Impulse #10: New challenges require new ways

"At ENGIE Deutschland, we understand contracting as a long-term, trusted partnership – and as a successful model for reliably achieving climate goals."

More than half, or to be precise, 57 percent. This is the proportion of medium-sized companies in the Federal Republic which stated in our current empirical study with the Handelsblatt Research Institute (HRI), in cooperation with the association Bundesverband Mittelständische Wirtschaft e. V. (BVMW), that they explicitly seek a partnership with an external specialist. The companies surveyed rated contracting in particular as an effective means of achieving the climate targets. This is what I told you about in my previous Impulse article and asked you about potential hurdles. The response was huge – all sorts of debates also arose within the ENGIE Deutschland team. In practice, contracting formats are now mainly used in public institutions. Only a few medium-sized companies have so far opted for the model – which is by no means new to the market, but has existed for over 30 years. How are our study results to be understood in this context? I would like to explore this question today.

Contracting is more than financing

First: I am aware that contracting is being critically discussed in the market. And I am also aware that this may sometimes not be unjustified – the key word being the lack of transparency in, for example, termination regulations. Moreover, I know from many customer conversations that companies often see contracting exclusively as a way of financing – and then compare this with straight external financing at the bank. Or they have concerns about giving too much influence to the service provider and thus into the hands of third parties, which would no longer pursue the original company interests. Others shy away from the long contract terms of, as a rule, ten to 15 years. And that list could be continued. For I have observed in the market for years that stubborn myths persist vis-à-vis contracting, while the facts and the enormous benefits receive little – too little! – attention. I firmly believe that contracting is simply misjudged – especially in the light of the worsening climate change.

Using facts to fight prejudices

You probably feel it reading: The topic of contracting is one I have been burning to talk about for a long time. I am anxious to take the concerns mentioned above away from you – and to put the picture of contracting back on track. Why is that? Well, because time is short. We must now take action to achieve the climate targets and counteract climate change. Fortunately, our study has confirmed that the vast majority of small and medium-sized enterprises share this view and would rather start today than tomorrow. So the question is not "if," but "how." We all face a huge challenge – business, society, politics worldwide. In order to do this, we have to consider new options, go different ways, expand our scope of action. Right now, climate change demands that we have a running sprint, so to speak, so that we have any chance at all of reaching the finish line by 2045. And that's where contracting model come in, which I think is a powerful tool for that.

Expand the scope with contracting

In many conversations with our customers, my team and I have noticed: Once the subject of contracting is on the table, unimagined possibilities often arise. For example, the use of energy generation methods that were previously irrelevant – and which can reduce costs and reduce CO₂. The fact is that contracting is so much more than just funding. I would prefer to call it an all-inclusive package in which we as contractors take on all regulatory and technical challenges; be it planning, construction and commissioning or communication with the authorities. In the same way, operational and maintenance risks are transferred to ENGIE Deutschland, and we supply energy and media in an agreed quantity and quality – thus ensuring maximum production reliability. Furthermore, our experts examine the possibilities for federal funding for efficient buildings (BEG), federal funding for efficient heating networks (BEW) and energy and resource efficiency in the economy (EEW). Last but not least, we are giving guaranties that energy consumption and CO₂ emissions will actually be reduced in the agreed period.

A partnership for climate neutrality

In a nutshell: At ENGIE Deutschland, we understand contracting as a long-term, trusted partnership. And for us, such a partnership is always just about optimizing things together with you and in your interests – and together on the path to climate neutrality. We draw on a wealth of experience. For many years, companies such as Ritter Sport, Milupa and BOS as well as public institutions such as the Pinakothek der Moderne in Munich and the Kunsthalle Weishaupt have relied on our expertise in contracting. Our team possesses both the technical and the commercial know-how to accompany, on the one hand, companies that do not have the necessary resources internally and, on the other hand, to enable companies with a certain energy knowledge of their own to focus more on their core business. If such companies were to exploit the enormous potential of contracting starting now – then I hope that 57 percent of them could confirm in a next survey that they have actually achieved the climate targets.

Dear readers, what do you think about contracting models – whether energy supply contracting, energy saving contracting or energy efficiency contracting? I cordially invite you to talk about this with me via e-mail at manfred.schmitz@engie.com. We are also happy to organize a visit to one of our customers near you. If you are interested in this or would like a consultation, our experts are looking forward to hearing from you. Let's start together!

warmest regards

your Manfred Schmitz
CEO ENGIE Deutschland