Joe Kaeser, the camera-friendly boss of Siemens and de facto ambassador for Germany industry, makes his annual pilgrimage to the World Economic Forum this week, where he will again join executives banging the drum for the role business must play in protecting the planet.
But rather than providing a blueprint for European peers, his company is fast becoming a cautionary tale. An outcry over a minor contract (roughly 0.02 per cent of annual revenue) to provide rail signalling on the periphery of a controversial Australian coal mine has generated thousands of negative headlines and could end up causing millions of euros of reputational damage.
The problem blew up partly because the company’s “bottom-up” risk reporting process failed to alert Siemens’ management board in Munich to the €18m deal in Queensland’s Galilee Basin, which became a flashpoint for environmental protesters as bushfires ravaged Australia.
A co-ordinated cross-border campaign, spearheaded in Germany by the Fridays for Future environmental movement and endorsed by Greta Thunberg, appealed directly to Mr Kaeser to abandon the contract, which they argued would facilitate the use of fossil fuels for decades to come.
Siemens suddenly found itself facing “an almost perfect storm”, a person close to the company said. Sticking to the contract would provoke further outrage while axing it without legal justification would set a difficult precedent.
In the end, the board opted to honour the contract with Adani, the Indian group developing the mine. In a long, tortured blog post, Mr Kaeser admitted that Siemens “should have been wiser about this project beforehand”.
It is a sentiment that will be echoed by angry investors at the company’s AGM in February. Their argument, that having a finger on the pulse of popular sentiment is a fiduciary duty, should be taken seriously in prosperous countries such as Germany, where school-age campaigners with a mature media strategy have the wherewithal to provide corporate scrutiny.
“Siemens and other multinationals will need to lower the threshold at which the board discusses controversial projects, especially those related to coal,” said Marcus Poppe, a portfolio manager at institutional investor DWS.
More involvement of a savvy corporate communications department in the decision-making process would no doubt help, as will other internal groups such as Siemens’ new sustainability committee, which will have powers to veto contracts.
Large industrial groups should also follow the example set by the banking sector in the aftermath of the financial crisis when reputational risk committees were installed at regional and multinational levels.
Yet identifying the next PR storm is also an unpredictable business. Mr Poppe notes the irony of Siemens, a company that still relies on its oil and gas business for billions of euros in revenues, being targeted over a small rail signalling contract. Energy giants RWE and EON have borne the brunt of activists’ ire, while Germany’s chemical companies, which account for roughly an eighth of the country’s annual CO2 emissions, have come in for less criticism.
Then there is the matter of what companies can do when they find themselves in campaigners’ crosshairs.
Engagement can only take you so far. In September, Volkswagen chief executive Herbert Diess tried to temper the threat of protests at the car industry’s showcase Frankfurt Auto Show by debating with a prominent activist. Joe Kaeser even offered 23-year-old Fridays for Future figurehead Luisa Neubauer a seat on the supervisory board of Siemens’ energy business.
Both attempts fell flat. The auto show is likely to be relocated and rebranded after it was overshadowed by anti-SUV protests. Ms Neubauer made it clear she had no interest in a Siemens board seat and has instead travelled to Davos, where she will continue her efforts to apply pressure on the world’s largest polluters.
Faced with this climate, multinationals must come clean about their green credentials. According to a study by communications advisory firm Hering Schuppener, only 20 per cent of Dax-listed companies have disclosed clear information on the integration of sustainability in their corporate strategy. Those that do, such as BASF and software giant SAP, score highly among investors. Bosch has gained the grudging respect of campaigners for its commitment to making itself carbon neutral this year.
This clarity of approach looks like a better strategy than Mr Kaeser’s, who equivocated for weeks over how to mollify the public anger that gathered momentum with every passing day. Siemens, which claims its technology helped customers cut 637m metric tonnes of CO2 last year, should have formed a clear position early and stuck to it, according to a person close to the board.
“The company,” he said, “missed an opportunity to create an immunisation shot”. The rest of the German industry is about to find out how costly this misstep has been.
