Disasters know no borders, so it’s good when solidarity doesn’t either. Commission President Ursula von der Leyen is traveling to Slovenia today, accompanied by Janez Lenarčič, the Commissioner for Crisis Management. She wants to learn how the EU can help with reconstruction.
The people in the flooded areas probably have other things to worry about at the moment than visiting politicians. Even though these trips to disaster areas have great symbolic power (and in Germany alone have already made or prevented one or two chancellors). People are certainly waiting far more eagerly for makeshift bridges and excavators, technical personnel, helicopters and dump trucks. Fortunately, they are already there or on their way – from neighboring countries, but also Germany and France.
This aid is sorely needed for the country with just two million inhabitants. The terrible effects of climate change are evident here: July was the hottest month globally since weather records began. The effects are showing up in the very place where the government set out a year ago to transform the country ecologically. Now the Slovenians have to rebuild their devastated country.
They won’t be able to do it alone. Slovenia’s Prime Minister Robert Golob now estimates the damage at several billion euros. The EU is also helping: Golob activated the EU disaster response mechanism on Sunday. This mechanism should ensure that aid is coordinated in the best possible way and reaches those who need it most. Support is also coming from far above: from the European earth observation system Copernicus, providing the helpers with precise geo-information.
Have an informative read,
TSMC and its German partners have made it official: The Taiwanese global market leader will build a chip plant in the city of Dresden. The company’s board of directors made the final decision in Taipei on Tuesday.
The key points of the project are very much in line with Table.Media reports from May and last year, which were based on informed sources:
The exact investment sum has not yet been officially determined as it depends on government funding, which itself has not yet been formally approved. But it will undoubtedly be in the range of ten billion euros. Around half of it will come from the German government. This is the only way TSMC’s statement of committing a maximum of three and a half billion euros of its own capital makes sense.
Commission President Ursula von der Leyen tweeted happily on Tuesday: “The series of massive investment decisions in a short time in Europe shows that the #EUChipsAct is working. Together we are strengthening Europe’s technological independence and creating jobs with a future.”
In the overall industrial policy picture, constructing a plant by the world’s most technically advanced semiconductor company is a success. As a result, German government politicians shower themselves with praise for the new site. Europe has lost key technologies to Asia decade after decade. This was not considered a problem as long as the supply was not in question in global trade. However, the geopolitical situation has changed. The tolerance for dependencies has declined sharply.
TSMC would certainly not have come without the large subsidy. However, the expenditure is in line with the German government’s security and China strategies as well as the European course of action. TSMC’s announcement explicitly mentions the EU Chips Act. So the companies want to draw funds from European pots.
The plant will mainly produce two classes of microchips:
This type of chip was considered new and modern around 2015. At least this is better than initially expected – the first reports about the plant had only anticipated 22-nanometer technology, which again was up-to-date around 2010.
But even 12 nanometers are not the vanguard of technology development. This feels particularly painful compared to TSMC’s investments in the United States: The Taiwanese company manufactures cutting-edge products there. What TSMC brings to Germany, on the other hand, is called “mature technology” in jargon.
However, these chips are currently still too modern for the German car industry. They require considerably simpler products with process sizes of around 90 nanometers, according to a German Association of the Automotive Industry (VDA) spokesperson in Berlin on Tuesday. The car industry certainly also needs the technologies that will be manufactured at ESMC. Nevertheless, the direct effect of the Dresden plant on its independence will be limited.
But the plant is not expected to be ready until 2027 anyway – and cars will soon mutate into high-performance computers on wheels. AI functions, such as autonomous driving at higher levels, will require fast and power-saving chips on par with modern graphics cards in the foreseeable future. These are already produced today in 7-nanometer technology and lower.
TSMC is ultimately giving Germany outdated technology after all. This is not in line with the spirit of the EU Chips Act: Internal Market Commissioner Thierry Breton had envisaged the creation of state-of-the-art plants to produce chips with the smallest process sizes. The reality falls short of these grand ambitions, writes the scientist Mathieu Duchâtel of Institut Montaigne.
But Duchâtel points out that this does not mean the Chips Act is unsuccessful. On the contrary, the TSMC plant is widely regarded as a strategic success. Because even if the site seems expensive from a business perspective, it was nevertheless the right thing to do: Building back a modern chip industry in Europe is necessary and overdue.
The necessary subsidies are also so expensive because the United States and China are spoiling the industry with billions of dollars:
In light of this comparison, the subsidy for TSMC in Dresden no longer seems so expensive, especially since Intel receives twice as much in Magdeburg.
TSMC technology also fits perfectly into the existing supply chains. Bosch and Infineon already run their own semiconductor plants nearby, which will be welcome customers for TSMC’s products. Infineon, for instance, is formally also a semiconductor manufacturer, although its business model differs from that of TSMC.
In fact, Infineon has some of its products manufactured in the Taiwanese’s highly efficient factories. This makes them more partners than competitors.
A new analysis published a few days ago by the Directorate General for Energy shakes up three basic convictions of the future hydrogen world.
The study “The impact of industry transition on a CO₂-neutral European energy system” was prepared by Fraunhofer ISI in Karlsruhe as part of METIS. The Commission repeatedly uses the results of this long-term project for its energy policy decisions.
The basis was assumptions from a 2018 decarbonization scenario for industry from the EU’s Clean Planet for All initiative. Researchers now modeled the energy demand for the manufacturing sector and derived the most economical expansion paths for electricity and hydrogen generation. Because this is a purely techno-economic analysis, no political restrictions such as energy supply resilience were assumed. Nevertheless, the results call into question many a conviction previously considered certain in the hydrogen debate.
“Central European countries, including Germany, Belgium and the Netherlands, have minimal or no hydrogen production by electrolysis despite their large hydrogen demand,” the report says. The Fraunhofer researchers see electrolysis capacities in the Federal Republic at “0 GW” in 2050. In its recently updated National Hydrogen Strategy, the German government already aims for ten gigawatts by 2030.
The EU report sees the reason in the cost structure of a hydrogen economy. The cost of transporting H2 would be low compared to production, and neighboring countries would have more favorable conditions. The leading hydrogen producers in Europe in 2050, ranked by their electrolysis capacities in gigawatts, would be:
“France has many good wind sites,” says Fraunhofer study director Tobias Fleiter, explaining the top ranking. However, the assumed expansion of renewables in France also reveals some limits of the study. The calculations result in 320 gigawatts of photovoltaics and 300 gigawatts of onshore wind energy for France. However, the French government’s political goals for 2050 have so far fallen well short of this.
In his Belfort speech last February, President Emmanuel Macron set 100 gigawatts of photovoltaics and 40 gigawatts of offshore wind as targets, explains the Franco-German Office for the Energy Transition. The annual addition of onshore wind is also currently low.
At the same time, the Fraunhofer study assumes that electricity production by French nuclear power plants will decline from 360 terawatt hours in 2021 to 206 terawatt hours by mid-century. This is only plausible with the assumption that old reactors will be decommissioned far faster than new ones will be built. Fleiter estimates electrolysis capacities would probably be lower with higher shares of nuclear power.
A slightly different picture also emerges in a scenario in which only 70 percent of Europe’s renewables potential is exploited. Then electrolysis would also make sense in Germany, says co-author Khaled Al-Dabbas. But capacities are still low, he adds. Even in an unpublished scenario with lower pipeline capacities, there would be higher hydrogen production in Germany, he says. “For Germany, however, it would definitely reduce costs to think more strongly about European integration,” Fleiter sums up.
Contrary to many political initiatives in Brussels and Berlin, the researchers believe that self-sufficiency in hydrogen is not just possible for Europe but is even cheaper than imports. “This was also interesting for the Commission,” reveals Fleiter. “It shows how huge and cost-effective the renewables potential still is in the EU.”
The picture is slightly different if the expansion of renewables is reduced by 30 percent. A minimal import of 160 terawatt hours of hydrogen by pipeline from Morocco would be necessary – still a small proportion in view of the generation of 3,000 terawatt hours in Europe.
Shipments of hydrogen derivatives and basic products for the fertilizer, chemical and steel industries could nevertheless play a significant role. Because in another scenario, the ISI has calculated the consequences if ammonia, ethylene and sponge iron were no longer produced in Europe but imported. Replacing just these three products would reduce hydrogen demand by a third. “We would almost have a different energy system,” says Fleiter.
On the one hand, imports of hydrogen derivatives would be significantly lower, especially in Germany. However, this would also make most offshore wind farms superfluous. The necessary capacities would be reduced by 60 percent. From a purely economic point of view, many rooftop solar plants would also not be needed.
But many companies in basic industries still have different preferences for decarbonization, Fleiter reports: “Some want to import green methanol and ammonia, others prefer hydrogen.” Depending on the strategy, some manufacturing stages would remain in the EU, others would not. He says the industry’s hydrogen needs are still very uncertain and not necessarily a no-regret measure, as is often assumed.
So now they are here, the European Sustainability Reporting Standards (ESRS). The EU Commission has adopted them and, based on the current situation, it is not expected that the EU Parliament and Council will exercise their right to reject them. Therefore, the way is clear for the already adopted underlying framework, the Corporate Sustainability Reporting Directive (CSRD), to be implemented in national law with the new standards by mid-2024.
It was to be expected that opinions on the new standards would differ. Business associations warn that the effort and bureaucracy required to fulfill the reporting obligations will be too much for small and medium-sized companies in particular. Environmental associations are critical of the significantly relaxed requirements compared with the original proposals of the setup working group.
As is so often the case, several questions remain, and not all of them will be answered by the EFRAG Working Group’s implementation guidance, which is still expected. However, what is already clear: The effects have not only a content dimension but also a management dimension in two respects.
On the one hand, simple reporting is not enough according to these standards. Rather, systematic process management is required, as we know from quality, innovation or risk management, for example. It includes the analysis of opportunities and risks, the definition of indicators for a target state, the setting of targets, the development and implementation of suitable measures to achieve them, and, of course, the regular monitoring of target achievement and the derivation of new measures.
Regardless of what companies define as essential and thus relevant for their sustainability reporting, they will need such process management. The good news is that this is a practiced procedure and in many cases can be easily integrated into existing process management standards. It corresponds to the well-known PDCA cycle of the continuous improvement process and is methodically on familiar ground. Nevertheless, it is remarkable that the Commission de facto demands such process management via the reporting requirements.
It is also worth noting the great importance attached to the materiality analysis, especially in combination with the stakeholder dialogs. It will be the most important instrument with which a company prioritizes its sustainability activities. It thus forms the basis for strategy development. It is remarkable that the Commission has laid down such clear methodological requirements for this. The present statements on the dual materiality with regard to external (ecological and social) impacts and internal (financial) impacts, combined with the assessment standard according to scope, range and irreversibility, already show that this will be a complex instrument.
That a topic must be considered relevant if it is related to a company’s business activities from either an inside-out or an outside-in perspective in the future – and no longer only if both perspectives are given – will make it more difficult to consider topics as not material.
In our consulting work, we see that companies that are less ambitious in terms of content, and that have also only practiced data-driven process management to a limited extent to date, have a particularly hard time dealing with the requirements. They have to be convinced not only of the meaningfulness of the topic but also of the necessity of systematic process management. We fear they will exploit the weakened reporting standards and the resulting reporting gaps to stay in their comfort zone. The methodological framework, as helpful as it can be, would then rather be used as an additional argument under the heading of “bureaucratization.” We advise them to use the opportunity presented by the increased transparency requirements to develop their management methodology.
Companies that are already data-driven and have appropriate process management will find it easier to adapt the ESRS. They will integrate ESG requirements more quickly, at least at the management level. For them, the challenge lies more at the content level: ESG competencies must be integrated into all business processes and business models must be adapted. Systematic and long-term change management can help them here: With its well-orchestrated mix of measures from communication, participation and qualification, it offers the necessary toolbox.
In the end, EU regulatory efforts – just like the activities of companies – must be measured by the extent to which they actually contribute to an ecological and social transformation in the spirit of impact orientation. The reporting standards are only one piece of the puzzle. Concerns about their dilution in terms of content are justified. However, with their specifications for the design of sustainability management, they can trigger good methodological further development, which companies should prepare for at an early stage.
Hilke Posor and Thomas Leppert are managing partners and shareholders of Heldenrat GmbH, a consulting firm focusing on sustainable business and cross-sector competence transfer in Hamburg.
Disasters know no borders, so it’s good when solidarity doesn’t either. Commission President Ursula von der Leyen is traveling to Slovenia today, accompanied by Janez Lenarčič, the Commissioner for Crisis Management. She wants to learn how the EU can help with reconstruction.
The people in the flooded areas probably have other things to worry about at the moment than visiting politicians. Even though these trips to disaster areas have great symbolic power (and in Germany alone have already made or prevented one or two chancellors). People are certainly waiting far more eagerly for makeshift bridges and excavators, technical personnel, helicopters and dump trucks. Fortunately, they are already there or on their way – from neighboring countries, but also Germany and France.
This aid is sorely needed for the country with just two million inhabitants. The terrible effects of climate change are evident here: July was the hottest month globally since weather records began. The effects are showing up in the very place where the government set out a year ago to transform the country ecologically. Now the Slovenians have to rebuild their devastated country.
They won’t be able to do it alone. Slovenia’s Prime Minister Robert Golob now estimates the damage at several billion euros. The EU is also helping: Golob activated the EU disaster response mechanism on Sunday. This mechanism should ensure that aid is coordinated in the best possible way and reaches those who need it most. Support is also coming from far above: from the European earth observation system Copernicus, providing the helpers with precise geo-information.
Have an informative read,
TSMC and its German partners have made it official: The Taiwanese global market leader will build a chip plant in the city of Dresden. The company’s board of directors made the final decision in Taipei on Tuesday.
The key points of the project are very much in line with Table.Media reports from May and last year, which were based on informed sources:
The exact investment sum has not yet been officially determined as it depends on government funding, which itself has not yet been formally approved. But it will undoubtedly be in the range of ten billion euros. Around half of it will come from the German government. This is the only way TSMC’s statement of committing a maximum of three and a half billion euros of its own capital makes sense.
Commission President Ursula von der Leyen tweeted happily on Tuesday: “The series of massive investment decisions in a short time in Europe shows that the #EUChipsAct is working. Together we are strengthening Europe’s technological independence and creating jobs with a future.”
In the overall industrial policy picture, constructing a plant by the world’s most technically advanced semiconductor company is a success. As a result, German government politicians shower themselves with praise for the new site. Europe has lost key technologies to Asia decade after decade. This was not considered a problem as long as the supply was not in question in global trade. However, the geopolitical situation has changed. The tolerance for dependencies has declined sharply.
TSMC would certainly not have come without the large subsidy. However, the expenditure is in line with the German government’s security and China strategies as well as the European course of action. TSMC’s announcement explicitly mentions the EU Chips Act. So the companies want to draw funds from European pots.
The plant will mainly produce two classes of microchips:
This type of chip was considered new and modern around 2015. At least this is better than initially expected – the first reports about the plant had only anticipated 22-nanometer technology, which again was up-to-date around 2010.
But even 12 nanometers are not the vanguard of technology development. This feels particularly painful compared to TSMC’s investments in the United States: The Taiwanese company manufactures cutting-edge products there. What TSMC brings to Germany, on the other hand, is called “mature technology” in jargon.
However, these chips are currently still too modern for the German car industry. They require considerably simpler products with process sizes of around 90 nanometers, according to a German Association of the Automotive Industry (VDA) spokesperson in Berlin on Tuesday. The car industry certainly also needs the technologies that will be manufactured at ESMC. Nevertheless, the direct effect of the Dresden plant on its independence will be limited.
But the plant is not expected to be ready until 2027 anyway – and cars will soon mutate into high-performance computers on wheels. AI functions, such as autonomous driving at higher levels, will require fast and power-saving chips on par with modern graphics cards in the foreseeable future. These are already produced today in 7-nanometer technology and lower.
TSMC is ultimately giving Germany outdated technology after all. This is not in line with the spirit of the EU Chips Act: Internal Market Commissioner Thierry Breton had envisaged the creation of state-of-the-art plants to produce chips with the smallest process sizes. The reality falls short of these grand ambitions, writes the scientist Mathieu Duchâtel of Institut Montaigne.
But Duchâtel points out that this does not mean the Chips Act is unsuccessful. On the contrary, the TSMC plant is widely regarded as a strategic success. Because even if the site seems expensive from a business perspective, it was nevertheless the right thing to do: Building back a modern chip industry in Europe is necessary and overdue.
The necessary subsidies are also so expensive because the United States and China are spoiling the industry with billions of dollars:
In light of this comparison, the subsidy for TSMC in Dresden no longer seems so expensive, especially since Intel receives twice as much in Magdeburg.
TSMC technology also fits perfectly into the existing supply chains. Bosch and Infineon already run their own semiconductor plants nearby, which will be welcome customers for TSMC’s products. Infineon, for instance, is formally also a semiconductor manufacturer, although its business model differs from that of TSMC.
In fact, Infineon has some of its products manufactured in the Taiwanese’s highly efficient factories. This makes them more partners than competitors.
A new analysis published a few days ago by the Directorate General for Energy shakes up three basic convictions of the future hydrogen world.
The study “The impact of industry transition on a CO₂-neutral European energy system” was prepared by Fraunhofer ISI in Karlsruhe as part of METIS. The Commission repeatedly uses the results of this long-term project for its energy policy decisions.
The basis was assumptions from a 2018 decarbonization scenario for industry from the EU’s Clean Planet for All initiative. Researchers now modeled the energy demand for the manufacturing sector and derived the most economical expansion paths for electricity and hydrogen generation. Because this is a purely techno-economic analysis, no political restrictions such as energy supply resilience were assumed. Nevertheless, the results call into question many a conviction previously considered certain in the hydrogen debate.
“Central European countries, including Germany, Belgium and the Netherlands, have minimal or no hydrogen production by electrolysis despite their large hydrogen demand,” the report says. The Fraunhofer researchers see electrolysis capacities in the Federal Republic at “0 GW” in 2050. In its recently updated National Hydrogen Strategy, the German government already aims for ten gigawatts by 2030.
The EU report sees the reason in the cost structure of a hydrogen economy. The cost of transporting H2 would be low compared to production, and neighboring countries would have more favorable conditions. The leading hydrogen producers in Europe in 2050, ranked by their electrolysis capacities in gigawatts, would be:
“France has many good wind sites,” says Fraunhofer study director Tobias Fleiter, explaining the top ranking. However, the assumed expansion of renewables in France also reveals some limits of the study. The calculations result in 320 gigawatts of photovoltaics and 300 gigawatts of onshore wind energy for France. However, the French government’s political goals for 2050 have so far fallen well short of this.
In his Belfort speech last February, President Emmanuel Macron set 100 gigawatts of photovoltaics and 40 gigawatts of offshore wind as targets, explains the Franco-German Office for the Energy Transition. The annual addition of onshore wind is also currently low.
At the same time, the Fraunhofer study assumes that electricity production by French nuclear power plants will decline from 360 terawatt hours in 2021 to 206 terawatt hours by mid-century. This is only plausible with the assumption that old reactors will be decommissioned far faster than new ones will be built. Fleiter estimates electrolysis capacities would probably be lower with higher shares of nuclear power.
A slightly different picture also emerges in a scenario in which only 70 percent of Europe’s renewables potential is exploited. Then electrolysis would also make sense in Germany, says co-author Khaled Al-Dabbas. But capacities are still low, he adds. Even in an unpublished scenario with lower pipeline capacities, there would be higher hydrogen production in Germany, he says. “For Germany, however, it would definitely reduce costs to think more strongly about European integration,” Fleiter sums up.
Contrary to many political initiatives in Brussels and Berlin, the researchers believe that self-sufficiency in hydrogen is not just possible for Europe but is even cheaper than imports. “This was also interesting for the Commission,” reveals Fleiter. “It shows how huge and cost-effective the renewables potential still is in the EU.”
The picture is slightly different if the expansion of renewables is reduced by 30 percent. A minimal import of 160 terawatt hours of hydrogen by pipeline from Morocco would be necessary – still a small proportion in view of the generation of 3,000 terawatt hours in Europe.
Shipments of hydrogen derivatives and basic products for the fertilizer, chemical and steel industries could nevertheless play a significant role. Because in another scenario, the ISI has calculated the consequences if ammonia, ethylene and sponge iron were no longer produced in Europe but imported. Replacing just these three products would reduce hydrogen demand by a third. “We would almost have a different energy system,” says Fleiter.
On the one hand, imports of hydrogen derivatives would be significantly lower, especially in Germany. However, this would also make most offshore wind farms superfluous. The necessary capacities would be reduced by 60 percent. From a purely economic point of view, many rooftop solar plants would also not be needed.
But many companies in basic industries still have different preferences for decarbonization, Fleiter reports: “Some want to import green methanol and ammonia, others prefer hydrogen.” Depending on the strategy, some manufacturing stages would remain in the EU, others would not. He says the industry’s hydrogen needs are still very uncertain and not necessarily a no-regret measure, as is often assumed.
So now they are here, the European Sustainability Reporting Standards (ESRS). The EU Commission has adopted them and, based on the current situation, it is not expected that the EU Parliament and Council will exercise their right to reject them. Therefore, the way is clear for the already adopted underlying framework, the Corporate Sustainability Reporting Directive (CSRD), to be implemented in national law with the new standards by mid-2024.
It was to be expected that opinions on the new standards would differ. Business associations warn that the effort and bureaucracy required to fulfill the reporting obligations will be too much for small and medium-sized companies in particular. Environmental associations are critical of the significantly relaxed requirements compared with the original proposals of the setup working group.
As is so often the case, several questions remain, and not all of them will be answered by the EFRAG Working Group’s implementation guidance, which is still expected. However, what is already clear: The effects have not only a content dimension but also a management dimension in two respects.
On the one hand, simple reporting is not enough according to these standards. Rather, systematic process management is required, as we know from quality, innovation or risk management, for example. It includes the analysis of opportunities and risks, the definition of indicators for a target state, the setting of targets, the development and implementation of suitable measures to achieve them, and, of course, the regular monitoring of target achievement and the derivation of new measures.
Regardless of what companies define as essential and thus relevant for their sustainability reporting, they will need such process management. The good news is that this is a practiced procedure and in many cases can be easily integrated into existing process management standards. It corresponds to the well-known PDCA cycle of the continuous improvement process and is methodically on familiar ground. Nevertheless, it is remarkable that the Commission de facto demands such process management via the reporting requirements.
It is also worth noting the great importance attached to the materiality analysis, especially in combination with the stakeholder dialogs. It will be the most important instrument with which a company prioritizes its sustainability activities. It thus forms the basis for strategy development. It is remarkable that the Commission has laid down such clear methodological requirements for this. The present statements on the dual materiality with regard to external (ecological and social) impacts and internal (financial) impacts, combined with the assessment standard according to scope, range and irreversibility, already show that this will be a complex instrument.
That a topic must be considered relevant if it is related to a company’s business activities from either an inside-out or an outside-in perspective in the future – and no longer only if both perspectives are given – will make it more difficult to consider topics as not material.
In our consulting work, we see that companies that are less ambitious in terms of content, and that have also only practiced data-driven process management to a limited extent to date, have a particularly hard time dealing with the requirements. They have to be convinced not only of the meaningfulness of the topic but also of the necessity of systematic process management. We fear they will exploit the weakened reporting standards and the resulting reporting gaps to stay in their comfort zone. The methodological framework, as helpful as it can be, would then rather be used as an additional argument under the heading of “bureaucratization.” We advise them to use the opportunity presented by the increased transparency requirements to develop their management methodology.
Companies that are already data-driven and have appropriate process management will find it easier to adapt the ESRS. They will integrate ESG requirements more quickly, at least at the management level. For them, the challenge lies more at the content level: ESG competencies must be integrated into all business processes and business models must be adapted. Systematic and long-term change management can help them here: With its well-orchestrated mix of measures from communication, participation and qualification, it offers the necessary toolbox.
In the end, EU regulatory efforts – just like the activities of companies – must be measured by the extent to which they actually contribute to an ecological and social transformation in the spirit of impact orientation. The reporting standards are only one piece of the puzzle. Concerns about their dilution in terms of content are justified. However, with their specifications for the design of sustainability management, they can trigger good methodological further development, which companies should prepare for at an early stage.
Hilke Posor and Thomas Leppert are managing partners and shareholders of Heldenrat GmbH, a consulting firm focusing on sustainable business and cross-sector competence transfer in Hamburg.
