Dr. Steffen Schwartz-Höfler is head of Group Sustainability at Continental. In an interview, he shared how far Continental has come in terms of sustainability and why the transformation upstream and downstream is only really just beginning.
Dr. Schwartz-Höfler, what role does sustainability play for Continental?
Sustainability is increasingly becoming an integral part of our compass for business development. We are convinced that only sustainable business is the future. Our ambitious sustainability strategy comprises four key focus areas. Firstly, carbon neutrality along the entire value chain. Secondly, emission-free mobility and industry. Thirdly, a fully circular economy, and fourthly, 100% responsible value chains.
Can you describe your role in the company? Are you some kind of co-CEO?
No, not at all. It would be arrogant of me to say so. We are team players and not in competition with one another. Sustainability is represented on the Board by Ariane Reinhart as Member of the Executive Board for Human Relations and Sustainability. Our role as a corporate function is to act as an internal advisor, to win others over and to develop tools to make a success out of sustainable transformation. We are far from having all the answers. And Continental is still not entirely green yet. Sustainability is a marathon that also requires several intermittent sprints here and there too. As a company, we want to allow for new business through sustainability and to make changes to existing areas of activity. In order to achieve this, we as a central function and our colleagues in the business areas as part of the management team are involved in many processes – from the remuneration system right through to strategy development.
How is your team organized?
The central team in Hanover has been in place since 2018. Added to this are sustainability teams in all business areas, as well as a large, global network made up of various people in key interfaces. Ultimately, however, all of the more than 190,000 employees will need to support our sustainability ambitions if they are to become a reality.
Are all aspects of sustainability – ecological as well as social – equally important to Continental?
Definitely. But for me, assigning sustainability aspects to different categories such as environmental, social or part of corporate governance is an outdated idea. I would like to answer this question with one of my own, on the subject of climate change: It is often said that climate change is an ecological issue. But why do people want to stop climate change? After all, it’s not because of the ecological aspects, but because these being out of step results in adverse effects for people. The social aspect in the fight against climate change is the attempt to prevent, or at least minimize, the negative effects on people. That’s why the topic of climate change is ultimately a very important economic and social issue, too. At Continental, carbon neutrality, emission-free mobility and industry, circular economy, and responsible value chains are all key focus areas. Furthermore, we have defined eight sustainability essentials, from good working conditions to sustainable corporate governance. Finally, there is a healthy ecosystem overall for mobility and industry – for people and the environment in equal measure.
To what extent are Continental’s production processes already carbon-neutral?
The question is ultimately which levers are already carbon-neutral – or not, as the case may be. Of course, the extent of current emissions can be assessed, and compared with prior figures. Depending on when the starting figure is taken from, there could be a saving of 30, 50 or even 80 percent. At Continental, we have around 110 million metric tons of carbon dioxide each year that arise as part of value creation. This then covers the entire value chain – from the extraction of raw materials to the product’s end use. We’re talking here about Scope 1, Scope 2 and Scope 3 emissions. Of these in 2019, Scope 1 and Scope 2 emissions – so own emissions within the plant premises – amounted to around 3.2 million metric tons. This is carbon dioxide that is released from our own chimneys during production or arises during the procurement of electricity and steam. Due to the full transition of all our production sites to green power, this number fell to below one million tons of CO2 by the end of 2020. This is a huge success – but with a view to carbon neutrality, we will have to bring these 110 million tons of CO2 down to net zero. This still corresponds to at least 0.2 to 0.3 percent of global emissions. In other words: If we use our levers, this will have a positive global impact and bring in new business. But at the same time, this is a disproportionately large task that also goes beyond the limits of our own company and involves our suppliers and customers too. That’s why green power in the plants is only the first of many intermittent sprints.
What will the second intermittent sprint look like?
The Executive Board of Continental AG decided on one of many other intermediate sprints at the end of 2020. Since the beginning of 2022 we have been offering our customers the option of achieving carbon neutrality for the business they do with Continental along the entire value chain by neutralizing the symbolic CO2 backpack. We place a strong focus here is on Continental products for emission-free vehicles, and additionally provide the option for the combustion-engine vehicle business and the industrial business. Because one thing is clear: The global climate can't wait any longer. This goal can only be achieved with the combination of neutralization and reduction – the smallest possible rise in global temperatures as defined by the Paris Agreement.
Will this transition be carried out all in one go?
Since it will not be possible to transition the entire value chain over to carbon-neutral enterprises all in one go, the incidental carbon dioxide emissions will be made carbon-neutral as an intermittent sprint through what are known as “negative emissions”, for example through reforestation projects. By doing so, we are heading in the right direction already. Of course, we will also gradually replace the negative emissions with measures to avoid generating emissions before they even occur.
Why is it currently the four focus areas of carbon neutrality, emission-free mobility and industry, circular economy and responsible value chains that drive you?
We launched an in-depth analysis into this beforehand – in search of the sustainability issues that would bring the greatest and most comprehensive transformations and in which Continental would have significant leverage. These inherently then have the greatest potential for opportunities – but also for risk. To this end, we asked employees, suppliers and customers – but also investors and politicians as well as sustainability agencies – for their opinions here. The decision with respect to what we would be focusing on is constantly being validated by developments in politics, on the financial markets and by our customers.
What does emission-free mobility and industry mean?
Behind this is the vision of emission-free driving and emission-free industrial production. This refers to zero emissions, mind you, and not just reduced emissions while driving. This focus area also looks at other harmful emissions such as nitrogen oxide as well as harmful particulate emissions.
And what is meant by circular economy? Recycling is relatively old hat at this point…
…and that’s precisely why we deliberately opted for the term “circular economy” and not “recycling economy.” The term “recycling economy” is often used in the context of waste and recycling in particular. But this rather implies that there is still waste that needs to be processed. In a circular economy, the idea is rather about creating completely closed product and resource cycles in which there is no longer any waste – just material in the wrong place. So, it’s an economy in which everything is salvaged and reused over and over again. This includes, for example, designing products so that they contain components that can be easily reused and thus do not generate any waste at all. Recycling as we know it, which is often limited to a certain number of cycles before the material loses its quality, falls far too short here.
How should we understand the term “responsible value chains”?
Companies that operate sustainably assume responsibility for the entire value chain and thereby also for society itself. Observance and promotion of human rights, for example, is an important task for companies, not only in our own plants, but in particular also at our partners and suppliers. Finally, it goes much further beyond this, however. We not only want to understand or minimize our risks in this area; in positive terms, we also want to eliminate them entirely. By 2050, Continental aims to have the value chain designed on the basis of fully responsible sourcing and business partnerships.
When will Continental be operating 100% sustainably?
We are making good progress and are in the midst of change. By 2050 at the latest, we need to have achieved carbon neutrality, emission-free mobility, a circular economy and fully responsible value chains. This is an entirely different global economy that we are having to envisage here. We cannot truly be 100% sustainable at this point. It is the much-talked-about marathon involving many intermittent sprints. Anyone resting on their laurels here will be left far behind. We will probably even have to be significantly faster to reach our target earlier than 2050. And even then, there will surely be new issues to tackle. There will always be ways to become “even more sustainable.”
Does a company of Continental’s size actually drive development forward itself, or is it rather the case that developments in sustainability come from policy makers, investors, customers or the media?
Both of these sources of change come together here. We are at once a driver of change and driven by change. We would certainly word certain framework conditions a little differently. But we also want to shape things ourselves. Sustainability is all too often discussed using terms such as “sacrifice” or “an end to growth.” But at its core, it’s about massive opportunities that arise only as a result of changing products and markets. Identifying these opportunities and consistently bringing our business model in line with them – this is something that is important now and will continue to be important in the future. However, if we try to continue as we are or do exactly as before, we will inevitably end up having backward-looking discussions on how we can carry on doing the same but better. This defensive strategy is simply not workable. What we rather need to do is seize entirely new opportunities and actively push forward with the transformation of existing business areas. Along the way, we will surely also have to make changes to one or more businesses that are still economically sound, however, since this does not necessarily mean they are permanently fit for the future. If I know that a transformation is on its way, I should help to shape this for the future rather than ignoring it or even fighting against it.
What role do employees play with respect to the transition toward sustainability?
Sustainability is achieved by people – and for people. Without our employees, this would not be possible. We do not need any grassroots movement for the implementation of sustainable strategies within the company; rather, we very much need employees who can understand why things need to change and the direction in which this needs to go. Only in this way can we unlock our employees’ ability to innovate. Other important aspects include guiding principles, specific skills, the right framework conditions and incentivizations, for example in the form of remuneration. In 2050, around 40 percent of those currently employed by Continental are expected to still be an active member of the workforce. They are part of the transformation, will help to shape it and will benefit from it. 2050 will also be a milestone marker for me personally, since I will hopefully be going into retirement that year. But no matter how long we are all going to be in employment still, together, we as Continental will seize the opportunities presented to us and be among the winners of the transformation.
What are you particularly proud of?
We have achieved a lot within a short amount of time. This was only made possible thanks to the many people working together in a spirit of trust, and to the courage shown by individual colleagues. The Executive Board set our ambitious climate goals, which we adopted back in 2019, with a view to the future in the face of the Green Deal set out by the European Union. Our Environment department took a pioneering role with this approach. They were not afraid to jump right in: We do this simply because it is right and forward-looking. When we embrace and “hug” sustainability, we can make the most of the opportunities of transformation. That turned out to be exactly the right decision. And it is exactly this kind of courage that we had with our sustainability ambition. In this way, we are embarking into a sustainable future – with plenty of business opportunities for our company.