How does a company that has set the environmental benchmark so high with the products they sell ensure that their own massive and far-flung operations conform with the sustainability standards they are helping other companies meet?
This was the challenge for Siemens Corp., the world’s largest provider of environmental technologies, a multinational conglomerate that generates nearly one-third of its total revenue — $30.5 billion — from green products and solutions.
For a company so invested in selling sustainability, with a time-honored tradition of technological excellence and a more modern focus on green innovation, the issue was consistency.
“Sustainability has always been part of the Siemens DNA,” explains Rainer Kohns, head of sustainability for Siemens Real Estate, the group that manages the company’s global real estate portfolio. But in 2005, a decision was made at the very highest levels of the management team to strengthen the link between sustainability and Siemens’ real estate portfolio. “We wanted to be sure that we were doing for ourselves what we were telling our customers they should be doing. Basically, we wanted to be sure we were walking the sustainability walk as well as talking the sustainability talk,” Kohns says.
This led to the creation of an ambitious internal green buildings initiative, currently under way. It’s a carefully calibrated, strategic plan to align Siemens’ massive global real estate portfolio — 3,000 facilities in 40 countries around the world — with the sustainability DNA of the products it sells.
To date, the company has invested in green upgrades to 90 of its older industrial facilities — modernizing heating and ventilation controls, replacing electric motors with more efficient models and retrofitting ventilators and pumps with frequency converters. “It is a huge challenge, because we are talking about huge numbers,” says Kohns. “Our facilities span more than 190 million square feet [more than 17.6 million sq. m.] of ground.”
Among the most recent efforts: a complete overhaul of an aging switchgear manufacturing plant in Berlin. The company is spending $132 million to build new shop floors and replace existing production lines with modern, clean and energy-efficient machinery. Siemens will locate a new global research and development center for high-voltage switchgear engineering on the expanded site.
Company officials also recently announced plans to redesign its Munich headquarters, with a goal of setting new international standards for energy efficiency and sustainable urban development.
Small Scale, Large Results
It’s one thing for a company that calls itself “the Green Giant” to decide to upgrade its own facilities. But for the universe of industrial firms that might not be as far along the green continuum, at a time when budgets remain tight, is there a value proposition beyond the goodwill and positive brand marketing for green upgrades to aging equipment and machinery?
Experts respond with an unequivocal “yes.”
Stephanie Miller, global head for Climate Business-Industries at the International Finance Corp., the private sector investment arm of the World Bank, says that upgrading processes with an eye towards incorporating cleaner production solutions and technologies can help companies save a significant amount in energy and water costs on an annual basis. IFC has helped client companies like Granules, an India-based generic drug manufacturer, shave $220,000 off its annual energy costs by identifying ways to enhance energy and water efficiency as well as solvent recovery.
“There can be a relatively short payback period for such renovations and upgrades, 18 to 24 months depending on what’s being done,” Miller says.
More extensive — and expensive — upgrades may come with a longer payback period: It likely will take Turkish galvanized steel producer Assan Demir three years to recoup its investment on a new-generation annealing furnace that reduces heat loss in the melting and casting processes and recovers waste heat, she notes.
“Even if companies think they can’t afford big fixes — like replacing an entire production line — they should not overlook the small opportunities, like replacing leaky pipes and changing out older-generation single-speed motors for variable speed motors,” Miller says. “In some instances, the accumulation of these small-scale changes can lead to significant results.” She notes that India’s JK Paper expects to see $1 million in annual savings following its implementation of such small-scale efficiency upgrades.
“A good start is lighting,” suggests Kohns of Siemens. “Twenty percent of electricity is wasted through lighting inefficiencies. It can be a very quick fix with our Osram products.”
For Siemens, too, the cost savings are important, he says. “Our upgrades to existing facilities are absolutely about efficiencies and the bottom line, in addition to the company’s impact on the environment,” says Kohns. Thus far, Siemens’ green upgrades have resulted in a savings of about $10.6 million, with an average payback period of less than two years.
“Our mandate is that anything we do has to have a payback period of four years or less,” Kohns says.
A Higher Standard
Siemens’ green imperative extends to its new facilities as well, with a mandate to strive for LEED certification.
“Even though this is a U.S. credential, it is well-known and well-accepted around the world,” Kohns explains.
The company’s gleaming new power distribution equipment manufacturing plant in the Turkish city of Gebze, east of Istanbul, was the the first Siemens facility to achieve LEED-Gold certification. The 377,000-sq.-ft. (35,023-sq.-m.) plant consumes 25 percent less energy than other similar buildings, saving an estimated $391,000 each year.
“This was the very first green building in Turkey,” Kohns notes with pride. Emerging markets in general are not as focused on sustainability issues as developed nations are, he says. “Sustainability is not their first priority.” Still, he says emerging-market nations like Turkey are ideal locations to implement a green building project, because there can be some very big wins in pollution reduction (a critical problem in many emerging and industrializing countries), in energy reliability, and in water conservation.
During the planning and design phase, Kohns’ real estate team worked hard to demonstrate the value of building a green building to their internal clients in Gebze. “It definitely took some convincing before the regional team saw the value of LEED certification,” Kohns says. When he first raised the LEED-certification concept with the Siemens Turkey project team, he says, “They asked the question that everyone asks: ‘How much more is this going to cost us?’ “
In fact, Kohns notes that project costs for the Turkey facility were a mere 1 percent more than what would have been required to build a less sustainable plant.