Episode 73
Head of Customer Cluster Utility at Volvo Construction Equipment, Mats Bredborg, shares insights on Volvo's plans to reach net zero emissions by 2050, and how the automotive industry is becoming more sustainable.
Episode 73
Episode Summary
Volvo's science-based strategy
Volvo plans to reach net zero carbon emissions by 2050. This ultimate goal works together with their ongoing production of construction equipment. Their vehicles usually have a lifespan of about ten years, which means their portfolio of products must be fully electric by 2040, to reach their science-based target in the following decade. Science is essential for calculating real sustainability objectives, as it gives organizations a detailed grasp of their emissions, enabling a more accurate, proactive response.
The fuels of the future
Mats also shared his views on how the fuel for cars will evolve in three key ways. These changes will continue to disrupt the automotive industry in line with more sustainable practices. Here are the three key aspects of future fuels:
- Hydrogen - engines that run on hydrogen are only just starting to develop, but their use is rising. Especially for larger vehicles, e.g. trucks, buses, and construction equipment, where it is more difficult for electric motors to be utilised, hydrogen engines will play a key part in making them environment-friendly.
- Electric vehicles - the electric revolution has already begun. This is evident in the increasing production of cars, charging stations, and other services around electric vehicles and their owners. The industry is receiving tremendous amounts of investment, which is only increasing, meaning the future of automotive sustainability looks bright.
- Synthetic fuels - since the electrification of vehicles requires a huge amount of investment, this creates a long wait time in reducing CO2 emissions down to targeted levels. The continued support and production of combustion engine cars only limits this goal further. Alternative, synthetic fuels can bridge the gap between sustainable cars' present and future.
Importance of transparency
As an increasing number of companies adopt sustainable targets, the importance of transparency in your aims is also growing, facing both employees and customers. Not only should customers be able to know exactly why, how and what you are doing to reach net zero emissions, but employees also need to understand the company's targets so that they can feel empowered in representing a wider movement.
This article summarises podcast episode 73 ”Reaching Net Zero in the Construction Industry" recorded by CX Insider. For more information, listen to the episode, or contact Mats on his LinkedIn profile.
Written by Marcell Debreceni
Full episode transcript
Valentina: Hello, everybody, and welcome to another video episode of CX Insider. This time, Adam and I talk to Max Bredborg, head of customer cluster utility at Volvo Construction Equipment. In this episode, we talked about sustainability, transformation in the construction industry and the challenges that come with it. Enjoy the episode and if you do subscribe to the podcast on your preferred channel. By the way, this podcast was brought to you by ACF Technologies, global leader in Customer Experience Management Solutions.
Mats: So my name is Mats Bredborg, and I'm Swedish, but I live here in the UK. I live in Cambridge, and most of the time I've been here, or all my time, I've been working for Volvo Construction Equipment and different roles around the world. And I've been in North America with Volvo and now I'm heading up the utility segment or utility segment products. And we're looking for how we can take those into being electrified and take them into the market being zero emission machines around the world. So that's me very quickly.
Valentina: So could you tell us a bit more about Volvo Construction Equipment and what's your role and what you're currently working on?
Mats: Well, the construction equipment is part of Volvo Group, and Volvo Group is commercial vehicles and power. So we do commercial vehicles like Volvo trucks. We have a division that is called Volvo Buses, the city buses and coaches. And we have Volvo Penta that does marine engine and power outlets, so construction equipment is part of that group and is separated, but we share the brand with the Volvo car industry. And then when it comes to my role in Volvo Construction Equipment, I work with the smaller products within the construction equipment, the ones that you often see in cities like mini diggers, mini excavators, mini wheel loaders and so on, and that we call the utility segment. And we made a decision many years ago that we will take that segment from being diesel products to being electrified. So we have done investment or we are working with investment in taking those products from being diesel units to being electrified units. And the reason why we've done that is that we signed up for science-based targets. So we have a timeline to get our whole range of products into electrification. And then it's obviously simpler with the smaller products because then we can utilize the technologies that we already have in the group from Volvo buses, for instance.
Valentina: More and more companies are committing to reducing their carbon emissions. Some are heading in the right direction. Some are dealing with accusations of greenwashing. After the Paris Agreement, a legally binding treaty created in 2015, governments and companies around the world committed to taking the necessary actions to reduce the negative impact of climate change. As Mats mentioned, science-based targets are targets that help companies achieve the goals of the Paris Agreement. This treaty is not the first agreement on tackling climate change. Before the Paris Agreement, there was also the Kyoto Protocol in 2005 and the UN Framework Convention on Climate Change in 1992. Conversations about global warming have been going on for a while. Time is going fast and companies are under increasing pressure to tackle this issue.
Mats: I think that we all have a responsibility towards the challenge that the world is facing. And I think that each company should focus in on their area where they are responsible for and develop those products and services or whatever it is that they need to do to make this come down to zero. And I think that there is a lot of good initiatives round the world, like the net zero initiatives, that they can sign up to make this happen. So, yeah. And I also think that it's so easy to look at some other areas and some other things, and it's much better to look at what we are responsible for and what we can do and take that to heart and then get that done. So and then also the other thing is that maybe we shouldn't strive for everything being perfect and a perfect solution. It's more about getting started, getting on the journey, get something done, maybe getting out of this like we always do this planning and visionary and so on. It's better to get something done and get it out there and then learn from there and take the next step.
Valentina: According to a report conducted by the Committee on Climate Change, new technologies and fuels make up only 38% of carbon emission cuts, whereas 62% consist of societal or behavioral changes. If companies commit to net zero, how much responsibility will fall on the employees?
Mats: Yeah, I mean, just the simplest thing to think about is how do you get from your home to work and what can you do from home to work to get your CO2 down or do it better. And so that's obviously one thing. And the other thing is in the companies, I think that it would be great with some kind of empowerment of the employees, like maybe it's not training, but that they are empowered to do things, to do the right things and come up with ideas and move that forward. And maybe we need to look at the whole management of this transition, [to make sure] it's done a little bit differently with empowerment of the employees to come up with ideas, to drive through those ideas, to do those small changes. And I think that the sum of all those small changes will make a big impact. And if we think that it's going to be the cleverest guy that sits on the top and comes up with the idea, and then they're going to go down from there on, that's not going to wait, it's going to happen. It's going to come from everywhere and go up. So I think yeah, I think that it's probably more about empowerment than it is about education and training.
Valentina: Have you faced any employee resistance?
Mats: Yeah. So when it comes to what's close to, for yourself, the changes that you have to do yourself, then it could be when it affects yourself, then it could be a little bit of a hard choice. And then you're waiting for, or people are waiting to see what other people are doing. And then it obviously, if they do something, then then they go on that bandwagon. But then sometimes it's hard for them, for people to take the first step.
Valentina: There is a growing number of consumers who opt for greener choices. Many want to live in sustainable homes, use public transport or cycle to work. Do they also care about how their homes were built? And we're going to talk about this a little bit later. Should you be the first one to do this transformation, or should you wait a little bit and see how other people are doing it? But before that, looking at this from the consumer side. Do you think consumers care about this? What are their perceptions of sustainable companies?
Mats: So we are a B2B company. So we do construction equipment that goes out and sells to construction companies or contractors out there. And the products that I represent or the product that I'm working with are the smaller products that are in cities and that you mostly see around the cities. And I think construction in the city is a little bit of a... it's not the nicest thing, because there is a lot of noise, there's pollution around it, so people don't appreciate or like construction in the city. So there is a perception that the citizens of London, for instance, want it to be a better place to live, and they want to get that to be better. So in everyone that we talk to about that, we have fully sustainable products that are zero emission. They are electrically operated. Everyone thinks it's a great idea. They think, "absolutely that makes sense." It's lower noise. We understand the pollution. It's more than CO2. There are other harmful gases that come out of a diesel engine, and that's very local. So they all buy into that. So we have a lot of support in the communities that this is when we talk to people, that this is the right way to go. But then from having that support to make it happen, it's obviously another thing.
Valentina: Once a company commits to net zero targets, the challenge is to plan a detailed strategy to achieve this. According to netzeroclimate.org, net zero is a state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere. Reduction of any emissions also needs to be done permanently, meaning once greenhouse gas is removed from the atmosphere, it should not leak over time and planted forests should not be cut. The Volvo Group set net zero targets by 2040. So how will they do that?
Mats: Yeah. No, absolutely. So first is that we signed up to the science-based target, which says that we're going to be net zero by 2050. So that is that the ultimate goal is 2050 with net zero. And then we may making product, we're making construction equipment product and they have a lifespan of about ten years. So our portfolio of products needs to be net zero or be emission-free by 204,0 like ten years before the target, because it takes ten years to swap out all the products that we have in the marketplace. And I don't know exactly the number, but it's around 75 million tons of CO2 that those products, that that portfolio of ten years of our products out in the marketplace is emitting every year. So that's if we can get by 2040 to have a full portfolio that is zero emission by 2040, then we will reach the goal. And by then, if you look at the portfolio, we probably have 250 products from small products to big products. So we need to deploy different technologies to make that happen. So that's one thing and that's our products in operation in the market. Then the other thing is, the other problem is that we, by making the products, then we emit some CO2.
Mats: I mean, in the manufacturing process, it's much, much smaller. So maybe, I don't know exactly the numbers, but just to put it in perspective, so if that was 70 million tons, then it maybe 70,000 tons that we do in our operation, and we're also looking at the same thing that we need to get that done by 2050, then complete. But we have a checkpoint: 30% by 2030 and then 50% by 2040 and then the rest. And then the third aspect of this is that we obviously have a supplier base. So we have a supplier base that also gets the products or the components to us. And a good example of that is that our product since it's a big construction equipment, is mostly done by, I mean, 80, 90% of the product is steel. And steel is a big... Making steel is a big emission of CO2. So fossil-free steel will be cut back. And then in our supply chain of getting fossil-free and we have produced a few machines and we partnered up with SSAB to develop fossil-free steel. And we have machines in customers' hands with fossil fuel steel. So it's three, three things. It's the supply, it's our operation. And then it's also our machines and operation.
Valentina: All business transformations always come with high risks, one of which is financial.
Adam: It does sound like a big challenge. It leads on to a question I was going to ask. Listening to all of that, one of the biggest things that we probably need to talk about is the financial risks that all of those challenges that you've got actually take on with Volvo and other organizations of your kind of size. What kind of risks are there?
Mats: Oh, it's a massive risk. And so there is no if we go on, the machines and operations are like having machines ready for this target, it's that today they are based on diesel technology and obviously we've engineered engines for hundreds of years and we have factories and we have all of that right now. And then we need to then do something different with electrification and then the investment. And so if we do that investment in electrical vehicles and build those capabilities and get that knowledge in-house and that investment to do that, what do you then do with the other things? Yeah. So and then how do you bet on this? Do you bet 50/50 that we do half our investment on diesel, half on electric mobility and see where the market goes, or do we go all in on electrification? And a little bit of the problem that we have is that the product that I work with, the smaller product, we made a decision that we go all in on electrification. So we do 100% of investment on the electrification. And that means that we cannot meet the emission regulations on the diesel versions because we haven't done any investment there. So then at some point in time, those new regulations and we have to stop them with the diesel versions. And then if we say, okay, now the market wasn't ready for electric machines and we have done the investments, then obviously we have a little bit of a problem. I think that I think that everyone I talked to thinks that the investment is right, the focus is right. But the timing. The timing, yeah, that could be the problem.
Valentina: As mentioned before, sustainability transformation concerns everyone. Sales, supply chain. And the more people are involved, the more opinions there are. The challenge is that the business needs everyone's support.
Mats: I think we will stick with the original idea. Go with that. And I think the car industry, I mean, there is no regulation saying that you have to have an electric car. I mean, you can still buy a diesel car and you can buy a diesel car that meets the regulations. But the public opinion has swung completely over towards electrification. So even if I mean, there are incentives in many countries to do this, but you see that shift has already happened. And that has happened because one manufacturer, Tesla, stuck by their guns, did the right thing, got it developed to be so good that that people say, okay, now I go electric.
Adam: Yeah. Absolutely.
Mats: And then I would say that all the ones that were sticking with the diesel kind of said,we have to sort this out, they now have to switch over. So, I mean, all other manufacturers are switching over to fully electric cars, too.
Adam: Yeah, absolutely.
Mats: So it's tough to be first. It's tough to be the leader in something. And we probably need to behave a little bit different being the leader.
Adam: That's what I was going to ask you, because you're right, it would be different from being the leader and being the first people that are doing, or the first organization that are doing it. But would you prefer to be that rather than, let's say, I suppose, looking at Tesla, for example, now we can see that Tesla's so successful when we chatted earlier and you were saying they're going to sell like a million cars and in hindsight you go, yeah, I'll absolutely want to be the Tesla. But obviously, they've gone through a lot of work to get there. And if you're doing this first in terms of electric construction equipment, is that the right place to be or would you prefer to - someone else did it and you learn from their mistakes? What do you think is going to be the easier approach?
Mats: I think being first fits Volvo very well, I think being first for some of the other brands doesn't fit them and it will be a higher, bigger challenge. So Volvo has more like always been into this sustainability. I mean, already in the seventies we said that this is the main direction that we need to take. And we have innovated a lot around this. So it's a space that we feel fairly comfortable going into. So and I think as a whole organization, we feel that we can take that space. But then, it requires that we operate a little bit differently from how we operated before. And that shift is probably going to be hard, and a little bit like you said, you asked about this before also, like You have to trust yourself that you're making the right decision and you need to have that confidence that this is the right thing to do. So even if we haven't sold a lot of electrical machines right now, and maybe that has even been a little bit lower than we expected, we still believe that we're doing the right thing. And that confidence, when we get that confidence, then people feel that we have the confidence.
Valentina: One of the reasons why we are building an online community of business leaders is that we want to share our ideas, opinions, and knowledge, but also our personal lessons and experience.
Mats: Exactly, exactly.
Adam: Absolutely. It makes perfect sense. And I think one of the things which I was looking at, and we were chatting about this earlier, is you've obviously got a lot going on. You've got some massive decisions to go on. And when you, for example, are selling construction equipment or supplying construction equipment, there's not just the Volvo staff involved. There's also everyone that ultimately sells all that equipment. How are you or how do you think you should tackle getting all these people on board with this sudden process change? Because, you know, flip it around and let's say I'm selling a diesel powered piece of construction equipment that I've been selling for 20 years. What is the incentive? What's the driver to me to suddenly look at electric? What do you think?
Mats: Yeah, it's the biggest, biggest challenge I think we have. And I think going back to that, the technology is available. So the technology is there. So it's not the hardest thing to actually build electric pieces of equipment. And I won't take anything away from engineering and from production. They've done a fantastic job. But that is one part then to convince everyone in the value chain to make this happen. That is the biggest challenge going forward. And to get this kind of kick-started, get it off the ground, to get going. I think we need a different strategy to go to market in the beginning and then we can probably put it back into how it was before, but we need to get it kick-started. And a lot of the work that we have done now is that instead of pushing down the value chain and pushing it to sell this, we've gone to the other end and looked at the demand side so we can get a pool, so that the companies that buy the services to customers - customers that buy the service from the construction companies, what do they think? Do they think that there is a value in paying a little bit of a premium to get a project done with zero emissions?
Mats: So when that happens, then that trickles down to value chain. And then obviously the ones that are selling it say, okay, now we see that some people are interested, now we can get engaged in it. But the question was more about the distribution and the salesman. I think everyone that I've been in contact with on the sales side, in our distribution, they are super excited about this. Right, because they see, they look around and they see the car industry, the buses and everything's changing. Everything's changing. And it's almost like if I'm not on this bandwagon... And then also I think that maybe it's a little bit like I signed up for Volvo, a more sustainable brand. So I'm already on this directory. But then of course, I mean, if I'm a salesman or in the selling organisation, I also need to have some demand I need. So and then to expand on this even further is I just came from a big meeting with a huge company, a global company and their headquarters here in London. And we had a meeting there and we discussed how can we make this happen? And they were like a customer's customer.
Mats: And then we got from there to invite all the people in the value chain to call in. And we had three questions for them. They had tried off the equipment and said we had three questions that were what was good, what was the benefits? And what was the challenges of learning of using electric equipment? And what can we as a manufacturer do and customer do to make this happen? And it was really like from the trenches of using construction equipment came into the boardroom of this huge corporate corporation, this big corporation of what we can do. And the questions before were more like segmentation and PowerPoints and how we do it, and that was more like, now it came down to what do we actually have to do tomorrow to make this happen? What do we do now to solve that problem to get it to happen now? So I think you're on to something with that. We need to look at the whole value chain. And I think my job or Volvo's job, and Volvo's role in this is to orchestrate that value chain to come together, to get the energy of making it happen.
Adam: Sure. And one of the things I was going to ask, if you were to try and advise any other organisation of a strategy for this, anything that you've picked up that you've learned on your journey so far? There's probably quite a lot I imagine.
Mats: Yeah. So there's a couple of things and we covered it before. It's like you have to have a strategy, and your strategy cannot only be the product. So the strategy needs to be a 360. You need to look at the whole thing with this. And so the product is very important. It's very important that you get the technology right, and right technology choices and so on. But you also need to look at the distribution, how you get to market, how do you engage the market into this? And going back to then, what is your messaging that you're going to take into the marketplace? And maybe this messaging is like you say that you want to live in a better world, and what should that be? So then also, I mean, there's a lot of learnings here. But also one thing that we absolutely got right is that we made a global product. We made a product that can go everywhere. So we didn't make a product that is delivered just for this market or this market, or this market.
Mats: We made a product that can go everywhere and can obviously meet all regulations because it's zero. So that was good. But then we need to think local, to take a global product and a global concept, just like an Apple phone or a Tesla car. It's a very global product. But how do you get that into the local market? And I don't think we can have like a global thing that happens in the local market and then it's more like creating almost like a small cell of people or a little a group of people that's working in that market, like a guerilla team that is taking care of looking at exactly what is needed for that market, and then pool the resources and the know-how and the budgets from a global perspective, but make it happen in that market. And then only think about what we should do in that market. So it's the combination of this global development of a product, just like any of the other, like Teslas and so on, but really a local implementation in the marketplace.
Valentina: Having a clear plan and strategy to achieve a sustainable goal is critical. But none of that will be effective without transparency and reporting. Adam, you had a very good point saying maybe it sounded like a buzzword in the past. Sustainability, sustainable transformation. I would say at this point today, companies probably wouldn't go very far saying, like H&M in the past, or any other company who tried to do like H&M, for example, one season's collection of recycled cotton and then everything else is just waste. Yeah, I would say nowadays every company, whoever says that they are trying to be sustainable or going onto this sustainability journey, they do need to have a clear strategy, a clear plan and be very transparent, very transparent about it and report on it.
Adam: It's definitely something that the consumer definitely seems to care about it now, which is obviously great for all of us. Now, for example, even if you wanted to book a flight, and I imagine you do lots of international travel, you go via things like Skyscanner, you can actually search by the lowest CO2 flight now. Two years ago, I seriously doubt that was on there. And pretty much everything that you buy now, it talks about whether it's recycled packaging, where it's coming from, clothes, you can get recycled materials, even car interiors, you know, like I think some of the new VWs, they're talking about how much the interior is actually recycled material. So we're kind of at that point where, certainly in Europe because that's who we talk to, we do actually care. So personally from my side of things, that can only be great news for you guys because you are those first people and you are taking that construction equipment into something that's going to be sustainable.
Mats: And that whole transparency that this drives, I mean, that's fantastic because then when you start to see the numbers, so we've gone from, and going back to the meeting that I had here in London was that we are all convinced we are convinced that this is the right way to go. So we know that this is the future. Okay, so now I need to get the numbers. I need to get the facts. How much CO2 is it and what is the cost for the CO2? I accept that it's more expensive, but I want the numbers. I want the facts about this, and that we have increased transparency generally helps a lot. And it's like everyone knows now what a tonne of CO2 is and how we can get that down and so on. So I think that is extremely good with increasing the transparency of what this means. And so we can make a change.
Valentina: I hope you enjoyed listening to the podcast. If you did, please don't forget to like share, comment or subscribe to the podcast on your preferred channel. If you have any questions, feel free to ask Mats and join the community on our LinkedIn page. Enjoy rapid fire questions and I will see you next time. Also, this podcast is sponsored by ACF Technologies. Okay, is it time for Rapid Fire questions?
Adam: You can do some quick questions. Go for it.
Valentina: Yeah, we didn't include these questions in the plan, but if you're okay with them, we've got four personal rapid-fire questions. Not too personal.
Mats: Not too personal.
Valentina: Yeah, okay. My first question is, and we always ask this, if you could interview anyone, who would that be?
Mats: Elon Musk.
Valentina: What was your favorite and least favorite subject at school?
Mats: Oh. Hmm. Music.
Adam: No singing after this, then.
Mats: Nah, nah, no, no singing.
Valentina: What would be your superpower?
Mats: Oh. Yeah. Mm. To have the influence to change the minds of people to go electric.
Valentina: Well.
Adam: That's amazing because we had this conversation before and I said that influencing people's minds. They all looked at me weird. So, yeah, at least there's two of us that think that.
Valentina: And my last question is, if you had to swap lives with anyone for a week, who would it be and why?
Mats: Yeah. I go back to my Elon Musk thing. I mean, why I would do this is that, I'm so impressed that he could make it happen. I mean, it's how he did this. It's unbelievable. And then if we could do or if we could learn or if I could be in his shoes for a week, get that knowledge, and then I could utilize that knowledge to change the world with construction equipment. But then Elon Musk.
Adam: But absolutely, I love the idea of using his ideas to improve the construction industry. Yeah, maybe send him a tweet.
Mats: Yeah. And then, maybe even then he's going to start building construction equipment.
Adam: So. Yeah, that's a good point. So maybe don't.
Mats: Maybe, though. Yeah. So I don't want to encourage him that there is another segment that is very profitable.
Adam: So one of the things I want to ask you is what's your opinion on hydrogen engines as a fuel as opposed to obviously EV, electric vehicles? Do you think it has a place? Does it have a future? Is it going to be something we see more of?
Mats: We're definitely going to see more of it. Definitely. So I think electrification is happening now. It's like you build, we're building charging stations, we're building cars. That's not going to stop. I mean, the investments, the amount of investment that goes into electric cars is tremendous. And then it seems like the technology is right for that segment. But then when you start to look at bigger things like trucks, buses, construction equipment, where it's maybe hard to get electricity out there, then hydrogen will definitely play a role. So I think there is a tipping point that is a break point where the bigger they get, the bigger machinery will then go for hydrogen.
Adam: Does weight have a factor? Because if you've got a big HGV with all the lorries that we have on the UK roads, for example, if you were to consider manufacturing an electric HGV, a big truck. Is that possible or would it just be too heavy or...?
Mats: Yeah, so in construction equipment, we add weight to the machines. So we have to add because we counterbalance, so we have to add weight in the back. So for us, weight is good. So for us a heavy battery is not..
Adam: It's a good thing.
Mats: Yeah. So we don't have to do steel in the back, but for a truck that is transporting things then weight is a bad thing. Yeah. So then hydrogen will probably be more the direction for long haul, use hydrogen instead. And then to add on to this, and I just don't want to derail from hydrogen, and hydrogen is absolutely the right thing. But generally, diesel engine or combustion engine has got such a bad reputation after what happened with with the scandals. So everyone went away from it and went and looked and it was really good because it really kick-started all the things with electric mobility and really got that in the forefront. But what I think will happen, and this is just my own opinion, is that we need a bridge technology, so we need something to get CO2 down faster than we can get just with electrification, because electrification requires so much investment and so much more product coming out in the marketplace still. I mean, all cars or most cars are combustion engine cars and trucks. So this with alternative fuel, with synthetic fuels. I think like six months ago, you never heard anything about it.
Mats: Now I'm getting invited to webinars and a lot of things. But looking at this with synthetic fuels, and if that could be a bridge of getting like maybe, maybe in certain application down to 50% of the CO2. So you're not going 100%, you're going 50%, but you're doing it quicker because you can use the truck or the construction equipment or car, and you can use the same process of getting a fuel there, but you're using a different kind of fuel. Then obviously, synthetic fuels have some disadvantages, too, that they need to overcome. But I think it's going to be clear that we need some kind of bridge fuel to utilize the product that we have today with the different kind of fuels to get it down. So it's not... you can say that it's three, three technologies that's going to play in. If we look at this timeline to 2040 and 2050 to complete it. It's the electrification. Hydrogen for the bigger product and the long hauls of products, and then alternative fuels either to be a bridge or at certain applications.
Adam: Thank you.
