Germany is home to some of the world’s biggest and best-known companies, and although they might not beat the drum loudly, there is a rich heritage in sustainable thinking
Germany’s economy is export-led and is still, relative to those of its European peers, reliant on large-scale manufacturing, with many German firms being international household names. Carmakers are among the most prominent – BMW, Daimler, Porsche and Volkswagen – but Germany is also strong in chemicals and pharmaceuticals, with BASF, Bayer and Merck, and consumer goods, where Adidas and Henkel lead the field.
Power for all this industrious activity is provided by some of Europe’s largest utilities, such as E.ON and RWE. And Germany has giants in the services sector, for example Deutsche Bank and Commerzbank, insurers Allianz, and software firm SAP. In many cases, these titans dominate in a European or global context: Volkswagen is Europe’s largest car firm, and BASF the world’s biggest chemicals maker.
According to the Organisation for Economic Cooperation and Development, 2.1% of German workers put in their shifts at manufacturing firms with 250 or more employees. This might not sound like a big percentage, but relative to Germany’s peers it is. In Britain, for example, the figure is 1.2%, in Switzerland around 1%, in France 0.8%, and in Italy a mere 0.3%.
With such a profile, it is hardly surprising that business initiatives in Germany have a strong top-down component, and that at the highest levels, business and government work closely to ensure Germany’s continued wellbeing. This is as true of corporate social responsibility as any other area.
Making Econsense
The top-down approach is evident with the Forum for Sustainable Development of German Business, otherwise known as Econsense. This has only 27 members but they are all the big names: Bayer, Bosch, BMW, Lufthansa, SAP, Siemens and others. Econsense was established in 2000 by the powerful Federation of German Industries with a mission to “optimally apply social responsibility” and drive forward sustainable development.
Thomas Koenen, Econsense head of office, says German companies are working hard when it comes to corporate responsibility. “When German companies in general are compared to companies in other countries they will be in the forefront in the world, but they just don’t talk that much about it,” he says. “In Germany, CSR evolved from a strong debate on ecological issues as early as the 1970s. The ecological arena remains important, but these days CSR has a much broader definition and involves social issues as well.”
When it comes to the environment, Koenen says: “The government from early on focused on strong environmental protection, and German businesses soon saw business opportunities in this issue. It became not only something that they had to deal with but something they wanted to deal with.” The fruits of this are now being seen, he argues, with German companies leading in the fight against climate change with their green innovations.
Matthias Thorns, adviser on European and international affairs at the Federation of German Employers, agrees that German companies are strong when it comes to responsibility issues. “Many independent studies show that the vast majority of German companies are very active, and are doing more than following the very highly regulated standards that the German state has set by law,” he says, adding that the nature of companies’ engagement with issues depends on their profile and the markets they operate in.
Traditionally, German companies, especially those operating only within Germany, have been concerned with social and employment issues, such as allowing flexibility for working parents, and frontline environmental measures such as recycling. However, as German firms have internationalised, supply chain issues and handling corruption in developing countries have become important. And, of course, climate change is now a predominant issue, especially considering Germany’s continued focus on manufacturing.
And internationally, German companies are not just exporting goods and services, but also standards, Thorns says. “The good reputation that German products have abroad has not been obtained only because of the quality but also because of the behaviour of the companies producing them.” This is especially the case with health and safety standards, Thorns says.
Still to be convinced
But not everyone believes that German firms are doing all they can on corporate social responsibility. Germanwatch, a campaign group working on global equity and sustainability, has said German companies have been relatively late to identify responsibility as a core issue and to build it into their business strategies. Germanwatch and other watchdogs would prefer companies to be obliged by law to report the social and environmental risks posed by their activities.
Sylvia Schenk, chairwoman of Transparency International Germany, says corporate responsibility in Germany has so far been taken up mainly by large companies, and even they have room for improvement. “For the smaller and medium-sized companies, CSR is not an issue. They might be doing something that can be called CSR, but they don’t really have a CSR strategy,” she says.
She adds that while firms such as Daimler and Lufthansa are strong on reporting, corporate responsibility in German companies needs more depth. “Very few businesses have understood that CSR is a strategy, that you have to change your whole business structure and incorporate all the CSR issues in the way you operate your company,” she says.
German action on corporate sustainability issues is important, she argues, because the ripples could spread far and wide. “Germany is an export world champion, so what we are doing is important globally. We can develop things for the good, instead of for the bad. If we want to be a leading country with responsible policies, we have to improve.”
Case study: BASF
BASF, headquartered in the south-western German city of Ludwigshafen, claimed a world-first in 2008. It said it was the first industrial company to produce an end-to-end carbon balance, finding that for every tonne of carbon dioxide it produced, three tonnes could be saved by its products – for example insulation materials or fuel additives. This claim was met with some scepticism by NGOs, but it illustrates the importance to BASF’s strategy of managing its environmental impact.
BASF does not produce a separate sustainability report, but reports its financial, social and environmental performance in a single document. This integrated approach has earned it plaudits: it is listed as the top performer in the German Institute for Ecological Economy Research’s sustainability reporting index.
The company argues that placing sustainability at the heart of the business helps minimise risks, enhance its current business and creates opportunities. It has a sustainability council, carries out detailed assessments of suppliers and has an ongoing eco-efficiency analysis process that aims to improve the economic and environmental efficiency of its products and processes. BASF’s report contains a “value added statement”, which details the financial contribution it makes to society through wages, taxes and other payments. In 2008 this stood at €13.2bn, with nearly €3bn paid in tax.
BASF’s corporate responsibility commitments are grouped under the broad headings “employees and society”, and “environment and safety”. It has a range of goals to be achieved by 2020, including reducing incidences of occupational disease by 80% (compared with 2004), reduce greenhouse gas emissions by 25%, and reduce emissions to water of various substances by between 60% and 80% (all compared with 2002). According to its most recent report, good progress is being made in most cases with, for example, greenhouse gas emissions already down by 14% in 2008 compared with the baseline, and the 2020 target for reducing emissions of discharges of nitrates to water already exceeded in 2008.
More information: www.basf.com/group/sustainability_en/index
Corporate initiatives
German business organisations are working within a number of corporate social responsibility networks and on a range of responsibility initiatives. In addition to the prominent Econsense association, the Federation of German Industries has cooperated with the Federation of German Employers to establish the CSR Germany portal, a corporate responsibility showcase aimed in particular at giving new ideas to small and medium-sized companies.
A number of initiatives and organisations have been started to promote environmentally friendly business. These include Future eV (which targets smaller companies), the German Environmental Management Association, and Business for Climate Protection, another project from the Federation of German Industries.
German retailers are also responsibility-aware. The Foreign Trade Association of German Retailers has introduced a monitoring programme examining its members’ actions in improving social standards in global supply chains. This was one of the main foundations for the Business Social Compliance Initiative, which has sought to roll out higher standards to retailers across Europe. The German Retail Trade Federation, meanwhile, has its own responsible trade website, with good practice examples and guidelines.
Germany’s important chemicals sector is extensively involved in the Responsible Care initiative, which began in Canada in 1985. The Responsible Care Charter now covers 800 German chemicals firms, representing 90% of employment in the sector in Germany. The charter covers environmental protection and industrial safety over and above the letter of the law.
Companies are kept on their toes by Germany’s Institute for Ecological Economy Research, which publishes a sustainability reporting ranking for the largest German firms, assessing the quality of their environmental, sustainability and corporate social responsibility reports. In 2009, BASF, Siemens and BMW topped the tree. But it was noted that a fifth of Germany’s 150 largest companies were “reticent” in their reporting, with supermarket giant Aldi and chemist-shop chain Schlecker highlighted as poor performers.
Useful links:
Econsense: www.econsense.de
Germanwatch: www.germanwatch.org/start/english.htm
CSR Germany: www.csrgermany.de
Future eV: www.future-ev.de
German Environmental Management Association: www.baumev.de
Business for Climate Protection: www.wirtschaftfuerklimaschutz.eu
Business Social Compliance Initiative: www.bsci-eu.org
Responsible Trade portal: www.einzelhandel.de/csr
Responsible Care: www.responsible-care.de
Institute for Ecological Economy Research sustainability ranking: www.ranking-nachhaltigkeitsberichte.de