Large corporations that want to lower their carbon footprints can’t do it alone. To be effective in the aggregate, companies throughout the supply chain must reduce theirs as well. This can be a challenge because many supply-chain companies lack the resources to track their emissions or even finance sustainability programs.
German conglomerate Siemens AG has a novel solution to the problem: put up the money to help small and mid-sized enterprises (SMEs) along the supply chain lower their carbon emissions through more sustainable practices and technologies.
That’s what one of Siemens’ U.S. units is doing. In March, Siemens Smart Infrastructure and Siemens Financial Services launched a $100 million capital program that will provide loans to SMEs in the U.S. so they can jumpstart their decarbonization efforts.
The move comes as lawmakers and stakeholders put increasing pressure on corporations to move more rapidly in adopting aggressive decarbonization initiatives. To get there, suppliers need to be brought quickly into the fold.
Small and mid-sized supply-chain companies make up 99% of the U.S. economy and therefore have an “outsized impact on the country’s ability to meet national and global climate goals,” Siemens said in a press release.
Emissions from suppliers, known as Scope 3 emissions, make up the majority of total greenhouse gas emissions at large corporations. This has put SMEs under increased scrutiny from customers and regulators alike.
“Small and medium-sized enterprises are the backbone of our economy, yet they may not have access to the same capital as our country’s largest corporations when it comes to making sustainability improvements,” Anthony Casciano, CEO of Siemens Financial Services, said in a statement. “With each part of the supply chain being evaluated, there is an opportunity for smaller companies to make necessary changes to remain competitive. We are launching this loan program to ensure essential resources for these companies are available to keep pace with our nation and economy’s climate goals.”
Because many small to mid-sized suppliers have no expertise in reducing emissions, they must hire expensive consultants to develop a strategy. Sustainability programs have become increasingly important in competing for contracts from large corporate customers.
“It’s going to be about the value of the carbon emissions that each company has, and that’s a real shift from how it was even 18 months ago,” Martin Powell, head of sustainability and environmental initiatives Americas at Siemens Financial Services, said in an interview with Bloomberg.
To help suppliers deal with the challenge, Siemens USA will provide loans for projects that might include installing solar panels to adding technology that can track emissions. Loans will likely range from about $1 million to more than $10 million over three or more years. Siemens plans to offer the loan terms in line with standard corporate loans.
Companies interested in the program have been instructed to send inquiries expressing their commitment and challenges in implementing sustainable operations. Those picked to participate in the program will consult with a team of Siemens financial and tech experts to create a custom end-to-end decarbonization plan. The plan will integrate Siemens’ Smart Infrastructure sustainable-oriented products, solutions, and services, including energy efficiency technologies, alternative renewable energy sources, and electric vehicle charging infrastructure.
“In this program, we are providing a complete sustainability strategy that encapsulates every step — from consulting services and financing solutions through to the cutting-edge technologies that make our customers efficient, resilient, and sustainable,” said Ruth Gratzke, president of Siemens Smart Infrastructure USA. “This capital is the fuel that will jumpstart the process.”