European Stock Story - Durr

By Rory Hammerson

Visible sustainability – Durr – attention to detail is always a positive.

“Therefore the winds, piping to us in vain, as in revenge have sucked up from the sea contagious fogs, which falling in the land have every pelting river made so proud that they have overborne their continents.”

A Midsummer Night’s Dream.

As a team, we have spent a huge amount of time over the past twelve months trying to understand how our investments are squaring up to the challenge of Net Zero. With no sensible legislation in place regarding short term milestone targets, companies are effectively following their own agenda, with an eye on a long backstop to achieve Net Zero by 2050. Let’s not mince our words at this point. Net zero by 2050 is a law which is so avoidant of the obvious reality facing our existence, that it makes an ostrich look positively leonine.

To be fair to many of the businesses we look at, 2050 is rarely used as a crutch to avoid the necessary hard grind and investment needed to combat carbon. Many of our investment companies have management teams who are not only bringing forward the timetable to 2030 but are making these targets material incentive targets for executive pay.

Decarbonisation is probably the most powerful tool at humankind’s disposal for stemming the inevitable consequences of our activity over the past century. Other solutions regarding capture and storage and further rollout of renewable energy will play their fundamental role in the process but decarbonisation is the key. Companies, driven by the quest for profits, will have to face a compromise.

Durr’s automation capabilities have made it a mainstay in car production

Investment in decarbonisation is an expense without commensurate revenue, so it follows that profitability is going to be impacted. Even if companies can capitalise these costs on their balance sheets, returns on capital will also be diminished. So, we can imagine a boardroom where tensions between necessary, non-revenue generating investments adding to the inflationary pressures bulging costs and stakeholder interests are going to be a source of much debate…

Occasionally we are bowled over by what we hear from our investment companies, and this has happened with German engineering group Durr, ( A leader in its field, Durr’s automation capabilities have made it a mainstay in car production. The business has had to adapt time and time again, facing severe challenges and making bold moves to diversify from its main industry exposure. In a recent meeting with the company, Durr outlined exactly where their carbon exposure is generated and have devised interesting incentives to decarbonise where they as an organisation don’t have control of emissions.

Most of the carbon generated in Durr’s value chain is downstream, generated by the client’s use of machinery which Durr manufature. Much of this machinery is old and therefore more carbon intensive than the innovative new products the company produces. In terms of what Durr itself can control (Scope 1 and Scope 2 emissions), Durr aims for net zero by 2030. Total decarbonisation will only take place by 2050 but this relies on Durr’s existing clients and indeed suppliers committing to their own net zero journeys, out with the company’s control.

Durr’s supply chain is vast with around 30,000 suppliers, who are incentivised to reach their own Net Zero targets via a 2-step supply chain finance scheme. Firstly, suppliers must provide data and they must work in line with the SBTI [1] framework in order to get better financing terms from Durr. Big suppliers carry out their own audits, but smaller companies will need to publish carbon emission data and then have these results independently audited.

Durr is in the final stages of choosing a partner to provide a platform and is working with banks and other financial organisations to have the program ready by 2nd quarter this year. The aim is to establish a 10-year programme with steps and targets published each quarter. By working with stakeholders and clients in this way, Durr can influence the real impact of its business model. The power to incentivise clients to buy more efficient machinery through the attractive financing packages proves a deep understanding of the company’s ability to be held accountable for its sustainability.

In terms of what Durr itself can control, Durr aims for net zero by 2030.

We are also impressed that Durr is spending no time on looking at offsetting programmes (investments aimed at offsetting the residual embedded carbon within businesses that cannot be removed). We are sceptical of many of these schemes which we see as presenting a greenwash risk. We would like to see management teams focusing on what direct actions can be taken to decarbonise rather than working out clever ways of avoiding potential fines through dubious schemes which are outsourced to others, whose motivations may well not be aligned.

There is a net zero impetus for zero emission vehicle fleet by 2030, and the company will publish a new policy in Germany, providing incentives, expanding charging systems at work and at home and in terms of the EV fleet. Management speaks about a credible medium-term pathway by 2025. Here again, transparency is all. These targets will take time and investment but what we see is a clear and progressive culture.

Durr is an engineering business and so it’s true resource is its people. Employees are encouraged to come up with sustainability ideas under the Spark programme where ideas are sent into a centralised inbox. This idea management forum allows new suggestions on sustainability in line with the corporate philosophy to reach the correct people within decision-making circles.

The journey will be long and arduous for Durr, but Paul Durr’s original metal shop providing roof flashing has come a very long way since its origin in 1896 Stuttgart. Durr is a technology company of the modern age, and it is using its competence and its innovation to future proof itself. A microcosm of what Planet Earth plc needs if we are to avoid Titania’s prediction.

A Midsummer Night’s Dream is meant to be a comedy, but as with many comedies, one wrong step can change the genre to tragedy. We have so little time, and we must speed up our journey with not a single misstep.

Written by Rory Hammerson

Sources and references

[1] Ambitious corporate climate action - Science Based Targets


Information is accurate as at 09.01.2023. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment capital is at risk.