With its climate strategy, AAE wants to reduce its direct (scope-1) greenhouse gas emissions by at least 55 percent by 2030. The same must apply to the supply chain and the customer base. This is the ambition of the system supplier from Helmond. The ultimate goal is to be net zero by 2040 at the latest and therefore no longer contribute directly or indirectly to climate warming. In that context, the company is now mapping its own impact on people and the environment, in line with the CSRD requirements. And without complaining about Brussels bureaucracy. ‘We ultimately want to become a net positive company that helps reverse climate change.’
Franks Mulders: ‘Wij zitten in een markt met louter global companies die de CSRD strikt toepassen. Wij gaan daarin mee en verlangen het van onze eigen leveranciers en andere klanten.’ Links Kurt Wils.
Over the split 2022-2023 financial year, AAE’s suppliers and customers have emitted an estimated 65,000 tons of CO2 through what they have supplied or received from the company in Helmond. This concerns AAE’s scope-3 emissions, which account for more than 99 percent of the emissions. Translated into euros, at the current price of 55.94 euros at which a tonne is traded in the ETS system, this is a cost of 3.9 million euros. Taking into account the true price of 875 euros per tonne, calculated by the province of Utrecht, which really takes into account all the costs of the social impact of climate change, the damage amounts to almost 57 million!
Aiming for zero climate damage
‘That’s the indirect negative impact of our company on society’, CEO Frank Mulders puts it bluntly. ‘Of course we can’t compensate for that damage. It would mean the end of AAE. But together with customers and suppliers, I want to reduce that amount as quickly as possible in the coming years and ultimately to zero by investing heavily in it. No, not 3.9 million, but this year alone 1 million euros.’ ‘We’d very much like to reduce our ecological footprint’, explains Kurt Wils, leader of the Sustainability team and head of the Improvement & Strategy department, ‘but without over-exploiting this company.’ Because then the machine and module builder is really acting in the spirit of its mission: to make the world happier with ‘pioneering high tech’ that is created sustainably, in an ecological, social and economic sense.
Being sustainable requires measuring
That estimated, alarming damage amount is the outcome of the preparations AAE is making to report on matters with ‘double materiality’, which have both a non-financial impact on people and planet and entail financial risks and opportunities for its own business. ‘Large enterprises’, with a turnover of more than 40 million euros and more than 250 people on the payroll, must provide this information next year for the 2024 financial year, in accordance with the criteria of the EU’s CSRD (Corporate Sustainability Reporting Directive). With a turnover of more than 150 million euros and a workforce of more than 500 people (at the end of the split 2022-2023 financial year), AAE well exceeds that limit. It must therefore comply with this disclosure requirement for the upcoming financial year (July 2024-June 2025). But, as the two men emphasise, even without that requirement it would carry out the data collection exercise. Because a company can only be ecologically, socially and economically sustainable if you make and measure policy in detail.
Relevant and significant
Collecting all the requested information is complex and as such, time consuming. The CSRD has twelve so-called ESRS standards (European Sustainability Reporting Standards), consisting of a total of approximately eighty disclosure requirements about which information may or must be collected. Data about activities that have an impact on both your own company and the outside world. ‘Not all indicators of our type of B2B company are relevant and significant for us and the outside world and we usually don’t report on it. In some cases we do so anyway, not because its impact on the outside world is significant, but because of our sustainability strategy. Our water consumption, for instance, is relatively low. But we still want insight into this so we can further reduce its impact in the long term’, Wils explains. ‘With the CSRD, the EU has provided us with an excellent instrument to map our complete impact.’
Explaining the choice
In many cases, the choice whether or not to report is up to the companies themselves, but it must be justified. ‘You do have to be transparent about it. If you choose not to report on a certain requirement, you must explain that choice’, as Wils points to the decision tree he is projecting on a large screen. It does so in a policy document on the approximately fifty topics on which AAE does report. In it, the company explains what risks and opportunities it poses for its own company by reducing the impact of that subject on people and planet. Furthermore, figures must be supplied – if relevant. ‘For instance, if it concerns paying the minimum wage’, Mulders explains, ‘then it’s sufficient for us to refer to the collective agreement for the Metals and Electrical Engineering Sector in the policy document. Because that’s what we adhere to. In fact, we always want to be at least among the 35 percent best-paying large metal companies.’ To this end, AAE has its salary structure benchmarked by certified and specialist external agencies such as Hay. ‘Our accountant then checks whether our CSRD information about this – in their jargon – ‘remains within the materiality limit’.’
From tonnes of steel to tonnes of CO2
A very important, mandatory disclosure requirement is the greenhouse gas emissions, in scope 1, 2 and 3. Scope 1, for example, includes a company’s gas consumption. The resulting CO2 emissions are calculated using a model of the Greenhouse Gas Protocol (GHG Protocol). Determining the emissions that the energy supplier must make to supply AAE with electricity – scope 2 – ‘isn’t complicated,’ according to Wils: ‘Thanks to the purchase of renewable electricity, it has been zero since 2021, and we want to keep it that way.’ The work in scope 3, on indirect emissions by all AAE customers and suppliers, will be extensive. ‘They account for more than 99 percent of our emissions. Fortunately, the GHG Protocol also offers a helping hand for this. If we purchase a tonne of a certain type of steel, we can use a GHG emission factor to convert this spend in euros into tonnes of CO2 emissions associated with the production of that steel. Even more ideal is that we receive the actual emissions from the supplier, but that’s not the case yet.’
Even more product passports
Wils believes the GHG Protocol models for calculating the carbon footprint are ‘highly detailed’. It becomes more ‘vaguer’ when it comes to, for instance, the CSRD resource inflow and resource outflow requirements. ‘They’re about the composition of raw materials and how much of it has been recycled and how much is virgin, I think.’ ‘We can’t provide this information either’, Mulder adds. ‘For that, our suppliers must supply complete product passports that specify the origins of materials in detail. Whether a certain type of steel consists of scrap and, if so, to what percentage. They’re still a long way from that. But that request for information will come our way’, he realises.
Digitally prepared
AAE itself is largely prepared for this. ‘In a year’s time, our product data management system – Siemens’ Teamcenter – will have been implemented for one hundred percent of our products. That will enable us to retrieve all that type of data at the push of a button.’ The high level of digitalisation of AAE ensures you won’t hear any complaints from the CEO about ‘CSRD bureaucracy’. ‘We’re among the 10 percent most digitalised companies in our sector. If you don’t have a fully implemented PDM system, it’ll be very difficult to provide that CSRD information.’ Mulders even ‘embraces’ the CSRD. Not because he, as the best boy in class, can submit his CSRD data to the European Commission, but simply because he wants AAE – in the long term – to no longer have any negative impact on people and planet.
Impact is getting expensive
Primarily because he is very concerned about climate change. Secondary because that impact will cost customers in the long term, he argues. ‘Look’, he points to a tall blue bar in a diagram on the screen (see illustration). This represents the tonnes of CO2 emissions resulting from the customer’s use of an AAE product. Above this ‘use of sold product’ category is a high and precise, yet estimated figure, because the measuring method is still being fine-tuned. ‘We build and market full high-tech printing and assembly machines under the AAE Printing & Assembly Automation brand. According to the GHG Protocol measurement method, in the year you deliver a machine, you include the emissions throughout its entire lifespan. Last year, this resulted in an estimated emission by our customers – in scope 3 – of more than 26,000 tonnes of CO2. We now offer machines in which conventional UV curing has been replaced with energy-efficient LED UV curing, to harden the ink. I’d like my customers to switch to this and use green electricity, because that saves me a lot of CO2 emissions in scope 3 and our customers in scope 2. True, at the moment these are just figures, but in the long term, I expect customers to increasingly look at us for this. After all, our machines last up to twenty years.’
Becoming net positive
Next to it in the graph is a very low bar, good for 600 tonnes of CO2, above ‘processing of sold products’. This concerns the CO2 emissions associated with the customer’s assembly of AAE modules in their machines. ‘We want to further reduce those scope-3 emissions. We will work together with customers to ensure their emissions also drop to net zero.’
Because AAE wants to reduce its scope-1 and 3 emissions by at least 55 percent by 2030 and be net zero by 2040 at the latest, just as it has already achieved in scope 2. ‘Eventually, we want to become a net positive company’, Wils emphasises. A company that, if you offset its negative impact on people and planet against its positive impact, is regenerative, in ecological, social and economic terms.’ And thus help reverse climate change with its processes and products.
Link magazine special 2024: The Dutch High-Tech Industry and the European Ecosystem: stronger together. Read this edition digital.
CSRD offers competitive advantage
A very noble goal, but the question is how realistic it is. After all, the CSRD is merely a European directive, which means each country can give it its own interpretation. In the short term, this may put AAE at a disadvantage compared to competitors in EU countries where the directive is interpreted less strictly. ‘We see it the other way around. The CSRD actually offers us a competitive advantage’, says Wils. Mulders: ‘We’re in a market with only global companies that do strictly apply the CSRD. We go along with this, because it makes us ecologically, socially and economically sustainable. Of course, there will be many small industrial companies in particular that do not want that. In any case, we do expect our customers and suppliers to do so.’
No immediate force
The question remains how AAE plans to exert that pressure in practice. After all, you wouldn’t want to exchange non-net-zero suppliers who are very reliable, for example, if you can find a good replacement in the first place. And loyal, well-paying customers, how do you retain them and force them to become more sustainable? Kurt Wils: ‘We’re not going to immediately apply pressure and force. First we start a dialogue about where we can become more sustainable together. How, by doing less bad and more good every day, we can move towards net zero together. Every relationship will be viewed in that light: to what extent does it contribute to our mission of moving the world happily forward.
No investors needed
The European Commission’s specific goal with the CSRD is to encourage investors to invest more in sustainable companies. This is because the directive provides a uniform system of regulations that sustainability reporting must comply with. This system is new. Investors criticised that the information reported was often insufficiently reliable. This made it difficult for companies that want to distinguish themselves in the field of sustainability to demonstrate this. However, tempting investors is not a driver for AAE. ‘We don’t need banks and private equity. We are one hundred percent owned by the Pijnenburg family and they fully share the chosen vision, to move the world happily forward.’
Groundbreaking technology in a close-knit family business
Since its incorporation in 1975, AAE has focused on making a global impact in the field of groundbreaking high-tech mechanical engineering. With more than 550 talented employees, AAE develops, produces and tests advanced high-tech modules and machines. These are mainly sold in the medical technology, semicon, automotive, thin-layer technology, consumer goods and life science industries.
