BusinessEurope Day 2018: How European industry brings value to society in a globalised world

BusinessEurope Day 2018: How European industry brings value to society in a globalised world


Thank you for the very kind words of introduction, and thank you Emma and Marcus Beyrer for the kind invitation to BusinessEurope, and congratulations for the 60th anniversary. I’m feeling really honored today to be with you to share view on how companies can bring an add value to society and global communities at large. And this is specifically important because we live in times where globalisation is very much challenged. And where the understanding of why international trade is important needs to be emphasised even more than before. In fact, it is important because in these times we are being challenged. We as the citizens of Europe have welcomed the benefits of globalisation, but are we also ready to take the consequences, and are we ready for the changes that come along with it? You all know the famous saying of Einstein who said we cannot solve problems by using the same kind of thinking we used when we created them. Along these lines it is our way of thinking that needs to welcome new perspectives. If we want to build a visionary future for Europe that is smart, sustainable but also future oriented. And at this very moment– I mean we see that there is dramatic change going on– one of the panelists mentioned that before- and it’s not only the digitalisation that requires changes. We are also seeing that the last decades have been carried by globalisation where you know companies went out in to the world and the main driver of growth was linked to volume. When you think the next decades ahead it’s very much about how do we deal then with resources in a smarter and more intelligent way. And while volume growth might continue, there’s a second wave coming and that’s called a value growth. Because resource usage will fundamentally questions the way we work. Despite this challenging agenda for the transformation yet, there’s one element that differentiates us more than ever and it’s a heritage from the past. And that’s why I was specifically happy to come here today Mr. Beyrer and Emma Marcegaglia because you really put it spot on. It’s the values that we live from. It’s the differentiating factor that is a most precious and valuable heritage from the past. During my speech I would like to look at four elements. Four elements for this transformation that we need for the future. First, to understand what the importance of Europe is today, and what its success was made of. Secondly, I will address the EU government policy and how challenges for our industry which is increasingly organised in global value chains can emerge. Thirdly, I would like to speak about the role of trade and investment policy preparing the ground for our panelists later on to promote our strong values. What can trade do for the industry, and where are its limitations? And i would like to finish because it’s not about only the others. It’s also about us. We as industry do we have to think about for a future- a future-oriented and optimistic Europe. In BASF we call this our value to society So let me first address the point of my speech. What is Europe all about? Which values have we promoted? And how can this count for companies also for a future success? For BASF, Europe is our home, and we are proud of it. Almost 50 percent of our annual turnover is generated in Europe, and it’s also here where we employ the majority of our workforce– around 70,000 employees. For us, Europe is indeed one of the most attractive places in the world in which to live, work and do business. The European Union made the European way of life possible. For over six decades, the EU indeed has contributed the advancement of reconciliation, peace, democracy and human rights. It has done so by promoting values like the freedom of thought, speech and movement that we heard in a panel before, as well as the rule of law and prosperity from the members and beyond. But the EU has also safeguarded different cultural identities and traditions. And you know what? For companies, it’s not only about gaining market share. It’s also about thinking, what can we learn from these cultures in our companies? And what is it good for? So we do also have an unparalleled social safety net and this is what Europe is most famous for. And you might question why is this all so important? It is because, you know what, today it’s not for granted anymore. Values are at the center of any nation that wants to achieve long term prosperity. However, we as a chemical industry for example are very clear on the fact that our chemical market demand will come from Asia more than 60% in the next decades, and this means we cannot rest on our European achievements. In fact some of the Asian leaders have understood how fundamental it is to bring society along. Lee Kuan Yew, one of the Singaporean former leaders once said, “The ultimate test of the value of a political system is whether it helps that society is able to establish conditions which improve the standard of living for the majority of people.” So that’s how they transform whole nations. To achieve this on a long-term basis, we have to think and act more European as my pre-speaker said. And i can only applaud to that thought because the future of Europe is the single market. And it’s at the core of the success because we deliver tangible benefits, prosperity and welfare to its citizens and companies. The pure facts support this, as the EU is the second largest economy in the world, and the largest trading bloc. Half a billion people in the in the EU generate 14 trillion gross domestic product today. The European Union accounts for 16% of the world’s imports and exports, and has negotiated trade agreements with numerous countries worldwide. This scale gives us tremendous influence in the international negotiations, and it is the ability to defend jobs and our values, industries against external threats. Looking into the future, the key for a long-term success, however, is competitiveness. And competitiveness is for us the way we innovate, the way we deal with energy and environmental cost, but also the way we shape the inter-operability of our European infrastructure. This all requires a single market and a very European way of thinking in much bigger frameworks. But there’s one key question, and by the way, it’s not a question just for Europe. It’s also a question for us as a company and for many companies these days because it’s the most fundamental question to develop further. And this question is Is Europe easy and simple to work with? Simplicity is essential because finally it translates into speed. And speed is what defines the magnitude of our economic society but also our environmental development. So all our challenges are of global nature and it requires global solutions and answers. So it becomes very visible, you know, our level playing field of Europe is not an inner- European view, even though we do have a lot of challenges. In contrast, the future magnitude of European influence has to be derived and be able to play with a global perspective. And this means also we we as an industry in Europe together with policy with NGO’s have to think big. While the moment today we tend to be occupied and position ourselves with inner-European regulations, legislations and discussions. While what is truly needed from Europe is thought and value leadership- which you heard in the panels before- for a globalised world because values is the most precious heritage we can give. This brings me to the second point that I would like to address, which is the role of governments and EU policy. How can a you policy support our industry especially if we take into account that we operate in a globalised world facing global competition. To start with a positive, the EU has a very good track record in implementing sustainability approaches in its policy making processes. An illustration of this fact is that Europe is in fact leading on social and environmental standards and on corporate reporting. For us as the chemical industry they reached legislation first painfully introduced, but jointly collaborated on. It’s a way that gave us and enabled us the safe use of chemicals along the entire value chain. It’s another illustration of where EU policy has been leading by example. Bringing trust and stability which are the foundation of collaboration common achievements. And which now leads to the situation where many other parts of the world are actually taking reach as a model of example for developing their own chemical legislation. While this strategy is often cited as helping European companies to get a first mover advantage, and become champions of global markets, one has to recognize though it can be drawbacks as well. A challenge for example can emerge if EU policies do not create favorable business developments and environments that stimulate innovation. Innovation is the core strength, however we need to make sure we have the right conditions to further develop, produce and market our innovations in Europe and not only innovate for other parts of the world. This relates specifically in part to research and spending on innovation as well as regulation which needs to be absolutely proportionate to risk and benefits of the products and processes concerned. For example, by operationalising the principle of innovation, the innovation principle which is highly welcomed by industry. This is important that the EU’s industrial strategy recognizes the importance also of good horizontal framework conditions and predictability for the EU industry. Competitiveness is indeed a precondition for companies to play their role in society. Less competitive companies make lower profits, invest less, innovate less, create fewer jobs, and reward shareholders less, and in the end pay lower taxes. So there is a cohesive pattern behind. Today I also would like to share the European chemical industry’s proposals because we want to be concrete in our response to the future of Europe. And so the industrial strategy chapter of the chemical industry has released seven points that i would like to quickly enumerate here. First, we would definitely vote for a more cohesive energy and climate policy on a cost competitive level, because this has to be globally competitive. The overall policy framework in all policy areas must consistently become more conducive to foster industrial innovation. A new focus on value chain is key to understand industrial added value for effective policymaking. Fourth, there is a need for great care in defining of overarching policy concepts like circular economy, which is understood as maximisation of resource efficiencies, and drives industrial economics and markets. And it makes for us as an industry perfect business sense, but we need a cohesive legislation framework for that. Fifth point, there are still considerable gains in efficiency of the single market, but that also means we need much greater coordination and interoperability of crucial infrastructure. For example, Europe’s railway network that is not cohesive at this point. Completion–is the sixth point– of single market is also equally important in regard to digitalisation. Giving you an example, we do have a regulatory for digitalisation, but do we have the infrastructure already done? In Europe, at least in Germany, I’m still missing the 4G bars, but that’s just one example. And i wonder how we as an industry should transform digital business models if we do not jointly work on a cohesive framework. And the seventh point: open market is a key for our industry. So all these points have been discussed in a base on a modern production structure, and also business models. And the most important element to emphasise in the modern production is we are globalised. We are globalised as business, and that’s why our value chains are also global. What driver for that is a constant flow of goods and capitals. Capital flows and debt spurs rapid technology change. So, breakthroughs, as I mentioned with the digital readiness, and that by the way also includes education for our children at schools. Breakthroughs such as internet, the rise of you know technical change emerging in companies, all these are accelerators of growth, and they need our coordination on a much broader level. Because most of our products are made in the world these days. They’re not just made in one country. If you talk about Brexit, you know, in the chemicals arena, one product you know surpasses the ocean more than four or five times because before it gets a product. So lots of components come from different countries, and sometimes even different continents. If you take into account that ninety percent of GDP growth in the future will come from outside Europe, and that will happen in the next 10 to 15 years, The EU’s economic recovery will need to be consolidated much stronger with the link to the new centers of global growth. The EU exports now support almost one in seven jobs in Europe. 31 million jobs, to be precise. These are jobs highly skilled and better paid than average. Imports are equally important. So, opening up the European economy is a major source of productivity gains, and private investment, both of which the EU sorely needs. free trade also benefits workers by increasing mobility and consumers by lowering prices and broadening choice of products. Therefore, the that globalisation and in particular trade and investments have come under increasing fire since the discussion of TTIP and CETA negotiations is a real concern. We have to address that we are much more integrated into a global economy. People have indeed become more critical about trade seeing it as a potential race to the bottom of environmental, social, standards. As a result, there’s a greater demand for more attention to sustainability, labour, human rights issues in trade agreements. And some even call for sanctions in case of non-application of certain provisions. Without doubt, trade negotiations per definition lead to trade offs. There are not only winners in globalisation and we have to get used to this. Trade offs mean that trade is not the fundamental problem. It’s rather the deficit of other areas for example in social policy systems unable to provide adequate social nets. To remedy such deficits, national governments need to act simultaneously with domestic policies. For example, by stepping up efforts to education and training to make people fit for globalisation and digitalisation. And this brings me to the third point, the point about trade and investment policy to promote our a strong EU values. What can trade do? And where should be limits? Far from being detrimental, trade rules and trade agreements are increasingly considered as an important tool to harness globalisation, and to promote not only economic growth, but also norms and values that will address challenges in today’s complex world. I think we heard that at one of the panels before. Throughout history, trade has proven to be the one most effective anti-poverty and pro-development tools. A very nice example for that is China. It’s the best illustration of that, because today it’s the world’s largest exporter, and the second largest foreign investor. Whereas 30 years ago, it ranked 32nd in world trade. Companies like ours have contributed to China’s economic success, but also to its ecological and social development, by building plants like our Nanjing plant in the early 2000s, according to the at that time and today’s best standards available in the area of health, safety, secured jobs, and improving the quality of life and communities, and also work-life. You know, concepts that had been new to that society at that time. That said, we should not overestimate the role of trade and investment policy. When it comes to promoting high environmental and social standards, trade and investment policy in my opinion has an enabling role. It should not be a leading role. Why is that? Trade policy primarily has a huge role to play in liberalising trade, and setting and enforcing common international rules and standards for trade in a multilateral system, thereby enabling a level playing field. By transferring know-how and technology across countries this will ultimately enable further development of global, societal, and environmental values. Trade is also subject to existing international rules from institutions like the ILO, the UN, or the OECD that addressed sustainable development and labor provisions, and that companies like ours are all complying to. This should be strengthened and better enforced to ensure an international level playing field, rather than using EU free trade agreements as an additional mechanism to address eventual gaps in these areas. This does not mean we do not support referencing such international conventions and principles in the EU FTA’s. Rather the opposite– We also welcome the inclusion of sustainable development aspects in the FTA to ensure the same level playing field. Our European chemicals industry association Cefic has first for example proposed to include provisions of sustainable chemicals management in future EU FTA’s, thereby encouraging authorities to establish a basic chemical management system to improve health, safety and environment. It would also help to enhance public confidence and trust in the industry commitment to safely manage throughout their life cycle. In this way, sustainability principles will be mainstreamed in practice, also in trade policy. European companies indeed are the vehicle for such sustainability promotion, and we are with you. We are with you with politics. We want to operate in these countries and we are committed to implement the 2030 UN sustainability development goals. And that brings me to the very last question, and that’s our role here as industry, and why we also have to think bigger. In BASF, we call our contribution to society, value to society. Because we have talked a lot about government politics, frameworks, necessity of trade agreements. But what is our contribution for a better tomorrow? What are the fundamentals that we need to rethink and what is it that we need to really deeply think about when we talk about an optimistic future for Europe. Today’s threats are numerous, as we are facing unprecedented and critical challenges like the debate around Brexit, protectionism, immigration, terrorism, many other challenges. The greatest current threat is the division of Europe between east and west and their return to a more nation-state related interest kind of region. And this is where we are all questioned. I can only say I was in the Brexit negotiations last November, December in Britain and you know the chemical industry said one word– do not repeat our mistake. We forgot to speak about the value of Europe to our citizens. And we are bitterly, you know, thinking about it, should have praised Europe more because we are ones suffering most from the Brexit right now, and we have not managed to give people the understanding what Europe is really all about. So do we as an industry here in Europe take enough of an active stand for Europe? Because, we cannot take Europe for granted anymore. It’s about time that business and industry has to engage across industries more before these matter, and i think it’s about, you know, not only creating wealth. For BASF, we are very clear it’s about creating value. When we looked at our overall contribution along the value chains from suppliers to BASF, to customers, we monetized not only the profit impact. We also assessed the total social and environmental impact we have on a monetary level macro-economically. On top of profit creation, we indeed looked at important social contributions. For example, paying taxes, salaries, investing in human capital. We also in that balance sheet looked at environmental contributions of our industrial production. Positive, also negative ones alike. Where we have improving numbers in the area of air pollution, greenhouse gas, and so on as a forth. But the most interesting finding for us was our value contribution showed one job in BASF creates five jobs in consecutive industries. So, in other words, our macroeconomic impact on human capital, wages, and taxes, and as a consequence on purchasing power in the markets is almost as big as our profit impact along the entire value chain. This means across the board was together with our suppliers and customers along the entire value chain we create 80 billion euros positive macroeconomic impact. This holistic view and our contribution to society as a whole is not new. In fact, some of the pre-speakers referred to the social market economy that was invented in the early sixties. But it’s becoming a different stage right now and I would like to come back to my first point. When this economy is moving from globalisation into a value related economy, it’s even more important that we get transparency in our contribution. And it’s the first time ever in history that we can monetize these impacts. With the rise of digitalisation, we will have trade off to make between humans and machines. And my generation specifically, you know, in responsibility has to think very carefully how to do this in a responsible manner so that next generations still have, you know, a work life that is joyful. Thirdly, the level of social inequality rises and this is a matter that also concerns us as industry. Why? Because it deeply challenges our political and democratic stability. So, our way of transforming Europe is we would like to really enter– and that was mentioned before– a positive dialogue on a positive optimistic future together with politics, industries, and also NGO’s. And this also means we have to leave all stereotypes behind. We appear as ever open for the dialogue. Our aim is to work on an optimistic future because we owe it to the next generations. But, we are very confident on Europe because there’s a huge heritage. And we should be proud of that. And let’s start looking into leadership. Because there’s one thing for sure. If you react, you can rest assured we are too late. So it’s about being proactive to shape Europe. And we are confident that this can be done in a right and visionary way. Thank you for your attention.

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