ESG in Mechanical Engineering: Enablers, Exploiters and the Desire for Uniform Criteria
9/1/2022 Sustainability & CO2 neutrality News

ESG in Mechanical Engineering: Enablers, Exploiters and the Desire for Uniform Criteria

Within the framework of the EU taxonomy, ESG regulations are increasingly coming into the focus of companies and also the financial industry. Essentially, the environmental criteria of sustainability are addressed first, but social components and aspects of corporate governance are also playing an increasingly important role in corporate cooperation. This also applies to companies in the mechanical engineering sector in Germany.

Graphic on industry indicators (CO2 emissions and production value) Source: IKB
Reducing the Carbon Footprint in or by the Mechanical Engineering Sector
At first glance, the relevance of the mechanical engineering sector to global greenhouse emissions is inconsequential, as less than 1% of emissions are directly attributable to this industrial sector. Nevertheless, significant successes in reducing greenhouse gas emissions have also been achieved here in recent years. In Germany, for example, greenhouse gas emissions from the sector were reduced by around 12% between 2008 and 2019, while at the same time production value increased by a good 15%, according to data from the Federal Environment- and Statistics Office. A closer look, however, quickly reveals the tremendous leverage potential of the mechanical engineering sector. It becomes clear that the sector can influence almost two-thirds of global CO2 emissions due to its extremely diversified customer base. These are mainly emissions in industry - for example in steel or paper production - or in energy generation. Studies by Oliver Wyman, BCG and VDMA show that new technologies can achieve savings of more than 80% in this target segment. By contrast, the impact of non-industrial emissions is considerably lower. These include means of transport and private households. But here, too, there is potential to be tapped.
Social Entrepreneurship Firmly Anchored in the Mechanical Engineering Sector
Even if the other two ESG components have been less in the public spotlight so far, they are firmly anchored in mechanical engineering. On the one hand, the industry structure shows a pronounced entrepreneurship, as a large number of the companies are owner-managed and, in addition to a generally sustainable corporate management, employee loyalty is also close. On the other hand, the strong involvement of trade unions in the employment of more than one million workers in the industry also ensures a strong emphasis on social aspects.
Diversity and Industry Structure Make It Difficult to Establish Company-Specific Indicators
For an objective comparison of companies and a possible peer group comparison, the formation of ESG-specific key performance indicators is essential. Here, it can be seen that a relatively good database exists for the industry as a whole, which is based on the economic analysis. This can be used to calculate both environmental parameters - such as greenhouse gas emissions/production value - and social and corporate management parameters - such as the proportion of companies in the sector with an active works council. At the company level, however, the challenge for the SME-dominated mechanical engineering sector is that the more complex parameters, such as the total CO2 emissions of the company, are often not known - especially when the CO2 backpack of the primary products is taken into account. This and the very diverse manufacturing processes in the various sub-segments of mechanical engineering make comparability difficult. Nevertheless, it is relatively easy to form initial indicative characteristic values at company level. These include, for example, the share of electricity from renewable energy sources in total electricity purchases. In other categories and indicators, it is possible to identify simple facts at the company level, although an external comparison here is again only meaningful if the geographical boundary conditions are taken into account. Here, for example, we should mention company affiliation or further training costs per employee. In summary, we see potential for ESG indicators to achieve a rating-relevant status in the future and thus to provide an objective picture of companies in addition to the still essential financial indicators. This applies in particular to environmental aspects.


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