A conversation with Oerlikon Executive Chairman Michael Suess (Suess) and Oerlikon Chief Sustainable Officer (CSO) Georg Stausberg (Stausberg) about the progress during 2023 towards Oerlikon's 2030 sustainability targets.
How would you describe Oerlikon’s sustainability strategy?
Suess: Oerlikon’s strategy is to hold the number 1 or number 2 positions with our technologies in our end markets. Today, we occupy “sweet spots” in markets with our innovative technologies, which serve as high barriers to entry. We are leveraging our core competencies, including market leadership, innovations and talents, as well as sustainability, to drive growth and profitability.
Our sustainability strategy is an important part of our business strategy. Our vision is to continue empowering customers with our technologies so that they can increase their efficiency and minimize their environmental footprint. At the same time, we are focused on minimizing Oerlikon’s own environmental impact, ensuring a strong health, safety and employee culture, engaging regularly with stakeholders and upholding good governance.
Can you elaborate on your sustainable products?
Suess: Oerlikon delivers innovative technologies that help customers achieve greater efficiency and productivity, while using less energy and producing less waste and fewer emissions. We serve a broad base of customers in diverse industries – from automotive, aerospace and energy to luxury, textiles and polymer processing.
Owing to our technology leadership and broad market reach, Oerlikon is a sustainable company, and contributes to sustainability across all these industries on an ongoing basis. By leveraging our core competencies and expanding into new applications and markets, we are growing our business and, at the same time, extending our positive sustainability impact.
Stausberg: This is the reason why we have set a target of investing 100% of our R&D expenditure in sustainable products by 2030, which will further expand our sustainability impact and contributions. We are making good progress on this target. In 2023, we invested 78% of our R&D expenditure in sustainable products.
This report provides many case studies and examples of our sustainable solutions for customers in key markets. These innovations are an integral part of the cost-effective and climate-friendly solutions that are needed by our customers for their own operations and profit models.
For example, our coatings can extend the lifetime of tools by 20 times, which is equivalent to reducing around 8.3 million metric tons of CO2 or 28% of Swiss CO2 emissions in 2022. Our high-tech abradable coatings in jet engines increase engine operation safety and reduce fuel consumption, thereby cutting CO2 emissions by about 26 million metric tons, or 88% of Swiss CO2 emissions in 2022. Collectively, just two of our solutions save more CO2 emissions than the amount of emissions generated in 2022 in Switzerland.
Another example is our EvoSteam process for manufacturing staple fibers. This can reduce waste by up to 50%, lower the carbon footprint by up to 50% and save up to 3.2 million liters of water annually.
We will continue to develop and enhance our equipment, products and materials to extend tool life, reduce automotive and aerospace fuel consumption and improve textile and machinery efficiency, as well as work to increase the recycling of fibers and materials. In addition, we will continue to pioneer technologies for future mobility and artificial intelligence (AI) applications.
We are also applying the same principles and approaches in our own operations. Our aim is to excel in our operations, reduce our environmental footprint and improve our diversity, equity and inclusion performance as we advance toward our 2030 targets.
What milestones did Oerlikon achieve in environmental sustainability in 2023?
Stausberg: We are making good progress in the implementation of our energy management systems (EnMs). In 2023, we added another 36 sites, bringing the total number of sites with EnMS to 90, or 52% of our operational sites. This means that we can expect to meet our target of 100% in the next few years. It is also worth noting that the 90 sites account for 81% of the total energy consumed by Oerlikon.
Another area where we are making progress is our work on Scope 3. With an external partner, we have gained a good understanding of the Scope 3 emissions generated along our value chain.
Our machinery and systems sold to customers are highly reliable and durable, with a lifetime of at least 10 to 15 years. This attests to the quality of our products, and the resultant positive impact that there is less waste. That said, Scope 3 requires us to account for the emissions
generated by such machinery over their lifetime when used by our customers.
Thus, we are systematically evaluating how we can meaningfully improve our Scope 3 impact, including for such machinery. We are presently working with an external partner to assess and quantify our Scope 3 categories for the calendar years 2022 and 2023, and the project is expected to be completed by middle of 2024.
We plan to disclose our Scope 3 emissions in our Sustainability Report 2024, in line with requirements of the Task Force on Climate-Related Financial Disclosures (TCFD). Moreover, we also plan to set and commit to a Science Based Targets initiative (SBTi) target in 2024.
With regard to our supply chain, our partnership with EcoVadis has to date facilitated us to cover 30% of our mapped spending (key and strategic suppliers), an improvement on the 20% figure in 2022. Furthermore, 66% of our suppliers improved their overall EcoVadis score in 2023. We have also identified and trained regional Sustainability Champions, who act as our regional experts and single points of contact for our sustainability campaigns.
What were Oerlikon’s social achievements in 2023?
Suess: In 2023, we further strengthened our diversity actions and initiatives. The theme of our annual diversity conference was “Connect”. It celebrated the diverse cultures, backgrounds and perspectives that constitute Oerlikon’s fundamental strengths. The talks and panel discussions explored the influence of different cultures and learning attitudes on professional behavior and provided tips on how to harness cultural diversity to build successful international teams.
We also expanded our diversity events and celebrated Pride Month, International Women’s Day and International Women in Engineering Day, among others. To show our commitment to diversity, Oerlikon is a signatory to Equal Voice and also of Switzerland’s Trans Rights pledge.
Stausberg: In 2023, we also introduced new Employee Resource Groups (ERGs), such as Parents@Oerlikon and MultiGen@Oerlikon, whose focus is to advocate for the groups they represent and help increase the opportunities available to them at the workplace.
How are the forthcoming new sustainability regulations impacting Oerlikon’s sustainability reporting and resources?
Stausberg: Several new regulations are coming into effect over the next years. The current one that applies to this report is the new Swiss law, Art. 964a et seqq. of the Swiss Code of Obligations (CO), also known as the counter proposal to the Swiss Responsible Business Initiative (RBI).
Since our first Sustainability Report 2020, we have been voluntarily and transparently reporting in accordance with the internationally recognized GRI standards and, since our 2022 report, also in accordance with the SASB Standards. Both standards are considered acceptable standards defined under Art. 964a et seqq. of the CO. Thus, we did not have to make any adjustments to our reporting.
Forthcoming regulations, such as the Swiss Ordinance on Climate Disclosures and the EU Corporate Sustainable Reporting Directive (CSRD), require additional disclosures, which we have already started working on.
Suess: We understand that these laws and regulations are necessary to ensure that companies are more accountable and transparent in communicating the impact of their operations on the environment and society. That said, we would welcome it if there were a more aligned approach between the regulators and with the standards. That would make it easier for companies to comply and would increase the quality, transparency and comparability of the disclosures.
How is sustainability governed at Oerlikon?
Suess: Sustainability is governed at the highest level, that is at the Board level. ESG topics are regularly on the meeting agenda of the Board of Directors and the Executive Committee, reflecting our leadership and commitment to sustainability.
Georg is a member of the Executive Committee and was appointed our Chief Sustainability Officer. He is responsible for executing the sustainability strategy and plan, supported by the Sustainability Management Team and various functions.
To further anchor sustainability across the company, we are evaluating whether in addition to the current employee safety metric in our short-term incentive program, there are other sustainability key performance indicators (KPIs) that may be relevant for our strategic goals and can be reliably measured.
In 2024, we will run a pilot project to assess which ESG KPIs can be implemented and measured on an annual basis. Feasible KPIs will then be implemented in 2025/2026 as part of the remuneration packages for management and employees.
How do you engage with stakeholders?
Suess: We work very closely with our customers and partners in developing our technologies. With respect to employees, in addition to our diversity, equity and inclusion (DEI) events, we regularly conduct employee engagement surveys. We also share our strategy and plans with them, including those on sustainability, utilizing our internal communication channels, such as townhalls and my blog.
As for the financial community, Paul Adams, our independent Lead Director, and I undertook further engagement initiatives with investors and analysts in 2023 to improve their understanding of our strategically relevant governance and sustainability topics.
Stausberg: With regard to suppliers, we engage with them in our audits and EcoVadis assessments to ensure that they respect and adhere to our Code of Conduct, which also strengthens our partnership with them.
Is there anything else you would like to share?
Suess: In 2023, we faced demanding challenges in our end markets, which were driven by the slowdown in production, consumption and investment in China. Despite these challenges, we remain committed to making progress on ESG, both within Oerlikon and across our value chain.
As mentioned earlier, we are a sustainable company by virtue of our technology leadership and market reach. At the same time, we are improving sustainability in our operations. We intend to continue doing our part in helping to reduce the global carbon footprint and contributing to society in terms of sustainability.
Both: On behalf of the Board and the Executive Committee, as well as the entire Oerlikon team, we would like to thank all of our stakeholders for their support and for the trust they have placed in Oerlikon, in our sustainable strategy and in our technologies. As always, we are grateful for their collaboration and support as we progress together on our sustainability journey.