We are meeting at a very exciting time for your business, as you have just announced record results for the first half of 2022. What has been driving this growth?
Our 50% sales growth in the first half of 2022 reflects that Danfoss is becoming a preferred technology partner for customers who want to decarbonize through energy efficiency, machine productivity and low emissions. We have an ambitious growth strategy, built on heavy investment into building our global capacity and launching new products that enable the green transition. The biggest trends that surround us are around climate action driving decarbonization and electrification - these were the foundations of our plan and what fueled our bold steps.
On top of this, we have just closed an important acquisition, which hasn't been driving the numbers yet but places us at the forefront of electrification. This is a truly transformative year for us.
Climate action has never been more stringent. What are the most important steps you believe must be taken to meet the world's decarbonization targets?
When considering ways to decarbonize the world, we rely on three key principles: first, we must use less energy; second, we must reuse the energy we have already used whenever possible (for example, at Danfoss, we reuse the heat produced by our manufacturing processes and data centers to warm up buildings); and third, we must use clean energy.
These principles are fundamental to our company. We have examples of carbon neutral supermarkets and water cleaning facilities with massive energy savings, and we are world leaders in heat pump technology. There is a lot of talk about new technology - we ourselves have a lot in the pipeline - but if we just use what we have today, we can make a huge difference. That, combined with moving towards electrification in the transport sector, is what we need most at this time.
We were excited to see that the North Sea will become almost a green power plant in the future. In the medium-to-long-term, the world needs to double down on renewables but right now there is too little emphasis on energy efficiency. If you look at recent IEA (International Energy Agency) statistics: about a third of the carbon reductions we need to reach the Paris Agreement targets must come from energy efficiency. It is not only the right thing to do, but it is also profitable as pay-back time is well under 3 years, so it’s really good business – especially right now with the current surge in energy prices. As an example, all electricity and heating for buildings at our headquarters in Denmark, which covers more than 250,000 m2 under roof, will be carbon neutral this year. We have taken our own medicine, and two-thirds of our heating demand is covered by green energy from carbon neutral district energy, utilization of excess heat, and from heat pumps.
Sustainability is often perceived as a cost by businesses, but you argue that it is also beneficial to the bottom line...
This is the backbone of our ESG strategy, the fact that we believe it is good business as well. Lower energy bills aside, this kind of approach also makes us more attractive as a partner, and more competitive. The most forward-thinking of our customers are pushing us hard to decarbonize, it all fits very well together. Financing is also becoming green, truly, all roads lead to this destination.
What are some recent innovations brought to market by Danfoss that the world should be excited about?
We have so many different innovations on all three pillars of our business. For instance, we came up with innovative compressor technologies for buildings that make air conditioning substantially more efficient and can lower energy consumption by as much as 30%. Same for heating systems: by using AI, it is possible to read the weather forecast six hours ahead of time and gradually adjust the building's temperature to what is to come.
Sounds like the ideal scenario: business efficiency and a moral high ground. How are you managing production in light of recent supply chain bottlenecks in order to capitalize on this perfect storm?
We have made significant efforts to regionalize our supply chains. This regional approach makes sense: our business is fairly evenly split between North America, Europe, and Asia; managing our supply chains regionally means shorter routes, a better customer experience, and less carbon added to our footprint. It is one of the areas in which we have invested heavily.
What do you see as the main challenges that Danfoss and the industry as a whole must work through at this point in time?
The biggest challenge I see is to build momentum on energy efficiency right now, not tomorrow but right now to build a better future. There has been a global failure to acknowledge that we should be using the energy we already have more efficiently and demand reduction.
The global energy crisis is a stark reminder that the need for urgent action requires us to put energy efficiency first.
We can do that because the technology is available, and we do not need much infrastructure around it.
