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Companies in Germany use only 50% of digital tech potential

Written by Thu 16 May 2024

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Companies in Germany are using only half the potential of digital technologies to reduce their carbon emissions or increase profits, according to a new study.

The Sustainable Economic Efficiency through Digitalisation (SEED) Index, by Accenture on behalf of the Vodafone Institute for Society and Communication, measures how well German companies use digital technology to reduce carbon emissions or increase profitability.

Last year, the SEED Index found German companies scored 53 out of a potential 100 points for digitalisation.

Managing Director for Sustainability at Vodafone Germany, Michael Jungwirth, said the findings of the SEED Index are a wake-up call for the German business community and the time to act is now.

“There is a significant gap between the current state of digitalisation and what is possible, and necessary, to make our economy future-proof and sustainable at the same time … We are standing at a critical point where we have to decide just how serious we are about seizing the opportunities of digitalisation,” said Jungwirth.

In 2023, digital technologies were adopted at a 29% rate to reduce carbon emissions. This resulted in savings of 31 megatonnes of CO2e, equivalent to just 4% of Germany’s 2022 emissions. 

Additionally, German companies saw a £24 billion ($30.4 billion) increase in combined earnings before interest and taxes (EBIT) through digitalisation, roughly 9% of the potential uplift. 

Despite the common perception that increased climate protection leads to higher costs and lower profitability, the SEED Index found the opposite trend for German businesses.

Digitalisation Promising for Germany’s businesses.

The Index discovered by 2030, digitalisation could enable a 90% increase in EBIT, to £45.4 billion ($57.6 billion). Companies could also reduce their CO2 emissions by 36%.

However, only 45% of German companies are expected to have digitalised by 2030, significantly below their 55% expected adoption rate and wider global benchmarks.

“This study is the only one of its kind and offers a clear roadmap for companies and policymakers to make Germany’s economy not only more competitive but also more sustainable,” said Alexander Holst, Head of Sustainability, Strategy & Consulting DACH at Accenture.

Digital Tech to Reduce Efficiency and Reduce Carbon

Vodafone said there are already available that could improve efficiency whilst reducing CO2 emissions.

These include ‘digital twins’, smart building management and predictive maintenance, artificial intelligence (AI), augmented reality and the Internet of Things (IoT).

The five sectors analysed by the SEED Index were buildings, industry, agriculture, logistics and electricity.

The SEED index found that with an adoption rate of 33%, the electricity sector is the most digitalised in Germany. The Logistics sector logistics only reached 17% of its potential, with intelligent route and cargo optimisation yet to be used at scale. The logistics sector is also likely to have the lowest adoption rate in 2030 at 34%.

The Index predicted the buildings sector will become a digital pioneer, reaching an adoption rate of 65% by 2030. Vodafone said this sector represents around 40% of Germany’s total CO2 emissions and will need to play a key role if Germany is to achieve its climate targets.

Agriculture is rapidly advancing, with a 63% adoption rate and the highest CO2 savings potential among all sectors, nearly 17%. The SEED Index asserted that smart soil, crop, and livestock monitoring will be pivotal in the coming years.

Germany Faces Digitalisation Gap

The SEED Index found collectively that digital technologies could slash carbon emissions by roughly 42 megatonnes annually, nearly fulfilling 10% of Germany’s CO2 reduction goal for 2030.

 By 2030, nearly all sectors could double their EBIT margin through digitalisation, but the gap between German firms and global standards is expected to widen.

These five sectors represent almost all of Germany’s CO2 emissions. The 26 use cases in the SEED Index encompass 95% of emissions from these companies, demonstrating how digital solutions can propel Germany towards its climate objectives. 

“It cannot and must not be enough for us to only leverage half of the potential of digitalisation,” said Thomas Koenen, Head of the Digitalisation and Innovation Department of the Federation of German Industries (BDI) e.V. 

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Written by Thu 16 May 2024

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