Finding the right balance between costs and the carbon footprint

A clear framework for sustainability

Siemens AG deploys its technology portfolio to support the public and private sectors in the digital transformation of industry, building and network infrastructures, mobility and healthcare, and thus can tap extensive business opportunities for value-enhancing growth. At the same time, Siemens AG offers cost-effective, innovative solutions for transitioning to carbon neutrality.

The Siemens AG portfolio helps customers lower their emissions and achieve their decarbonization goals. Besides aiming to make their own business operations climate-neutral by 2030, Siemens strives to lower all emissions associated with them – from the supply chain throughout the use phase of the products. With its commitment to the Science Based Targets initiative, Siemens supports the Paris Climate Agreement goal to limit global warming to 1.5 degrees Celsius.

“Sustainability is part of our DNA,” says Judith Wiese, chief people and sustainability officer and member of the managing board of Siemens AG. “It is not an option; it is a business imperative.”

Sustainability is the heart of Siemens AG business and the engine that drives it. This is why Siemens AG developed an ambitious new sustainability framework: DEGREE. The DEGREE framework is based on six fields of action: decarbonization, ethics, governance, resource efficiency, equity and employability.

The Siemens AG Cost and Value Engineering (CVE) team plays a major role. The CVE acts as lead customer for Siemens Digital Industry Software. With their goal of expanding product cost transparency with product carbon footprint transparency, the CVE team collaborated closely with Siemens Digital Industry Software. Together they improved the solution for all Teamcenter® product cost management customers. CVE implemented two versions of the digital twin: one was for cost transparency and the other was for carbon dioxide equivalent transparency (CO2e), including all greenhouse gas (GHG) emissions, also known as the Green Digital Twin™.

The digital backbone for cost and value engineering

The CVE team has been using Teamcenter product cost management to create product cost models for years. Teamcenter product cost management is part of the Siemens Xcelerator business platform of software, hardware and services.

Individual production steps are simulated with machines, material and personnel. These are multiplied by the cost rates contained in the database, such as for labor, machine records and material records, including both off-the-shelf and specific data gathered by CVE. This allows Siemens AG to determine what it will cost to manufacture a new product while it is still in the design phase.

This is a core element of the CVE’s work. Based on these cost calculations and simulations, CVE experts work with engineers to identify improvements in product design, manufacturing and supply chain. By becoming familiar with their suppliers’ manufacturing processes and costs, they can improve their arguments in price negotiations. At the same time, they can work closely with their suppliers to optimize their processes and costs.

An integrated approach for product cost and carbon footprint

Seeking to reduce greenhouse gas emissions toward net zero requires identifying the key impact areas. Gaining transparency into the carbon footprint on the product level is an essential precondition to work towards that goal. Therefore, Siemens AG had been looking for a suitable digital solution to efficiently calculate product-related cradle-to-cradle/cradle-to-grave carbon footprints.

According to Josef Schneiders, CVE, Siemens AG, “When a business decision needs to be made to develop a new product with optimized carbon footprint, the first question will be, ‘what is the product cost behind the product with the lowest carbon footprint?’ For this reason, we cannot separate the carbon footprint impact and the cost impact.”

That’s where the Teamcenter Carbon Footprint Calculator module comes in. The module is part of the Teamcenter product cost management solution. The approach takes advantage of the transparency and optimization offered by bottom-up target costing. It allows CO2e emissions to be calculated in the same granular way.

“Since Teamcenter product cost management was the only tool that allowed us to calculate costs and carbon footprint in parallel, it was the clear choice for us,” says Schneiders.

The Teamcenter Carbon Footprint Calculator module follows the same bottom-up analysis workflow for emissions, where all relevant emission factors of the product along the value chain are summarized. This means data is collected on all emissions corresponding to direct costs (raw material, semifinished parts, machine type, energy type, tools and devices), including upstream activities for purchased parts, energy consumption, transportation and waste. It also means data is collected on emissions associated with indirect costs embedded in the product, such as plant overhead and transportation. Finally, emissions from downstream activities, such as utilization, recycling and disposal, are factored in. CVE experts can then classify the detailed data on product emissions into the established GHG protocol classifications of scopes 1, 2 and 3.

Scope 1 are direct emissions from company-owned and controlled resources. Scope 2 emissions are indirect emissions from the generation of energy purchased from a utility provider. In other words, all GHG emissions released in the atmosphere, from the consumption of purchased electricity, steam, heat and cooling. Scope 3 emissions are all indirect emissions – not included in scope 2 – that occur in the value chain of the reporting company, including both upstream and downstream emissions.

Another factor being considered for cost calculations is product carbon taxation. Companies have to show environmental taxes not only on combustion processes like oil and gas but also on their products, depending on the country. Thus, the tax consequences of a product can be shown.

Classification of detailed data on product emissions into the established GHG Protocol for scopes 1, 2 and 3.

Simulations on material substitution, weight savings, manufacturing process optimization, etc., can be performed by using a database with CO2e values for material data such as metals, polymers, composites, powder materials and energy mixes from various countries and regions. The data sets of the mentioned areas will be continuously extended in Teamcenter product cost management.

“With an integrated CO2e database, we can efficiently determine and calculate without having to rely on external data from our suppliers, which is a great added value for us,” says Alexander Bayer, CVE, Siemens AG. “Therefore, we have been taking great efforts to acquire, transfer and integrate dedicated product carbon footprint factors into our Teamcenter product cost management environment. These data are indispensable for efficient CVE work.”

Based on the cost and carbon footprint simulations, CVE experts work with engineers and procurement to identify factors that impact costs and emissions along the entire value chain of a product. Using the Teamcenter analysis solution to examine a product’s cost and product carbon footprint at each stage of the development process (green-target-setting, design-to-green, supply chain environmental footprint improvement, environmental footprint analysis for negotiations) provides greater transparency, enables smarter trade-offs and provides information for better CO2e avoidance strategies.

The main advantage of the Teamcenter solution is the same bottom-up model that can be used to roll up cost as well as CO2e emissions along the given value chain, as each material, production and overhead item has both a financial and CO2e emission impact. Further, the Green Digital Twin™ solution supports accelerating the product cost and product CO2e calculation decisions by using artificial intelligence (AI) based algorithms.

“Using Teamcenter product cost management provides increased efficiency since we already map a large number of our products to their value chain for calculating costs and the carbon footprint,” says Bayer. “This allows us to re-use the same bottom-up cost engineering model to roll up the CO2e emissions along the value chain.”

Teamcenter product cost management provides a level of transparency that gives Siemens AG a new level of flexibility. In addition to the initial design or redesign phases, it is applicable when there’s a need to change suppliers or to make any change at any stage in the value chain. Iteration and refinement aren’t nearly as cumbersome, costly or risky.

The Teamcenter Carbon Footprint Calculator module was developed in close cooperation with the CVE experts from Siemens AG by adopting an agile approach.

Continue to accelerate the sustainability concept

To support the goal of achieving net zero, Siemens AG plans to scale the use of the Teamcenter Carbon Footprint Calculator to cover many of its business units and a large part of its product portfolio. This will be done with the help of the CVE network, which is globally distributed across all business units. In the future, Teamcenter product cost management will also be used to support these goals by providing a direct, visible link between product costs and CO2e emissions to identify the key levers that will deliver the greatest saving potential. CVE experts and their partners will also use Teamcenter to continue to analyze impact the trade-off between carbon footprint, profit margin and customer value. This enables them to achieve the greatest value based on their own requirements and make strategic decisions based on long-term risk mitigation potential and available resources. In this way, going forward Siemens AG will gain a competitive advantage in its sustainability strategies.