Sustainability is Driving All Industries – Transcript
Hi there, I am Conor Peick, a writer on the thought leadership team at Siemens Digital Industries Software. In this podcast, we are continuing our series of discussions with myself and Dale Tutt, our VP of Industry Strategy.
Today, we have a slight programming change. For this two-part episode, I asked my colleague Nick Finberg to guest host in my stead. Nick and Dale are joined by Eryn Devola, Head of Sustainability at Siemens Digital Industries. They will discuss how companies are pursuing sustainability today, some of the challenges that stand in the way, and how a digitalization strategy can help companies to achieve the sustainability demands of tomorrow.
Nick Finberg: Welcome, Eryn, can you give a brief introduction summary of your experience and what you’ve been working on lately here at Siemens?
Eryn Devola: Sure. I have the pleasure of being responsible for sustainability within our digital industries portfolio and what that really means is I have three lenses of which that I’m able to look at sustainability through. The 1st is looking at our own operations, the energy that we use, and the resources that we consume to develop software to support data centers, to produce products, to drive our fleet, to manage our business travel. That’s our first dimension. The second dimension that I have responsibility for is our products.
We make a lot of physical products. So, what resource or resources are being consumed? They are across the whole lifecycle. So, looking upstream at our supply chain through those operations I just spoke to and then also most importantly, for a lot of our products is in that use phase. How much energy are they consuming in that use phase for our customers? And the third dimension is taking the tools that we create and really helping industry become more sustainable. Those are really the playing fields that I get to operate in. And it’s really a great time to be working in sustainability because I feel like the timing is starting to line up, that we have the right motivation, the technology is available for us to do something here, and now I think industry is really starting to focus on making sustainability a priority.
Nick Finberg: Awesome. So, it’s sustainability seems to be an increasingly central part of many companies’ strategies for the future. I might ask, why now? What is what is driving companies of all types and sizes to make sustainability of a central focus moving forward?
Eryn Devola: The first thing is if you look back to the last three to five years, we saw a lot of companies making Net Zero type commitments, which are great and noble, but they didn’t necessarily have a plan on how to get there. And as you look forward, 2030 and 2040 are not as far away as they once were. So, companies are now looking to really put focus on the how we get there and put investment behind that and that’s driving it in one angle. The other angle that I see a lot of is governments and governmental agencies are trying to drive legislation.
If you look to the European Union, they have released the first two of six chapters of the EU taxonomy on climate adaptation and climate mitigation, and those chapters in the taxonomy are trying to classify products as being relevant to the sustainability topics or not, which is not mandatory. However, coming in fiscal 25 they have what they call the Corporate Sustainability Reporting Directive, or CSRD, which is mandatory for anyone who wants to be doing business in the EU. And this requires companies to have much more transparency on their environmental impacts than what they have today.
I think that’s one of the main things driving innovation. On the other side of that, we’re seeing investment and capital expenditure driving towards sustainability. This comes, in my view, from one main lever, which is ESG funds, which have been outpacing the market in doubling year over year. If you look back over the last five years, the other piece of it which I think is interesting in the US is that
we’ve got the inflation Reduction Act or the IRA, which has a lot of incentives for sustainability activities within the US. So, I think that that’s another place that you’re having some funding available to help you meet the plans that you’ve laid out. And I think the third thing, especially as we look at consumer industries, is that we have consumers who are much more aware and put priority on environmental impacts or the minimization of those impacts and they’re willing to pay a premium for that. So, if we look into the food and beverage industries and any consumer products, they are really leading the charge in many ways based on that consumer demand.
Nick Finberg:
Dale, does that drive with what you’re seeing at an industry perspective and an industry level?
Dale Tutt: Yeah, absolutely. I think when, as Eryn described a lot of the changes to the regulatory environment has certainly driven the need for a lot of these companies and a lot of our industries to shift their focus to how to operate more sustainably.
There certainly is a lot of, I would say the image piece, you know being a good corporate citizen. But you know that both customers and employees want to be associated with companies that are being good stewards and that they have a sustainability plan. And so, I think that a lot of these companies see that it becomes a source of competitive advantage that if you are perceived with the right image, and that you are getting some of these financial benefits that that they’ve got to start their sustainable journey.
They’ve got to be able to demonstrate more than just saying it but doing it. So, I think that’s really has become a main focus of conversation in boardrooms across all the whole world. It’s been a big change over the last four or five years where we’ve really seen a lot more focus now on sustainability.
Eryn Devola: Dale, I just wanted to add to what you said there which I think is interesting is that we see companies are releasing sustainability as being a future license to operate. And we those forerunners and thought leaders trying to do it faster so they can obtain that competitive advantage to get there. First, if everyone’s going to have to get there eventually, they want to win the race and take any additional share or margin that might be available in the short term.
Dale Tutt: Absolutely. And surprisingly, the companies that are getting there first are also starting to see the benefits. They’re using less energy and they’re producing less waste and so it becomes almost self-fulfilling at that point in time that you started down the path for one reason, but then you started to see some of the advantages to your competitive position and so I think a lot of companies then move beyond just talking about it and that’s when I when they really start to see the benefits of it.
I called it once the gift that keeps on giving. At one of my previous jobs where once we started saving money it was like hey, this is actually pretty good deal. So, it works out well.
Nick Finberg: It sounds it like that shift in perspective from seeing sustainability as a requirement to seeing the economic benefit of it might be a first step. Are there some other first steps that you’re seeing companies take to act on sustainability?
Dale Tutt: Yeah. I think that companies for so many years as they’ve developed new products, they focused a lot on performance or styling or cost of the product. If you’re designing airplanes, you might be worrying about the weight of the product, and you would see that there was a lot of focus on these items. But I think now as companies are starting to get involved in it, really understanding the full scope of what the challenge is, it’s what are the regulations and what are they doing in their current systems? And so, I think that’s one of the biggest first steps that a lot of these companies really struggle with and how to evaluate their sustainability.
Eryn Devola: And I think the first steps are part of gaining that better understanding and I think something you just said there I’ll touch on is that there’s information and there’s data that you need that comes from a variety of sources, but there’s also requirements and market considerations coming at you from so many different angles, and I think a big part of it as being able to consolidate all of that information down and really understand what your impacts are across your life cycle.
So really being able to combine what’s going on beyond your gate to gate and I know for so many years and manufacturing we would focus on what’s coming in our front gate and what’s going out our back gate.
And now with what’s being required from a governmental perspective in reporting is you really have to understand the entire life cycle of that product. That really requires people to be working together and collaborating with their supply chains, with their distribution chains, and with their customers in ways that they never have before.
Dale Tutt: There’s so much information to look at now. So, you know Eryn, how do companies manage this? Say they already had a lot of data, and they were already optimizing products based on a set of parameters, what are your thoughts, how are companies overcoming that challenge of managing this mountain of data now?
Eryn Devola: We continually design or put together tools that make design engineers jobs easier and then we give them more requirements that make it harder again and it’s a continual cycle. I think the best way to ensure sustainability is to design it in and what you need to then do is have those sustainability requirements like how much CO2 you want to or you’re willing to accept it emitting, how much water you’re looking at it being able to use, and how far you want it to travel.
All these additional requirements need to get put into your overall requirements management system the same way you would with a performance requirement, a size requirement, a weight, a color. These are requirements for products moving forward. Like I said, in a way I feel bad for those design engineers because we continue to make their job more complicated. However, the good news is we have tools where we’re integrating and able to present these trade-offs.
One phrase that often comes to me, and it’s a huge challenge for businesses to overcome, is turning data into decisions, and that’s what we’ve been working to do with a lot of our design tools as to put more intelligence into them that allows us to turn those that those data points into decisions.
Dale Tutt: Yeah, I’ll just add one last piece to that, Eryn. I agree with you that, that characterization, we give them tools, and then we give them more work to do, but all kidding aside, it really is enabling them. These tools are empowering them to be much more innovative and to really consider more and more of these parameters. That’s what’s so great about the current opportunities that we have as digitalization tools continue to mature and help those engineers be more productive and to automate some of the administrative tasks.
It’s making it much easier to incorporate new requirements such as sustainability. Whether it’s merely reducing carbon usage, overall energy usage, or reducing waste, I think in some respects it’s really helping them to be much more innovative and much more creative in solving some of these problems. I think that’s been a pretty good outcome with that, even though we do keep finding new things to keep them busy.
Eryn Devola: Right. There’s always another angle for coming at and one of the concepts that we’ve been talking a bit about here at Siemens isthe idea of collective intelligence and where, no one entity is going to be able to be fully sustainable. To optimize over an entire ecosystem, you have to have the intelligence of that ecosystem and a lot of that is putting it in those design engineers’ hands, but also putting it in those production managers hands and putting it in those logistics providers hands and pulling that data together. We see a future where there’s a lot more information and data sharing and people are collaborating in a different and more fundamental way.
Looking at it in an entire value chain optimization, rather than optimizing for my gate to gate or your gate to gate, looking at that entire value chain of a product, and I completely appreciate that that feels daunting, but I believe that we have the technology, and we just need to be able to continue to use and apply to these types of problems.
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