never runs out, stags are "milked" three times a year
at breeding farms, and kept alive. Since demand consistently outstrips supply, however, most of the musk in use today is synthetic. In 1926 the chemist
Leopold Ruika first described the structure of muscone and later produced
think: act BUSINESS S u s t a i n a b i l i t y 2 5
Over
20 Mio
copies of the book "Perfume"
were sold worldwide
and it was translated in
47 languages.
3000
is the number of fragrances

processed by the perfume
industry. A perfume can
contain up to 300 different
aromatic substances
the first synthetic variants. Not that that has really helped the deer, some
species of which are threatened by extinction. Protective laws have been put
in place to keep the worst from coming to the worst.
White (or industrial) biotech should help. It might even make it possible to
do without the natural musk suppliers entirely. As part of the BIO2021 project
initiated by Germany's Federal Ministry of Education and Research, developers at scent specialist Symrise in Holzminden the beating heart of the
country's fragrance industry have developed an independent and competitively priced biotechnological musk production process that can also substitute for the artificial musks hitherto synthesized from petrochemicals.
"We are moving into completely uncharted territory," says Johannes Panten,
Project Manager and Director of Technology Scouting at Symrise. "No-one has
ever yet explored the paths of natural biosynthesis."
Symrise is a global leading manufacturer of aromas, perfume compositions
and cosmetic ingredients. Its customer list includes big-name food producers
and the perfume industry. The company processes around 10,000 raw
materials. Its R&D effort is increasingly focusing on the use of renewable
resources.
Biotechnology is widely tipped to be the pivotal technology in the 21st century. Red biotech seeks to derive medical applications from research into biotechnology and genetic engineering. Green biotech is used in agriculture,
primarily to improve cultivated crops. Following in their footsteps, white biotech aims to use microorganisms, enzymes and other natural production
systems to replace chemical production processes. The German government
sees in white biotech "highly promising growth potential for branches of indu-
The world of Symrise

Symrise is a global provider of fragrances and flavorings. It also
manufactures raw materials and active ingredients for the perfume,
cosmetics and food industries. Sales of around EUR 1.4 billion in 2009
and a workforce of some 5,000 people make the company one of the top
four in the global fragrances and flavors market. Headquartered in
Holzminden, Germany, Symrise is present in over 35 countries in Europe,
Asia, the USA and Latin America. Seven percent of its sales revenues are
plowed back into research and development.
WHAT IS A PERFUME?
Perfumes contain 20% to 30% aromatic substances and are mixed
with 95% alcohol volumes.
Eau de parfum (also referred to as esprit de parfum or parfum
de toilette) is a weaker variant of the perfume containing a
concentration of aromatic substances of around 15% to 25%.
Eau de toilette contains 10% to 20% aromatic substances.
Eau de cologne contains only 2% to 5% aromatic substances and
is blended with 70% to 80% alcohol. This designation is often used
for men's fragrances.
Perfume gels contain 5% to 7% perfume oil and little alcohol,
but also contain gelling agents.
After shave (aprs rasage) contains at least 3% to 5%
aromatic substances.
stry with a significant impact on the economy." In line with its high-tech strategy for Germany, Berlin will pump EUR 100 million into white biotechnology
between now and 2012.
Biotechnology already significantly affects products and processes in many
industries. Strictly speaking, however, it is anything but new. Some 8,000
years ago, the Sumerians in Mesopotamia are known to have brewed an
alcoholic beverage the world's first beer from germinated barley. There
would be no wine, leavened bread or cheese without microorganisms. Today,
white biotech is all around us: in the enzymes used in household detergents,
in the dyes and leather treatment products used in the textile industry and in
substances used to decontaminate waste. Now, however, it is the turn of
the chemical industry to benefit. This aspect of the discipline is
young indeed. Yet the benefits of the processes
used are plain to see. Large numbers of white
biotech processes are catalytic and highly
selective. In many cases, there are no byproducts at all. Better still, white biotech
frequently gets by without the use of
individual aromas combine
hazardous chemicals.
to form the unmistakable
400
taste of vanilla
Research and development on the basis of

renewable resources is at the core of
Symrise's sustainability strategy.
"Sustainability has become integral to
our corporate strategy," says Chief
Executive Officer Dr. Heinz-Jrgen
Bertram. "That is what the market
wants. Moreover, we owe it to the
environment." Food producers in
particular are coming under pressure from consumers who want natural, ecofriendly foodstuffs that are traded fairly and are above all affordable. "That is
why at Symrise we factor sustainability into the development of flavorings
and ingredients from the word go," explains Dr. Claus-Oliver Schmidt, in charge
of Global Quality Control and Innovation Management at the fragrance and
flavoring factory in Holzminden. "People don't just expect the ready-made
products they find on supermarket shelves to have been produced using
sustainable methods. They are paying more and more attention to the individual ingredients." Nor is the matter confined to cutting the consumption of
water and energy and reducing carbon emissions. Nowadays, the issue at
stake is "sustainability in every product development cycle."
Take vanillin, for example. More than 400 distinct aromas contribute to the
unique flavor of vanilla which, in its natural form, is derived from the pod of
a species of orchid. Vanillin is the most important sensory component of
vanilla. Wilhelm Haarmann succeeded in synthesizing it as far back as 1874.
This first revolution is now being followed by a second: biocatalytic synthesis.
The flavor is derived from rice. Natural ferulic acid is converted to vanillin with the aid of enzymatic fermentation,
a process that yields several benefits all at once. First,
the substance used is a natural, renewable resource, so there is no need
for chlorous inputs. Second, the process takes place at room temperature,
so considerably less energy is consumed.
Third, the wastewater is pH-neutral.
Wherever possible, Symrise adopts a "farm-to-fork"
policy, using locally cultivated raw materials. This
keeps transportation costs to a minimum and optimizes
supply chains. Local farmers supply onions, Savoy cabbage
and beetroot to the company's headquarters in Holzminden.
The company and the farmers together decide on the choice of
seed, use of fertilizers and timing of the harvest. The pomace left
over from production is spread on the fields as an eco-friendly fertilizer. Since Symrise acquired raw materials supplier Aromatics S.A.S. in
Madagascar, vanilla pods too have been processed where they are grown.
Symrise is thus the only flavoring company committed to backward integration in this discipline. Citrus flavorings are another of Symrise's core competencies. It is only logical, therefore, to find that citrus the most successful
taste in the beverages sector is an important element in the company's
sustainability strategy. Shipping is minimized thanks to a global citrus center
in Brazil. Exemplary energy standards ensure "clean" production. And sustainable extraction processes use environmentally friendly solvents.
Innovative technologies support these processes. One of them is SymTrap,
a system that recovers the high-quality flavoring molecules that are normally
lost during the industrial processing of fruit and vegetables. The use of the raw
materials is optimized, albeit without consuming a lot of energy. The result is a
natural, authentic flavor profile. SymTrap can be used for fruits, various types
of vegetable, herbs, other natural crops, and even fish and meat.
USD
" "
For the biotechnological synthesis of

musk aromas, Symrise cooperates
with a number of partners under the
aegis of a project sponsored by the
Excluding sustainability from
Federal Ministry of Education and
our corporate strategy
Research: the Technical University of
is unthinkable, the market demands it.
Darmstadt and the Technical
Besides, we owe it to the environment.
University of Dresden, the Karl
Winnacker Institute (Society for
Chemical Engineering and
Dr. Heinz-Jrgen Bertram, CEO, Symrise
Biotechnology) and Leipzig-based
enzyme specialists c-Lecta. Johannes Panten, Project Manager at Symrise,
spells out the part played by these partners: "They use their molecular biological procedures to elucidate the metabolic pathways in natural producers and
convert them to biotechnological processes."
This joint effort could help the musk deer in another way, albeit only in theory.
Molecular relatives of the coveted aroma are also formed in other mammals
and plants. Muskoxen, musk beetles, muskrats and Muscovy ducks all secrete
"counterfeit" musk. The Allegheny monkey flower and abelmoschus do the
same. Their secretions are unsuitable for industrial usage, however, as the tiny
concentrations yielded could never justify the huge cost of extraction. So the
only truly viable alternative is synthetic production.
Synthetic musk is produced using petrochemical substances, of which there

are three major classes: polycyclic, macrocyclic and nitro musk compounds.
However, polycyclic musk substitutes in particular are in the firing line due to
environmental and healthcare concerns. Concentrations accumulate in fatty
tissue and are not readily degradable. In conventional sewage treatment plants,
only part of these substances can be removed from the water. Symrise therefore focuses on macrocyclic aroma substances, which are biodegradable and
whose properties are at a premium in the perfume industry.
In one way, the biotechnological production of musk aromas is no different to
white biotech as a whole: "The standard of industrial production that would be
needed to leverage this technology ubiquitously and profitably has not yet been
reached," Symrise boss Bertram openly admits. "In research, staying power is
of the essence."
2.350
is how much it costs

to buy one bottle
(330 ml) of the world's most
expensive perfume
Clive Christian No. 1
Naturalness:
New rules in the EU
Regulation No. 1334/2008 of the European Parliament and of the

Council of December 16, 2008, on flavorings and certain food ingredients is intended to facilitate the free movement of food and help protect the health and well-being of consumers. The regulation comes into
force on January 20, 2011. For the purposes of the regulation, flavorings
are products that are not intended for sale but are added to food in
order to modify or create a certain aroma and/or taste. The regulation
does not apply to substances that have an exclusively sweet, sour or
salty taste, raw foods, smoke flavorings or mixtures of fresh, dried and
deep frozen spices and/or herbs, blends of tea and blends of tea-like
products, provided they are not used as food additives. Only those flavoring substances that appear on the EU Community list are permitted
and approved.
Food flavorings must be indicated on the packaging by the word "flavoring", a more precise indication or a description of the flavoring. The
statement "for food" or "restricted use in food" or a more specific reference to the intended food use must also be provided. The term "natural"
is only to be used for substances or extracts that are derived directly
from an animal or vegetable source. The term "nature-identical flavoring"
has been removed.
How
Sustainability in practise: PROCUREMENT & SCM
Blue power
AUTOMAKERS ARE KNOWN TO RUTHLESSLY EXPLOIT THE PURCHASING POWER THEY HAVE
OVER SUPPLIERS. NOW, HOWEVER, IT IS THEY WHO ARE COMING UNDER PRESSURE.
AND THEY ARE NOT ALONE: COMPANIES SUCH AS SOFTWARE GIANT SAP ARE CONSCIOUSLY
USING THEIR INFLUENCE TO FURTHER THE CAUSE OF SUSTAINABILITY
AND ADDING A NEW DIMENSION TO MANUFACTURER/SUPPLIER RELATIONS
he message to the workforce of SAP AG was no more than a couple

of lines long. For the habitually successful premium manufacturers
in Germany's auto industry, however, it was not good news. In future
the top-down instruction read company cars leased by the Walldorf-based
software group would be permitted to emit no more than 170 grams of carbon
dioxide (CO2) into the air per kilometer, 30 grams less than had long been the
company's yardstick. Thanks to improved, more environmentally friendly
engine technology, SAP employees had no reason to fear for their creature
comforts on the road. Even so, they would have to make do with a lot less
power. The door had slammed shut on models at the top end of the mid-range
segment, not to mention luxury limousines in the premium segment. An Audi
A6 or a Volkswagen Passat 2.0 TDI, a Mercedes Diesel E 200 or a BMW 530d
was still just about doable. Anything bigger was off the menu. Period.
"We at SAP must play our full part in building a future that is both livable and
sustainable. We are actively driving this process." This one of the key tenets
of the software company's strategy. Nor is SAP content for the principles of
sustainability to be lived out on its own premises or for customers to be
supplied with smart software solutions. "Our overriding goal is to leverage
the unique strengths of our company to contribute to economic and social
development and help protect the environment."
The sustainability strategy at SAP +++ Become more profitable through

rising customer expectations +++ Sustainable business processes help to
Leverage its strengths? Isn't that a discipline hitherto associated primarily

with the lead buyers of supermarket chains, who ruthlessly exploit their purchasing power in the retail sector, unleashing cut-throat competition in the
process? Unconventional development and purchasing methods in the automotive industry too have triggered a huge transition in the supplier industry.
Now, however, the car makers are on the receiving end. Having market players such as SAP flex their muscles so aggressively in favor of sustainable
development adds a new quality to the whole issue.
"The business strategy behind our sustainability approach aims to increase
short-term and long-term profitability by actively managing the full spectrum
of economic, social and ecological opportunities and risks," says Daniel
Schmid, Head of Sustainability Operations at SAP. The most important thing,
he adds, is to have a strategy that covers all the bases that captures CO2
emissions, energy and water consumption, financial data and the social
impact of entrepreneurial activities. Nor should that apply only to one's own
company. "Step by step," Schmid explains, "we are integrating our network of
suppliers and partners into our sustainability strategy."
In the software industry, SAP is already hailed as the global sustainability
leader. In its category, the German giant has won top slot in the Dow Jones
Sustainability Index (DJSI) four times running. Since 2005, media company
Corporate Knights too has had SAP on its list of the Global 100 Most
Sustainable Corporations. And whether you look at the FTSE4Good Index, the
Global Challenges Index or the NASDAQ OMX CRD Global Sustainability 50
Index, you will always find the name SAP among the front runners. By 2020,
the company wants to slash greenhouse gas emissions to the 275 kilotons
of CO2 last achieved in 2000. Measured against 2007 figures, when the company belched 540 kilotons into the atmosphere the highest figure in its
history that would be equivalent to a 50% reduction. Throughout the company, Sustainability Champions act as multipliers. On paper at least, the mere
fact that greenhouse gases were cut from 500 kilotons in 2008 to 425 kilotons in 2009 yielded savings worth EUR 90 million.
For Schmid, this is "the strongest evidence that sustainability and profitability are not mutually exclusive." However, while the matter may not exactly be
a revelation to the many companies focused on cost-cutting and strategy
programs, implementation remains a smoldering problem. This is the conclusion drawn by Leuphana University Lneburg, which specializes in sustaina-
50%
that's how much below

average ordering costs are at
top industry and services
companies
50%
less greenhouse gases
SAP's target for 2020.
The base value is 540,000
metric tons,
what it was in 2007
bility (see , p. 11). Yet Schmid believes the recent economic crisis clearly
showed "that companies who sensibly manage all their risks and opportunities put themselves on a sounder economic footing."
"For SAP, sustainability is part of strategic planning. Both for us and for our
customers it is an essential factor, because we target long-term business
success," says Peter Graf, Chief Sustainability Officer and Executive Vice
President Sustainability Solutions. Back in March 2009, SAP set up a crossfunctional Sustainability Business Unit headed by the Chief Sustainability
Officer. Graf's mandate is to coordinate all initiatives that relate to the environment, social commitment and economic development, both inside the
group and in the global business community. The unit is attached to other
functions within the SAP organization. Its aim is to implement sustainability
initiatives on every level.
At all its facilities worldwide, SAP is, for example, committed to environmentally friendly, energy-saving and sustainable construction. Compliance with
at least the silver certification level of "Leadership in Energy & Environmental
Design" (LEED) is the minimum requirement. SAP's Newtown Square facility
in the US state of Pennsylvania actually won platinum certification. Here,
geothermal installations use constant geothermal energy for heating and
cooling. Lighting systems linked to daylight levels combine with light sensors to regulate indoor lighting. A hybrid air-conditioning system uses ice to
cool the building during the day. At night, when energy consumption and
electricity costs are lowest, the melt water is then recooled.
sustainable business +++ Tougher regulations, increasing operating costs and constantly +++
successfully master these challenges +++ The sustainability strategy at SAP +++ Economies ++
How
A solar system on the roof of SAP's premises in Palo Alto, California, should
shave 154 tons off annual CO2 emissions. The installation also means that
the data center one of the hungriest power users no longer feeds off the
power grid. In Brazil, SAP operates its own sewage treatment plant.
All the electricity needed by the plant is generated from
renewable sources.
not over yet, he admits. "But the goal is to rigorously align our value chain
with these criteria. Customers and employees alike expect a lot of us." SAP,
too, is clearly feeling the pressure on its own sustainability performance.
Anyone who wants to become (and stay) a business partner

to SAP must bow to the company's "Supplier Code of
Conduct", an extensive confession of loyalty to the software giant's ambitious sustainability goals that is also
SAP employees have taken
posted on the Internet.
22.000
SAP bundles its social commitment under the "Clear

Purpose" label, which essentially reflects a coordinated,
part in virtual events.
big-picture approach to corporate social responsibility.
This meant fewer had
to travel by plane,
Under the aegis of Clear Purpose, SAP manages all its
By accepting the Supplier Code of Conduct, SAP's partners
leading
to huge savings.
contacts with non-government and charity organizations
commit themselves to upholding current legislation,
in the fields of education (focusing on mathematics, inrespecting social standards, dealing carefully and responsformatics and natural science), transparency and governance
ibly with the environment and natural resources, refraining from
(openness, communication and responsible management), bridging the
violations of copyright and intellectual property rights, and avoiding any
digital divide (enabling access to electronic information) and environmental
and all conflicts of interest. Merely paying lip service is not enough.
protection (the responsible handling of natural resources). Every employee
Backed by contractually binding provisions, SAP conducts strict controls
at SAP can sign up as a volunteer; in 2009, 16% of the workforce participated
to check for violations of the ban on child labor and forced labor, for example.
in such initiatives. Together, they put in more than 62,000 hours of unpaid
Hardware suppliers come in for particularly close scrutiny due to human
work (7,700 person days or 21 person years) in 30 countries.
rights issues associated with the mining of raw materials (such as cassiterite, coltan and BFRs).
"Sustainability at SAP," says sustainability chief Peter Graf, "is not confined
to our own four walls. It covers the entire value chain." Business partners
Two hundred top suppliers, each with a purchasing volume of over EUR 1
suppliers and customers, subcontractors and consultants feel the full
million, have been asked to document their own sustainability policies. To
impact of SAP's positioning as both role model and provider of solutions.
date, over a third have submitted answers to the catalog of 90 questions.
Every year, the bar is raised a little higher. And big money is at stake: SAP's
Schmid says the results have been "generally positive which we had not
annual purchasing volume comes to around EUR 3 billion.
expected." What he will do with firms that do not want to take part in the
survey has not yet been decided. Of one thing he is sure, however:
"Bit by bit, we have begun to factor criteria such as economic, ecological and
"The journey will continue." Power utilities and even rail and postal carriers
social actions into our purchasing policy," says Daniel Schmid. The process is
are among the market heavyweights who get an idea of where the journey
is headed in their negotiations with SAP's buyers. Some of them can only
hope to land lucrative orders if they help SAP to raise its global share of green
electricity from renewable sources from 33% to 50%. In Germany, the share
of green power actually increased by 50% this year. The country's rail and
postal carriers have developed carbon-neutral models to move SAP's staff as
well as letters, parcels and express deliveries. SAP accepts that higher prices
will result and makes up the difference from its energy-saving programs.
In 2009, SAP used 7% less electricity than in the previous year. EUR 1 million
thus stayed in company coffers.
"
Sustainability at SAP
doesn't stop at the wall of the
company building
it stretches across the entire
value chain
Peter Graf, Sustainability-Chief, SAP
"Sustainable Sourcing and Procurement: More than Green" is SAP's message

to its customers. And the message could not be clearer: Sustainability is only
effective if it saves money. The purchase price of a computer, say, accounts
for only 20% of its lifecycle costs. Expensive initial outlay can easily be
recouped thanks to lower operating, maintenance and recycling costs. For the first time,
SAP is aligning the purchase of IT equipment
with these lifecycle costs.
The rise of sustainability

as a factor in business
That is cold comfort for the automakers, who

already find themselves grappling with SAP's
next carbon-cutting initiative. The company
hopes extra bonuses will encourage its 18,000
or so users of company cars around the world
to undercut the 170 gram mark. Even so, SAP
consultants and sales executives are not left
with a just a grim choice between thrifty VW
Polos and miserly Smarts. Vehicles in keeping
with their social status can already be had with
under 120 grams per kilometer.
A NEW STUDY BY ROLAND BERGER STRATEGY CONSULTANTS AND THE

GERMAN ASSOCIATION OF MATERIALS MANAGEMENT, PURCHASING AND
LOGISTICS (BME) REVEALS THAT SOUND BUSINESS LOGIC IS THE KEY
DRIVER OF SUSTAINABILITY WORLDWIDE.
HOW SAP
MANAGES SUSTAINABILITY
In March 2009, SAP introduced a governance model for sustainability.
One aspect of this model is the
Sustainability Council, which is empowered to take key decisions relating to
sustainability. Board members (including the two CEOs) and other senior
executives sit on the Council. The governance model also creates a number of
top management functions, including
Chief Sustainability Officer (Peter Graf),
Head of Sustainability Operations
(Daniel Schmid) and Vice President
Green IT (Timo Stelzer). SAP defines
sustainability as increasing short-term
and long-term profitability by actively
managing all aspects of ecological,
social and economic opportunities and
risks.
www.sapsustainabilityreport.com
More than 250 decision-makers from the

purchasing departments of leading companies took part in this global study. We
wanted to know their views on the extent to
which sustainability influences their purchasing behavior, what goals they associate
with the topic and how traditional measures
of performance price/cost, lead time/
accurate delivery and product delivery
are changing as a result. The key finding
was unequivocal: 69 % of the companies are
convinced that sustainability and profitability are not mutually exclusive.
But inner conviction is by no means the
only consideration that is causing purchasing departments in all industries, especially in Western Europe and North America, to
rethink their objectives and develop sustainable sourcing models. The market itself is
demanding a shift of focus. Sustainability
and profitability are not mutually exclusive.
For the overwhelming majority (83%) of
buyers surveyed by Roland Berger Strategy
Consultants and BME, "sound business
logic" is the key driver behind efforts to
promote sustainability followed by customers' needs (78%) and corporate philosophy (77%).
Roland Schwientek, Partner at Roland
Berger, sees the findings of the study
as an indication of "how purchasing
departments are already systematically
engaging with sustainability issues."
And that's not all: "Their importance is set to

increase significantly in the next five years."
A good third (38%) of the companies that
took part in the study already involve direct
suppliers in their sustainability activities.
By contrast, the practice of integrating multiple delivery stages is still in its early days.
Only 20% of respondents are in contact with
second-tier suppliers, and a mere 5% with
third-tier suppliers. The degree to which
sustainability issues are implemented likewise varies from company to company.
Roughly every second firm defines sustainability as one of its corporate goals,
according to the study. One in three companies also aligns its purchasing practice with
this principle. Having said that, only half
the companies surveyed have actually
distilled these aims into specific actions
and activities.
38%
of companies that
participated in the study
include their direct
suppliers in their
sustainability
activities
of the purchasers
surveyed by Roland Berger
and the BME named
"economic calculations" as
the main driver of their
sustainability efforts
83%
Who
7
questions for Otmar Hauck,

COO, Kion Group
OTMAR HAUCK, 55, Chief

Operating Officer of the KION Group, the
market leader in Europe and the number 2
worldwide in forklift manufacturing.
Otmar Hauck started his career as a soldier

in the German Armed Forces, during which
time he also studied electrical engineering
at the Bundeswehr (armed forces) University
in Munich. After leaving the military, he moved
to Audi AG, where he held several management
positions in HR from 1986 to 1992.
Through 2003, he assumed various managerial
roles in Volkswagen's manufacturing and human
resources functions.
From 2004 to 2007, he managed Volkswagen's
automotive plant in Mexico. Hauck then moved to
Wolfsburg to take over as Executive Director Business
Unit Plastics for Volkswagen AG. In this role, he was
responsible for the development and manufacture of
plastic components and modules for the Volkswagen
brand. He has been a member of the KION Group's
Executive Board since 2009.
COO, that's true; but they are set to become

much more important generally. A COO is not
BUSINESS
S uthat
s t a iessential
nability
merely best placed
to ensure
33
operational core processes in a company
work together; he or she also ensures that
tried and tested standards and best practice
processes are adopted throughout the company. So I'm firmly convinced that appointing COOs is the right way for European companies to go too, provided the position is
tailored properly.
3.
HOW WOULD YOU DEFINE YOUR ROLE?
The most exciting thing about my job, as
I see it, is translating market opportunities
or demands into a real, tangible, superior
product that comes in at cost, or, even better, below it. This incredibly complex task is
the real challenge in this job, and what actually motivates me at the same time. You
never stop moving.
4.
1. WHY DOES
KION NEED YOU?
I'm what holds the three core areas of our
company together, that is, development,
procurement and production. What really
matters here is whether the aims of our
extremely ambitious Operational Excellence
Program are actually being achieved. A COO
doesn't just manage an across-the-board
process, he is much more: the key to operational success. The products Kion is involved
with are complex and technically sophisticated. Having development, procurement and
production mesh closely is absolutely
essential, but it doesn't just happen.
My role also has a lot to do with quality

assurance. And the keyword above all is cost
leadership. So sourcing and supply chain
management are the fields in which COOs
must really stand out; not as autonomous
decision makers, but as part of the management team.
2.
DO YOU HAVE A FUTURE
AT THE COMPANY?
Oh yes. I believe that the title of COO is
something only the Anglo-Americans are
familiar with so far. This role even seems
rather exotic in Germany. That's changing
fast, though. Not every company needs a
DO YOU FIND YOURSELF

BEING PULLED IN MANY
DIRECTIONS AT ONCE?
Quite the opposite: especially as the initiator
of the company-wide Operational Excellence
Program, I see myself as the person at Kion
who is always looking for the best procedures and processes, optimizing them and
then implementing them to the benefit of all
locations and regions. This gives those in
charge of operations real added value, which
helps them in achieving their goals. At the
same time, by merging all the purchasing
functions of all our brands, we can use the
synergies our group offers to best effect.
The question of who ultimately decides on a
product is not an individual decision, but a
collective one, although such decisionmaking procedures must be clearly defined.
. WHAT OCCUPIES
YOU MOST?
We seem to have got through the global
economic crisis, if you believe what the analysts and forecasters are saying. We can feel
that, too. But we're going into the upturn
with our eyes open, which means we will
continue consistently with the program of
reducing costs and optimizing processes
we started early on. At the same time, we
are also working within my area of responsibility to exploit the clear growth opportunities in regions such as Asia, Eastern Europe
and South America to the full. So we're
looking in two directions: we're rearming
ourselves, while remaining growth-oriented
at the same time. That's not as easy as it
sounds, but our aim is clear: we want to be
the world market leader.
6.
HOW DO YOU USE YOUR

RESOURCES?
As a member of the management, I'm
responsible for development, purchasing
and production, including quality assurance, sustainability and safety. Management
sets the company's strategic direction,
sets the targets for individual brands and

different from any other company. Sustainsafeguards tried and tested standards and
ability has nothing to do with being on a missynergies throughout the company. My job
sion or wanting to put the world to rights. To
is also to define our long-term aims and
us, doing business sustainably means still
strategies with my staff and help them
being in business tomorrow. Sustainability
implement these. Sustainability is a key
and profitability are not mutually exclusive.
issue here. It is something every company
WHAT DO YOU
should be dealing with today. To us, that
STAND FOR?
means primarily new production methods
For always striving to improve through soland using environmentally friendly materiving problems successfully. That will make
als. Compared with other products on the
the company even more successful overall
market today, for instance, a Kion forklift
and bring us toward our goal of market leaduses around 40% less energy with at least
ership step by step.
the same turnover rate. A major part of
making ourselves fit for the future is to consistently build on our lead and continuously
look for new
ways of
offering
PORTRAIT: KION
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What
It's not over till it's over Automotive

suppliers in the wake of the crisis
THE BOOMING AUTOMOTIVE MARKETS IN CHINA, INDIA AND BRAZIL HAVE PUT CARMAKERS BACK INTO THE
PARTY MOOD. THE AUTOMOTIVE SUPPLIER INDUSTRY, HOWEVER, IS STILL ON THE OUTSIDE LOOKING IN:
ITS FUTURE APPEARS TO BE ANYTHING BUT ROSY.

EUROPE
100
25
AMERICA
45
2007 2008 2009
JAPAN
55
70
20 40
2007 2008 2009
25
25
2007 2008 2009
INSOLVENCIES IN THE AUTOMOTIVE SUPPLIER INDUSTRY, 2007-2009
But there seems little cause yet for celebration.

The EBIT margin average of 6% is only really
good at first glance, especially considering
the extent of real-asset investments and enormous R&D expenditure required by the automotive supplier sector. Other industries have
long been accustomed to higher margins.
At the same time, the price pressure being
exercised by carmakers is tending toward the
extreme. Even generous discounts are no
longer an automatic guarantee for winning the
contract. Suppliers across the board are now
considering whether certain types of business
are even still worth their while. Resistance can
quickly lead to blacklisting.
About 350 suppliers around the world were not able to survive the global economic crisis
Source: Roland Berger
"The automotive industry is on its way to recovery. But the suppliers now face significant
challenges," concludes a study by Roland
Berger and US investment bank Lazard. Ever increasing pressure on the part of the carmakers
is squeezing the margins. At the same time,
suppliers around the globe are having to shoulder an estimated refinancing volume of some
EUR 130 billion up until 2015 no mean task.
Nevertheless, the industry still has every reason to be satisfied with itself, despite some
gloomy figures. Worldwide losses during the
crisis included some EUR 200 billion in revenues, EUR 75 billion in EBIT and EUR 15 billion in
equity. 350 companies fell victim to the
plummeting global car markets. In the meantime, however, the situation has eased considerably, and in Europe and North America
remarkably so.
Even during the catastrophes of 2009, the
industry maintained positive free cashflows.
Investments were reduced, working capital
actions optimized and costs rescaled. The
result: "Supplier sales worldwide have almost
regained pre-crisis levels. Profitability will possibly even reach an all-time high with EBIT
margins of approx. 6% in 2010," says Marcus
Berret, Partner at Roland Berger Strategy
Consultants.
Moreover, real consolidation has not taken

place, despite the crisis. One in five companies
of the global supplier base is still deemed to
be structurally weak. They will be in particular
danger as soon as manufacturer sales figures
begin to indicate a downswing. The gap between the strongest and the weakest in the
industry will grow even wider. The crisis has
merely reinforced this trend.
The fact that manufacturers are shooting themselves in the foot is only partially true, says
Berger Partner Berret: "During the crisis, the
automotive groups helped their suppliers out.
And when push comes to shove, they must
ensure that the company remains in operation
especially if it has a particular significance
for its own segment. But the carmakers will
still continue to intensify the pressure, even to

the point of it becoming an existential threat."
Hard as it may seem, they have hardly any
other choice. Being more considerate merely
helps the competitors who rely on other
manufacturers paying higher prices and demand larger and larger rebates for themselves.
The result: the industry is increasingly losing
attractiveness for investors and owners.
The study has consequently come to the conclusion that the suppliers must continue to
improve their performance, increase their discipline in parts pricing and focus on profitable
business instead of fighting for each project.
Moreover, they need to search rigorously for
new sources of financing.
Berret: "At the same time, carmakers
should switch to a more collabora-
Hidden treasure
THE CRISIS HAS ERODED LIQUIDITY.
MANY SMALL AND MEDIUM-SIZED ENTERPRISES
MOAN ABOUT THE CREDIT CRUNCH.
WHAT THEY OVERLOOK IS THAT THERE ARE RESERVES
TO BE FOUND IN THEIR OWN COMPANY
SMEs on a strict diet: Around 60 billion
euros, says Roland Berger Strategy Consultants, is the sum companies need to spend
on raw materials, operating resources and
capital goods by 2012 money that is not
there. The crisis has eroded their liquidity
cushion. Many companies are victims of the
credit crunch. And it's when the economy
starts to pick up again that they frequently
have no means to make any financial outlay,
thus impeding their recovery.
In many cases, the money is right in front
of their noses. In a wide-ranging survey conducted over the past four years taking in the
views of 2,500 companies and 300 executives, Roland Berger and information and
collection agency Creditreform found that
unused liquidity reserves are enormous.
Working capital the management of inven-
tive approach regarding their suppliers and

focus on revitalizing structurally weak product
segments by allowing and supporting real
consolidation."
60
120
billion euros
remains untapped in
liquidity reserves, estimates
Roland Berger
billion euros in cash is

what German SMEs need for
the recovery, according to a new
Roland Berger study
tories, accounts receivable and accounts

payable is underestimated.
The average capital tie-up for the companies
surveyed did fall from 64 days to 56 days
between 2006 and 2009. And the proportion
of late payments also went down. But even
so, capital in large companies is tied up only
half as long as it is in German SMEs.
The good news is: "Most companies have
dramatically improved their liquidity management in the crisis," says Roland Schwientek, Partner in the Operations Strategy
Competence Center at Roland Berger Strategy Consultants. The bad news is: "German
SMEs have a lot of catching up to do."
Working capital is a major issue for any company with annual revenues in excess of 200
million euros. Smaller firms are less

concerned with it and in some cases not
concerned at all. Corporate groups run their
liquidity management very professionally.
"Traditional SMEs," explains Schwientek,
"tend to concentrate on revenues and
growth instead."
Food producers (7 days) and retailers
(16 days) have the lowest capital tie-up
periods of any industry, while apparel manufacturers (57 days) have the longest.
Many companies in the machinery industry
have capital tie-up periods just half of the
industry average, whereas for others they
total more than 600% of the average.
Roland Berger estimates that there are
around 120 billion euros in untapped reserves across all industries.
What
Many do not believe this can be true. Almost

90% of those surveyed by Roland Berger and
Creditreform firmly believe their debtor
management has improved greatly in the
past three years or is at least as good as in
2007. But balance sheet analyses tell a different story: only two thirds of SMEs can
actually claim that. All others have seen a

deterioration, and a significant one at that.
inventories by means of optimized contract

planning can quickly release liquidity.
Even a 5-10% shorter capital tie-up period

can absorb the whole of the financing requirement that a 10% rise in revenues brings.
Automated debtor management and lower
"However, more professional screening of

the customer base taking credit scores into
account will play a more significant role in
the future," says Schwientek with certainty.
In their own juices

EVERYBODY TALKS ABOUT IT, BUT VERY FEW DO IT:
CROSS-FUNCTIONAL WORKING LEADS TO MORE EFFICIENT ORGANIZATIONS. DISAPPOINTING: MOST DEPARTMENTS NEVER GET BEYOND
THE RIM OF THEIR OWN TEACUP.
Instead of seeking to communicate with

people who may think differently, departments prefer to sit and stew in their own
juices.
"Alongside a clear trend toward network and

process organizations, it is becoming more
and more important to enable employees to
collaborate efficiently with other divisions,"
says Thomas Rinn, Partner at Roland Berger
Strategy Consultants. But the dream and the
reality are worlds apart. A survey of 20 companies in Germany from different industries
showed: Individual desires are more important than the common good.
Efficient organizational structures don't look

like that. "The main objective of a modern
management system is to increase the integration of the functions," says Jochen
Gleisberg, also a Partner at Roland Berger.
"Our study showed that the primary organizational structure, roles that support cooperation and HR management are the key
levers." Roland Berger Strategy Consultants
is convinced that, depending on the industry
in question, network and process organizations will become much more important in the
future.
Many of the participants in the survey see

alternative organizational structures that
promote integration between functions as

being on the advance. But 85% of these companies also said that functions such as procurement, production and sales continue to
live their old autonomous life undisturbed.
Nearly the same number of respondents
(81%) consider their current level of crossfunctional cooperation to be insufficient
against their better judgment. A lack of
incentives, managers' fears of losing power,
or quite simply a lack of capacity preclude
close cooperation or even just the exchange
of know-how or ideas across departments.
Throughout history,
only a very few
have dared to look beyond
and broaden their
horizons.
The role of the caretaker will also become

more crucial, meaning that of employees
who operationally drive tasks forward, while
moderating among stakeholders. Another
key is giving the staff the competence to
successfully approach tasks in less structured environments and without having authority to directly give instructions to others.
Roland Berger Project Manager Sebastian
Durst: "Employees who bring this skill to the
table will become ever more valuable.
Farsighted companies are already preparing
for this today."
39
Kiosk
Chinas
Management Revolution
OUR EXPERIENCE WORKING IN CHINA FOR
OVER A QUARTER OF A CENTURY SUGGESTS
THAT A NEW MANAGEMENT APPROACH IS
EMERGING FROM CHINA.
The recent global economic crisis has called
into question the way business is done.
Governments and business leaders the world
over are asking how they can make their
Green Growth, Green Profit

HOW GREEN TRANSFORMATION CAN
BOOST BUSINESS
Sustainability is more than just a buzzword
it's shaking up the business world as did the
Industrial Revolution centuries before. Just
like all revolutions, the green revolution will
crush companies and wipe out industries
that miss or ignore the signals. Those that
fail to offer transformative products and services will miss valuable opportunities for
economies and companies more sustainable

and more resilient in the face of sudden and
unexpected shocks, financial or otherwise.
In the past they would have looked to the
great business schools in the US for a lead.
Now, eyes are turning else-where. One possibility identified by Roland Berger Strategy
Consultants is a management approach

being developed in China that could prove
influential throughout the world.
Title: Chinas Management Revolution Spirit, Land,
Energy, Author: Charles-Eduard Boue, Member of the
Global Executive Committee of Roland Berger Strategy
Consultants and President of Asia
http://think-act.com/fresh-thinking-for-decision-makers/think-act-books/chinas-management-revolution/content.html
new growth and jeopardize their business.

The book "Green Growth, Green Profit How
Green Transformation Boosts Business"
brings together the pro-found knowledge and
broad practical experience of experts from
Roland Berger Strategy Consultants, a global
strategy consultancy with unprecedented
green technology know-how.
Title: Green Growth, Green Profit How Green
Transformation Boosts Business, Author: Roland
Berger Strategy Consultants, International Green
http://think-act.com/fresh-thinking-for-decision-makers/think-act-books/green-growth-green-profit/content.html
New think: act CONTENT: Supply chain management
Supply chain management is a high

management art. Not to mention a strategic
competitive advantage. But only if the sup-
ply chain fits! The highly interesting new findings of an exclusive study conducted by
Roland Berger in collaboration with WHU Otto
Beisheim School of Management in Vallendar
near Koblenz, the Swiss Federal Institute of
Technology Zurich and Stanford University in
California show: The former cost killer is turning into profit driver! Best practice companies that rigorously segment their supply
chains and align them to product characteristics reap greater benefits than the market
in general. These companies generate twice
the return on assets of companies that lack

supply chain fit an approach developed by
Roland Berger Strategy Consultants designed to closely align supply chains to a
company's business model.
Read more about the findings of our study in
our latest think: act CONTENT on supply
chain management.
http://www.think-act.info/

Roland Berger - COO Insights On Sustainability - 2010

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ROLAND BERGER STRATEGY CONSULTANTS

MIXED PICTURE: PROGRESS TOWARDS SUSTAINABLE DEVELOPMENT IN THE EU

GROWTH OF GDP PER CAPITA

CLIMATE CHANGE AND ENERGY

GREENHOUSE GAS EMISSIONS*

ENERGY CONSUMPTION OF TRANSPORT

SUSTAINABLE CONSUMPTION AND

ABUNDANCE OF COMMON BIRDS**

HEALTHY LIFE YEARS****

EMPLOYMENT RATE OF OLDER WORKERS

OFFICIAL DEVELOPMENT ASSISTANCE*****

** Based on 19 Member States

clearly favourable change/

*** In North East Atlantic

**** EU-25, from 2005

***** From 2005

moderately unfavourable change/

Source: European Commission, Sustainability Report 2009

ty. Sustainability is not an alternative lifestyle on a remote island, but a management

ho would have thought it:

think: act BUSINESS S u s t a i n a b i l i t y

ROLAND BERGER STRATEGY CONSULTANTS

The idea is not to have success and sustainability,

BUSINESS Sduesst iagi n atboi lvi at yl u e5

ROLAND BERGER STRATEGY CONSULTANTS

iemens is doing it. BASF is doing it.

mentally and socially responsibly.

Barbara Kux, Executive Board, Siemens AG

think: act BUSINESS S u s t a i n a b i l i t y 7

WE HAVE IDENTIFIED FIVE CONSUMER TYPES BASED ON THEIR

"I do my bit for

on the backs of future generations, we need

"I want to know if

"Taking new approaches

21,2% 19,5% 18,2%

Source: GfK; Roland Berger study

initiatives are from one department to

Operations are the key here: development,

any industries buy in more than

ROLAND BERGER STRATEGY CONSULTANTS

Sustainability audits are managing the supplier pools.

new production methods and optimizing the

Our central executive

effectively combines all management proces-

Thomas Weber, Executive Board, Daimler AG

at the same time reducing CO2 emissions by

think: act BUSINESS S u s t a i n a b i l i t y 9

Measure sustainability performance along the value chain, taking all

within the target purchasing triangle of

For BASF, the question is not sustainability OR financial growth. Instead,

management as a way of integrating social and

Make production and logistics net-

can grow financially only if we pursue a sustai-

works sustainable at a time when customers' demands are becoming increasingly

nable strategy, which is also how our partners,

markets and our neighbors see it.

such as our customers, our staff, the financial

but realistic, such as the proportion of

rise to recommendations for all staff: only

An effective sustainability strategy

ROLAND BERGER STRATEGY CONSULTANTS

whole life cycle, much like the total cost

On paper, the matter seems