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Siemens mustn't pull out of Adani contract

Boehme Henrik Kommentarbild App
Henrik Böhme
January 13, 2020

Siemens intends to honor a controversial contract to supply signaling systems to an Australian coal mine. DW's Henrik Böhme says this was the right decision for the moment, but the incident shouldn't be repeated.

Deutschland München l Proteste gegen Siemensentscheidung zu Adani Projekt
Image: picture-alliance/dpa/M. Balk

Admittedly, the German Fridays-for-Future figurehead, Luisa Neubauer, taking a seat on the supervisory board of Siemens' future Energy AG would have been quite an interesting publicity stunt, had she accepted the offer. Especially because the portfolio of that part of the company's business is to include all of the firm's power activities.

But it is Siemens Mobility, a different division, which is currently receiving the brunt of criticism for the engineering conglomerate's dark side of business. The division has signed a contract with Indian mining giant Adani to build a signaling system for the rail connection between its Carmichael coal mine in Queensland, Australia, and a terminal for shipping the coal abroad.

For quite a while now, pressure has been building from environmental activists against Adani's controversial mining project. A major point of criticism of the project is the terminal in eastern Australia, which the activists claim will threaten the coral habitat of Australia's Great Barrier Reef. More general concern comes with the use of coal as such — a commodity that is in the firing line for its huge carbon emissions.

As a result of the protests, a sizable number of companies have already pulled out of the Adani project, and several investors, banks and insurance firms have pledged not to support it. 

Siemens, however, hasn't seen the writing on the wall, or is choosing to deliberately ignore it. They might have thought that if we don't do it, someone else will step forward.

Minor issue, major damage

Siemens CEO Joe Kaeser met with Neubauer in private talks on Friday and surprised the 23-year-old by offering her a seat on the supervisory board of Siemens Energy, which she turned down.

DW's Henrik Böhme
DW's Henrik Böhme

Kaeser himself is said to have been caught by surprise about the resistance organized by the activists against the firm's delivery of signaling systems for the coal mine — a relatively modest contract worth €19 million ($21.16 million) tends to get overlooked among Siemens's annual revenues totaling €87 billion.

Nevertheless, pacta sunt servanda, meaning contracts must be kept and cannot be easily torn up. What happens the next time climate activists stage protests at the gates of the Volkswagen headquarters in Wolfsburg, demanding the end to car production in Germany? 

Of course, Siemens could just shrug off the financial damage resulting from a withdrawal and the ensuing litigation for breaking contractual obligations. But this would come at the price of a severely damaged reputation as a reliable partner and supplier. 

So, now that the damage has partly been done, the company should strive to contain the fallout from it. Damage control must now mean putting an early warning system in place that prevents a repeat of a project misfiring so badly. This must be Kaeser's priority, especially in view of Siemens's wholehearted pledges to become climate neutral within the next decade. 

Greenwashing in times of climate change

What's even more important for the company to realize is that the movement away from fossil fuels is already well underway. Divesting from ethically controversial businesses has been in the headlines ever since the struggle against South Africa's Apartheid system and the campaign against Big Tobacco in the US.

Now, fossil industries are in the public eye, being bashed from all sides for their potentially devastating effects on the global climate. The world's biggest insurer, Germany's Allianz, in 2018 stopped investing in new coal power projects, and has promised to completely divest from companies by 2040 planning to build new ones. Allianz's French rival Axa has made a similar decision.

Even the Rockefeller Brothers Fund, created by the descendants of the famous US oil magnate, has been withdrawing hundreds of billions of dollars from oil and coal businesses. All of this goes in the right direction.

And yet, it's not safe to say if the global divestment drive is leading the business world into a greener era. Much depends on the decisions taken by the top players of global investment, the likes of BlackRock, Goldman Sachs and others. So far, they show little enthusiasm for protecting the climate.

Nevertheless, pursuing business in a climate-neutral or even carbon-free way is increasingly becoming a sales pitch for companies. Neubauer might agree. That she would shun the Siemens CEO's offer for a board job must have been clear to the Munich-based company even before they made it.

Hopefully, Kaeser and his team of managers are now realizing that they can no longer pursue business as usual in the face of resistance from younger generations.

Boehme Henrik Kommentarbild App
Henrik Böhme Business editor focusing on international trade, cars, and finance@Henrik58
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