ESG – regulations should go hand-in-hand with development to ensure decarbonization

Profit is no longer the sole measure of corporate success, and this has changed the way business is done. Today, companies are increasingly embracing environmental, social, and corporate governance (ESG) standards. One of the panels at Belgrade Energy Forum 2023 brought together companies with developed ESG strategies. Representatives of Lafarge, A1, UniCredit Bank, BASF, and Interenergo described their approach, stressed the importance of innovation, and highlighted the challenges they face in this field.

ESG is a set of standards that steer corporate policies towards compliance with sustainable development principles in the areas of environmental protection, social responsibility, and corporate governance.

One the panels at the region’s biggest energy conference, Belgrade Energy Forum 2023 (BEF 2023), covered corporate strategies aimed at reaching carbon neutrality – bringing down net emissions of greenhouse gasses to zero.

Responsible and sustainable business has no alternative

The banking sector helps channel capital, so it can significantly influence decarbonization by deciding who will receive funding and for which projects, said Svetlana Cerović, Head of Financing at UniCredit Bank. “Responsible and sustainable business has no alternative,” she stressed.

Svetlana Cerović, Head of Financing at UniCredit Bank

Cerović said that UniCredit wants to set an example on how to be sustainable in business. The UniCredit Unlocked strategy enables the bank to monitor improvements in the field of ESG based on the Paris Agreement goals, she explained.

The bank is currently financing the construction of eight wind farms, three of which independently. Although significant, Cerović said, this is not enough. “The group’s strategy is to invest EUR 150 billion over the next three years in projects that have the ESG label,” she said.

Telecoms: the power of the individual creates change

Dejan Turk, CEO of A1 Serbia and A1 Slovenia, highlighted the fact that telecom networks consume huge amounts of electricity, of which phone charging is only a small part. Every megabyte, gigabyte, terabyte consumes energy, and therefore data centers consume it as well.

Since the launch of operations in Serbia, mobile carrier A1 has been implementing eco-driven projects, such as installing solar panels on base stations, Turk pointed out.

The plan is to increase the number of solar panels in Serbia to 5,600 by the end of the year, he recalled, noting this would generate enough electricity to cover the needs of 750 households.

In cooperation with Enel PS, the company has so far installed 5,000 solar panels, which have already generated 312 MWh of electricity, said Turk. Noting that the output covers only 5% of the company’s consumption in Serbia, he said that “it’s a small step, but in the right direction.”

Dejan Turk, CEO of A1 Serbia and A1 Slovenia

Sustainable business culture

Interestingly, China produced as much cement in 2018 and 2019 alone as the United States did in all of the 20th century, panel moderator Danko Kalkan noted. Cement is essential for the development of infrastructure, but it is very carbon intensive and there is no substitute for it.

Lafarge has shown how such an industry can set high standards of sustainability and energy efficiency, said Marko Muhadinović, geocycle manager at Lafarge, noting that the company sees sustainable business as something like a religion.

The biggest challenge for companies in Serbia is in the regulations, as they are currently more of an obstacle than an incentive to decarbonization, according to Muhadinović.

Marko Muhadinović, geocycle manager at Lafarge

Lafarge uses all locally available alternative raw materials, such as fly ash from thermal power plants and slag from steel mills, he said. Alternative fuels make up 20% of consumption compared to traditional fossil fuels, Muhadinović added.

Construction waste that could be recycled and turned into a key raw material for cement production ends up in landfills.

The unregulated use of construction waste and the ban on the import of non-hazardous waste, which Lafarge would use as an alternative fuel, is the main obstacle to reducing its carbon emissions, Muhadinović stressed.

Chemistry as a solution

We are surrounded by chemistry, and we are not even aware of it. BASF operates under the slogan: “We create chemistry for a sustainable future.” Without chemistry and chemical processes, there are no solar panels, hydrogen or energy storage batteries.

The production of equipment for green energy generation requires raw materials that have little or no impact on the environment, said Simon Franko, Managing Director of BASF Adriatic. BASF has been investing in the energy transition for a long time, and it is not an easy task, he stressed.

BASF has been investing in the energy transition for a long time, and it is not an easy task

The chemical giant consumes as much as the Czech Republic, he explained. To achieve carbon neutrality, it needs complete electrification, which means three to four times more electricity from renewable sources.

Thanks to its verbund concept, BASF saves 50% of energy annually. In German, verbund means connection, and at BASF it means using waste from one production process as raw material in another.

Simon Franko, Managing Director of BASF Adriatic

To ensure the necessary electricity, BASF has started investing in power plants. Currently, the Hollandse Kust Zuid wind farm, with 140 turbines, is under construction in the Dutch part of the North Sea.

This facility, in which BASF has a stake, will have an installed capacity of 1.5 GW, enough to cover the electricity needs of a city the size of Belgrade, Franko explained.

The company has also launched a string of projects to achieve energy efficiency, including the construction of an industrial heat pump the size of a soccer field.

Interenergo produces renewables energy in a sustainable way

“Our vision is to produce energy from renewable sources, and in a sustainable way, in a green Europe,” said David Huber, Managing Director of Interenergo, part of the Kelag Group.

Since the beginning of operations the strategy has been to invest in the international renewable energy market. It started with wind projects in Romania and Bulgaria, followed by investments in several smaller hydropower plants in Slovenia.

Kelag intends to invest EUR 2 billion in the next 10 years in renewable and sustainable energy projects, making it also Interenergo’s strategy, said Huber.

“Southeast Europe has a great potential of renewable sources that can be invested in,” he said, adding that he believes a large part of the investment will go to Western Europe.

David Huber, Managing Director of Interenergo

Local action

For strategies to be successfully implemented, they must be adapted to the local context. Dejan Turk, CEO of A1 Serbia and A1 Slovenia, said that recycled phones account for up to 4% of A1’s sales in Slovenia. Achieving this in Serbia acquires additional education, he believes.

In Serbia, the company is implementing a project aimed at reducing the impact of climate change in 10 cities. What is certainly universally applicable is smart network management, says Turk. Thanks to monitoring and artificial intelligence, network strength is reduced when it is less used, for example during the night, he explained.

UniCredit Bank has a special team of sustainable business advisers, who provide assistance to loan applicants to direct their business towards carbon neutrality.

Cerović particularly highlighted an educational program that the bank is carrying out both internally and externally. A series of educational activities on energy efficiency and decarbonization is intended to spread knowledge among small and medium-sized enterprises.

In Serbia, Interenergo has replaced public lighting in the municipality of Osečina, providing energy-efficient LED lights. Interenergo adapts its solutions to the needs of clients, so the local context is always in the foreground.

Challenges

Besides legal and regulatory hurdles, companies face sector-specific challenges. BASF is a large consumer of natural gas, so last year was very challenging, said Franko. For this very reason, it is necessary to secure as much renewable energy as possible because, apart from decarbonization, it enables independence from geopolitics.

In addition, the development of the smart power grid and the electricity exchange would greatly contribute to business development, according to the representatives of BASF and Interenergo.

The conclusion of the panel is that there is no alternative to sustainable business. Decarbonization is the only chance for human survival on Earth, the participants agreed.

Cooperation, a change of mindset, responsibility, individual engagement, and, finally, the hope that obstacles can be overcome are the keywords for achieving net zero emissions and decarbonization, according to the representatives of the corporate sector who took part in the panel.