In this episode of OMV’s podcast series “Rethinking Resources”, the hosts and journalists Julie McCarthy and Steve Chaid are joined by OMV CEO Alfred Stern, he is a firm believer in the Circular Economy and, as the head of OMV, he has unveiled a new strategy for the company and put it on a bold new course to turn away from fossil fuels and make OMV a leader in circular solutions.
In this episode of OMV’s podcast series “Rethinking Resources”, the hosts and journalists Julie McCarthy and Steve Chaid are joined by OMV CEO Alfred Stern (https://www.linkedin.com/in/alfred-stern/), he is a firm believer in the Circular Economy and, as the head of OMV, he has unveiled a new strategy for the company and put it on a bold new course to turn away from fossil fuels and make OMV a leader in circular solutions.
Alfred Stern addresses questions if OMV’s push to net-zero targets until 2050 are too little too late and if single used plastics are contradicting OMV’s circular approach. Additionally, he reflects on OMV’s strategic outlook and the way OMV will look like in the future.
More about “OMV Strategy 2030”: https://www.omv.com/en/about-us/company/strategy
More about OMV’s patented chemical recycling solution “ReOil”: https://www.omv.com/en/innovations/circular-solutions/recycling-technologies
Video Series “Oil is more than fuel”: https://www.omv.com/en/blog/the-plastic-that-shapes-our-daily-lives
OMV Blog “CEO Alfred Stern on the OMV Strategy 2030”: https://www.omv.com/en/blog/ceo-alfred-stern-on-the-omv-strategy-2030
More about OMV: https://www.omv.com/en/about-us
OMV Blog: https://www.omv.com/en/blog/the-right-recycling-method-for-all-plastics
Steve Chaid Hello, everybody. Welcome to a special episode to wrap up the first series of the Rethinking Resources podcast brought to you by OMV. We are your hosts -
Julie McCarthy I'm Julie McCarthy.
Steve Chaid And I am Steve Chaid.
Julie McCarthy Steve and I are two independent radio journalists who've been taking you inside the biggest challenges we're facing in the climate change transformation.
Steve Chaid Our topic this first season has been the circular economy. We've spoken to experts on several aspects of the circular economy, talking about what it is, why it is so important to get it right, and how it is becoming a reality.
Julie McCarthy In this episode, we're joined by the CEO of OMV, Alfred Stern. He's a firm believer in the circular economy. And as the head of OMV, he has unveiled a new strategy for the company and put it on a bold new course to turn away from fossil fuels and make OMV a leader in circular solutions.
Steve Chaid Alfred Stern, thank you so much for joining us. Welcome to Rethinking Resources”.
Alfred Stern Thank you for having me. Looking forward to the discussions.
Steve Chaid So are we. Let's begin with the new strategy. Please sum up strategy 2030 and the big idea behind it.
Alfred Stern Yeah, the big idea behind is really circling around our purpose, “reinventing essentials for sustainable living”. As OMV all the time in the history of the company, we have provided essentials to society, we have provided energy that is affordable, that is secure, that makes the lives of people better. We have provided materials like chemicals and plastics. Now, what we have realized and implemented in this new strategy is that with a growing population on this planet, with increasing living standards, we are testing the limits of our planet. It's just becoming too much, emissions and waste generation is too much. And that's why we said we have to reinvent those essentials so that they become more sustainable. What does that mean specifically? That means that in the energy business we are looking at low carbon business. In the chemicals business, we are looking at circular economy and in the fuels business, we are reinventing sustainable aviation fuels, for example. The operating principle of the whole is circular economy, and we are aiming to be net zero by 2050.
Steve Chaid Okay. So let me recap some of the things you said or touch on them again. OMV aims to focus increasingly on producing and selling sustainable fuels, as you just mentioned, expanding the chemicals and materials portfolio. This is a different direction to what we're seeing most industry players do in your sector. Why this path?
Alfred Stern I think it's looking at the history of OMV, right, you have to look at where are your strength as a company, where you're good at and where do you have business today and where do you see growth opportunities out there? If you look at oil and gas, these are important fuels in the next years to come as we transition our energy landscape. But the growth opportunities in it are much less than when you look at chemicals and materials or sustainable fuels. And that's what we chose. We picked growth sectors like chemicals, like circular economy, like sustainable fuels, and we said that's where we want to invest more and that's the direction where we go. And we can do that because we are already active in those sectors today. We have people that know how to do these things that are innovative and creative and can push in this direction.
Julie McCarthySo we mentioned two years there, two dates: 2030 and 2050. So, beyond 2030, the strategy aims to gradually reduce the production of oil and gas and make OMV a net zero company by 2050 at the latest. It's a radical transformation. So, will OMV even be recognizable compared to the company that it is now?
Alfred Stern Of course OMV will be recognizable, right? Because it's not the products that define a company. It's the people, the culture, the purpose of the company. And we will continue to reinvent essentials for sustainable living. This is in our DNA. This is in our lifeblood. We will continue to do that. Will we sell the same products? Most likely not, right? The company will look different. We will be active in different areas. But I think the important thing is, we will be recognizable by being a growth company, by being a successful company, and by being one of the lighthouses also here in Austria.
Julie McCarthyIt's a bold endeavor. And the English economist Kate Raworth says: 21st century business leaders are asking totally different questions than their predecessors. Rather than asking how much value you can extract from something. Enlightened new leaders are asking how many benefits can be created from new ways of designing and doing things. Are these the kind of questions that you're asking, too?
Alfred Stern Absolutely. When you look in our strategy, sustainability has actually become a centerpiece of it. And rather than looking at sustainability or at emissions and how to avoid those, we have looked at sustainability as becoming innovation and business driver. So how can you make business with this? Because there's no question about it, right. Energy consumption will go up. Living standards will improve. We must find solutions how to make our lives more sustainable, right. That could be in the heating of houses where we are looking at geothermal heating. That could be electric cars that need to consume less energy. And we are creating plastics that make cars more lightweight. Or, people will still want to go on vacation and fly somewhere. And in order to make that with lower CO2 footprint, we are inventing sustainable aviation fuels. So all these are business opportunities that we are targeting, and that's really the question to ask here. We have a big challenge with climate change. We must address it and industry is at the center of addressing those things. OMV and industry will be the key drivers of an energy transition, and in order to achieve that, you must ask those questions.
Steve ChaidAs the CEO of OMV Alfred Stern, you are highly visible and you're a big target. You have, of course, critics. Let's start with those who say strategy 2030 is too little, too late. Especially when you push the net zero target all the way out to the year 2050. What do you say to those who want bigger and bolder steps to come sooner?
Alfred Stern So our commitment was to be net zero in 2050 at the latest. Of course, 2050 is quite some time away. And what we all realize is that we have done too little in the past years to combat climate change. We have started too late. And any way that we can find to accelerate the transformation of OMV, but the transformation of our energy landscape or the way we live will be desperately needed in order to limit the global warming to below 1.5 or to a minimum of warming. So of course, but at the same time, sustainability is not just the emissions or global warming. Sustainability actually has three Ps, right? And that's: planet, profit and people. And we need to take care of all these three things at the same time as we can observe in a crisis like we have today, when we can’t supply enough energy and the energy prices skyrocket. This has a tremendous negative impact on society. So, we must manage a transition in such a way that we can supply the necessary energy and at the same time reduce emissions as fast as possible. The way we have found in our strategy is that at the latest by 2050 we will be net zero.
Julie McCarthyAnd in addition to those critics that you have from the outside, you also have critics within the industry who say that turning from fossil fuels right now, turning away from them is absolutely insane. So, what do you say to them?
Alfred SternYou know, here the question is really, are you future ready? This is really the question, are you future ready? I think it's very important that we have fantastic capabilities in OMV to manage crisis, just like the one that we have now, the energy crisis that we have in Europe. We know how to manage this at OMV and we are doing everything possible to mitigate the effects. We made available 100% of non-Russian gas sources, for example, to supply all of our customers in case the supplies stop. We have increased our gas storage and all that. So, crisis management is one thing. How we have to manage the now is another thing, but we must have a firm look on the future. The investments that you make in a company like OMV today determine what the company looks like in 10, 20 and even beyond 30 years from now. So, the investments that we make today determine what our company will look like in 2050. And you've got to start moving now in order to make sure that OMV is also a successful, sustainable company that is creating good employment, is making contribution to society in 2030, in 2040 and 2050. And for this, we got to start working now.
Julie McCarthyIt's difficult, though. It's a lot of work and it's kind of the hard road so to say. Taking the easy road would mean bigger profits in the short term and also happier shareholders. So why not take the easy road?
Alfred SternThere is no easy road, right? And of course, the art of this is to manage both of them well, right. To take the running business of today and make sure we optimize that. We are competitive, we are managing our profitability there, and that we take investments that are creating a future for us, investors to ask this from us, they want to make sure that we are investing into a future. If you look at the stock market, what you will find is that the valuations, the multiples that are assigned to oil and gas companies are significantly lower than they assign to future looking companies that are also managing to invest into a more sustainable future. So it is important because your cash flows of today, they are driven by the market today and by the business today. Your valuation on the stock market by your investors, that is determined by their expectations of what future cash flows you will be able to generate. And as I said before, right, you need to be in a growth area. It needs to be something that fits into the policy and regulatory framework of the future. That's exactly what our strategy does.
Steve Chaid Let me ask you about another tough topic. Single use plastics are per definition a contradiction to circularity. As the owner of the plastics producer Borealis OMV is making profit from selling the raw material used for plastic production. What's your position on the ban of single use plastics?
Alfred Stern Yeah, single use plastics is something that, of course, we find very broad application in our society today. If you look at it, right, our, the life of society on this globe has changed tremendously over the last hundred years. The urbanization is one of those big drivers in millions and billions of people living in cities. They also need food and other products that come there packaging and these kind of helps that we use in order to make that fresh, healthy and so on, very important tools that we use. The big issue is in the linear economy to just take resources, use them for a short while and then make waste out of them. It is a big issue and getting the right regulatory and policy framework in order to avoid this is really an extremely important step. We have made some progress here in Europe, in particular in this area that is helping to drive this circular economy forward. You just have to imagine, right, a single use plastic, right. By the way, the plastic doesn't know if it's single use or not, right. We decided to only use it right. And I like to tell the story. I no longer have it, but I had one of those thin plastic bags for over ten years in my bag, right. And I kept reusing it because they don't break, right. We just decided to throw them away after a single use, right. But anyways, you have to imagine all the work that goes into this product that by the time they become a plastic bag or a single use item and to throw these valuable, highly processed and clean materials away is really a shame. We can use our Reoil technology at OMV to bring those back and become valuable raw materials again that you can make new materials out of it again, at lower energy consumption, at lower water consumption, at lower CO2 emissions. And this is why the circular economy is so important. It's a driver to create the things that we use today with less energy, with less environmental footprint.
Steve ChaidBut let me press you again on the timeline. Some say it can't happen fast enough. Some say we're being pushed too fast. So how quickly will your plastics division be able to make the transition to circular solutions? There's still a massive reliance on fossil fuels. Will this be fully circular by 2030?
Alfred Stern So that's, of course, always the challenge, right? How fast can you move there? In our strategy, we are saying that by 2030, about 40% of our European chemical business will be based on sustainable feedstocks. That's 40%. I think that's a fast move. We are scaling up things very quickly in order to get there. But to get to 100% will take longer than 2030.
Julie McCarthy But was there a specific point in time when you became convinced that the circular economy is the way to go for economic growth? And that would be essential for the survival indeed of OMV as a company?
Alfred Stern I think it's always important to listen to different stakeholders both inside and outside the company. As you travel the world, as you visit places like Indonesia, for example, and you look at some of the communities there, you find what poor treatment of waste can actually create environmental challenges also for the people that live there. You can't help but get convinced quickly that action is needed and is needed urgently. But then looking into the things a little bit more and doing some assessments around that and discovering that we can actually use circular economy, not just to finance waste management efforts - because we are giving a value to waste. We can also use circular economy to do the same things with less energy, with less CO2 footprint. But it does require a redesign of our supply chains. So, then you become convinced pretty quickly because all circular economy does is it eliminates waste from our supply chain. When you think about it, it's just natural. It's normal. If you eliminate waste out, it must become more efficient. When we get the policy and regulatory framework right, this will also result in a more economic, in a more competitive system for the people that apply it.
Julie McCarthy Right. And speaking of sort of future, looking into the future, future generations, you’re a father yourself, has that affected your perspective of how this is all going to go in the future and what is going to be left behind for the next generations?
Alfred Stern Yeah, you're right. I actually have twins. They are 15 years old now. At 15, right, you can have some really good discussions with them. And as kids are, we spend a lot of time discussing about those things. So, you get, they challenge me and they ask those things, right? So that's one thing. But, of course it makes you realize also the broader perspective of it. We want to make sure, and I think that applies for the majority of the employees of OMV. Also, we want to make sure that we leave a better world for our kids, right. We want to make sure that we don't leave something that is a dead end, right. We have to apply innovation and technology to make sure that the next generation, not just my kids or our kids, but the people coming after can make a step up. That becomes increasingly more difficult because populations will continue to grow. And progress was achieved over the last many years by increasing living standards. But that has also meant that we consume more. We need more energy. We consume more resources. And as we are learning very quickly, waste and emissions that we generate, create more and more issues for the living conditions that we have, right. If you look now, COP 27 going on in Egypt and I think it's a big sign that the first discussion they had there is the many billions of damages that will have to be financed in the global south caused by environmental changes. And I think that influences me. But it also influences everybody else, right? The big art is, how to make that transformation in an economic way, because in the end, these things don't come for free, right. We can do it at OMV because we have a solid company performance, and we can take a lot of that money. Right. We actually, up until 2030, we will dedicate in average 40% of our CapEx of our investments into green investments in order to drive that transition as fast as we can.
Steve ChaidLet's come back to your specific leadership role. As the CEO of OMV, you are the change agent in chief, leading OMV from a linear to a circular business model. So, taking into account your personal role, your preferences, what you want to do to lead the company forward, what will be the critical success factors?
Alfred SternI think the biggest thing is, it's always easier to do the things that we are already doing and doing them a little bit better. In my career, I used to work for some 15 years for one company, and actually every year I had to deliver a little bit more with a little bit smaller budget, right. And then I got offered a job where I was supposed to build out in an innovation activity and make investments, hire people and everything. And I thought, that sounds really cool. I would like to do that, right. That would be a nice change after 15 years of always becoming more productive. Quite honestly, when I arrived there, it was great. It was very stimulating. And I'm still proud of what we achieved. But I did discover that that's actually more difficult than doing a little bit more with a little bit less every year, yeah. And I think the point that I would want to make is embracing these innovations is also taking some risk. You don't know how it's going to work out. It's a little bit like running a marathon, right? You know, I tried it myself and I can tell you I didn't enjoy each kilometer on the 42 kilometers. But when I arrived, it was really cool, yeah. And that's a little bit of what it is. So, you are exposing yourself to taking risks, to come do obstacles that you haven't anticipated to have to overcome them. And I think that's a big thing that you have to learn as an organization and that you have to stimulate in order to be able to do those things.
Steve Chaid So other companies are watching you and the moves that OMV is making. What's your advice to other businesses that want to transition from linear to circular but are maybe hesitant or afraid to make the move?
Alfred SternI think the biggest advice that we can give as OMV is that we are successful. If we are successful and move this forward and if we can deliver some of our things, then people will start copying us. That's how it always works. And in that sense, trying to make some of those moves and progressing them enough that people can see that, that's always a good thing. The second piece would be look outside, talk to many people. Don't just spend time in your goldfish pot together with - only in your environment, because there's much more to learn. So, curiosity, I guess, would be the advice; to see what else is out there and what can be done.
Julie McCarthyAnd as you said, we have to look towards the future and the vision of the future. So, let's assume that OMV transitioned from a linear business model to a circular one, and along with other industry leaders that also see the wisdom of making that significant change as well. So, what does that future look like?
Alfred SternYeah. That future, of course, does revolve again around our purpose. I really think it's important that we carry that as a company, right. We are proud to deliver to our customers, to the places where we are essential things of making lives better and that we want to continue to do. But we must do it in a different way. Hence reinventing those essentials for more sustainability. And that's what we should do. We should make sure we can provide solutions so that people can live better lives, that they can go on vacation, that they can fly and that they can book with the airline, that they take the sustainable aviation fuel that has 80, 85% less CO2 emissions, can still enjoy their vacation, but can also be sure that the generations after them can enjoy the same kind of planet and can go skiing in the winter in the Alps.
Julie McCarthyMakes absolute sense. Sounds great.
Steve Chaid So the future doesn't look so bad after all. That's very good to hear. Thank you very much, Alfred Stern, for sharing your strategy, your insights on the circular economy and your rather positive vision of the future.
Julie McCarthy Yes. And indeed, we hope that you all enjoyed listening to this special episode. And again, if you listened to the podcast and want to watch the conversation with Alfred Stern, then head over to OMV’s YouTube channel. Or if you have feedback indeed or questions, please write us an email to podcast@OMV.com. We'd love to hear from you, of course. And for more background information on the circular economy and this episode, check out our shownotes where you'll also find links to lots of valuable information.
Steve ChaidAnd that will do it for us this time around. We hope you will join us again for the next season of Rethinking Resources.