In pursuit of a sustainable future

The pandemic has taught us that caring for the environment is the key to a good life. A sustainable community needs access to local products, green agriculture, organic food, naturebased solutions, and a healthy circular economy. At the same time, it must implement smart city solutions, eco-friendly transportation, and sound waste management policies. Representatives of companies that are highly involved in local communities talked about the way we can create a better, more sustainable life for ourselves at Business Review’s Environmental & Sustainability Summit, a Zero Emissions event organised with the support of FEPRA.

By Aurel Constantin

Sustainable solutions are already in place or are being implemented in several industries. For example, there are ways to make agriculture sustainable and to make sure that our food and water are used more efficiently in order to cover the needs of a growing population. “Over the last 10 to 15 years, we’ve really shifted from an intensive model of growing crops to a more environmentally-friendly and highly-optimised way of producing every crop in the world. The idea is to produce more with less and have a smaller impact on the environment. It is our responsibility as individuals and as companies to achieve that goal,” said Remi Dei-Tos, Row Crop Seeds Production Lead at Bayer.

The pursuit of sustainability in agriculture leads companies to find solutions to grow better crops while using less water and fewer fertilisers. “When farmers learn that they can obtain better crops by using these solutions, they obviously begin to adopt them. So far, our network of farmers has been very supportive of such solutions and they are fully on board,” said Dei-Tos.

Bayer has come up with a way to use less water in irrigation systems and it is helping farmers implement the solution, either directly or through partners. “The technology allows farmers to see exactly when a plant needs water and how much it needs, instead of just using estimates. If we want to go into detail, we can map out the soil to figure out which parts of the plot retain more or less water. We can then adjust irrigation so that we only use water when and where it is needed. We are making massive investments in these types of irrigation solutions,” the Bayer representative explained.

Water is an essential element for the beer industry as well. Agricultural irrigation systems are complex and expensive, and though water management may be simpler in a factory, it still raises many challenges. “Through our water management system, used water gets treated and re-enters a new production process, so it doesn’t go into the sewer. That's how we manage to use as little water as possible. We have some clearlyestablished targets and our goal is not to waste any water at all. We try to recover all the waste that results from the entire production chain so it doesn’t end up in the garbage. At the end of last year, we were able to reach our zero waste goal as we recovered all the waste, including yeast, which we dried and used as animal feed,” said Alexandra Barroso, Legal and Corporate Affairs Director at Bergenbier.

IRRIGATION VERSUS RAINFALL

deployed with very little evaporation. “Spraying water is a method that is still being used today, but this mode of irrigating wastes water through evaporation, and that water never even touches the plant. As such, we are deploying new techniques to direct the water into the canopy and we are reaching 80 percent efficiency, which is very good. But the next step involves drip irrigation, which means installing some pipes in the soil in order to maintain moisture levels. This is the best method, with an efficiency of 95-98 percent, allowing us to use the exact amount of water that is needed, at the root of the plant,” said Rami Dei-Tos of Bayer. Weather prediction is also very important in the context of sustainability, as knowing exactly when it will rain helps you significantly reduce water waste. “It is pointless to irrigate while it is raining; you’re just washing the water away.” It goes without saying that such an advanced water management system doesn’t come cheap. The initial investment can be substantial, but the benefits are immediate. “The cost of water will never stop growing, so in the end the investment will be offset. We were the first ones to launch a system like this, but we hope to implement it at global level and offer solutions at lower costs. So far, we have been supporting farmers in this direction. We are not promoting irrigation for the sake of irrigation, but as something that can be helpful for the farmers, even if they operate in a good climate. There’s never enough rain, so irrigation will help increase production,” Dei-Tos explained. The biggest problem with rainfall is that it doesn’t always happen at the right time. If we look at the same crop before and after irrigation, we’ll see that the yields are completely different. “You get about 8 tonnes without irrigation and 13-14 with irrigation, so the profit obtained by farmers is much higher. In the end, it is sustainable and brings more value to farmers. This is the role we can play as a company,” Dei-Tos added. “We are working with our partners to deploy this water management system. So far, we have implemented it on almost 10,000 ha, another 10,000 ha with an irrigation system, and almost 1,000 ha with dripping irrigation or adjusted irrigation systems. This is all being done here in Romania, with Romanian farmers.”

LOCAL, SUSTAINABLE FARMING

To have local farmers producing every type of crop, Romania needs to update its legislation. One of the problems encountered by beer producers in the past was the fact that they couldn’t find enough hops in Romania, so they had to rely on imports. “The problem

wasn’t that Romanian farmers didn’t want to produce more, but that they faced various legislative impediments. The Romanian Brewers’ Association also includes producers of raw materials, and one of its greatest achievements was that it managed to obtain the legislative changes needed to produce more hops. That also helps reduce costs, because when you import a lot of materials, prices increase along the chain,” Barroso noted.

Other entities are also committed to show farmers how they can turn to 21st century agriculture. “Our mission of Ateliere Fara Frontiere is to integrate into the labour market those who are able to work, but find it difficult to find jobs for various reason. Organic agriculture is quite complicated, as it requires both major investments and a large workforce,” said Lorita Constantinescu, Deputy Director at Ateliere Fara Frontiere. “It is important for people to understand what organic agriculture means, which is why we organise visits to the farm,” she explains.

Ionut Badica, Project Manager at Sol si Suflet, argued that “increasing the natural fertility of the soil is a key component in positive agriculture, and without that efficiency we cannot talk about positive agriculture.” And since there are no positive farming courses in schools, Sol si Suflet started an internship programme at their farm.

SUSTAINABLE COMMUNITIES

Green agriculture and water management systems are just a part of a sustainable community. “We all know that communities play important roles in our lives. Our entire activity is split between communities, whether we’re talking about friends, families, offices, neighbourhoods or artistic communities. Having a sense of community unites and it definitely makes our tenants feel better, as it gives them the opportunity to connect with people with similar values and preferences. We experience the need to create and develop strong communities even more during this period, thus the need to communicate more with tenants and provide them with access to amenities like multimodal football courts, outdoor gym activities, and outdoor spaces when they can work or relax and feel safe,” said Antoniu Panait, Managing Director at Vastint Romania.

“There are two ways in which we develop large and sustainable communities. On one hand we have communities that we started years ago, such as our core project Greenfield Baneasa, which need to be transformed into sustainable communities. On the other hand, we have the new developments that we are planning, which will meet all the sustainability criteria we are committed to from the very beginning,” said Constantin Sebesanu, CEO at Impact Developer & Contractor. “I am often asked whether sustainability is a trend or a fad; I say it's a must. We need to create viable communities and improving people’s lifestyles is not something that we even need to push, because it’s coming up anyway. We just need to stay one step ahead of it. We have just conducted a survey inside the Greenfield Baneasa community and one of the questions asked during a focus group was about how people had experienced the pandemic inside Greenfield. About 85 percent responded that the only place where they would have wanted to live during this period was their home in Greenfield, which was extraordinary to hear,” Sebesanu added. “Building sustainable communities is not easy. Our focus must be distributed to several crucial elements, from mobility to waste management, from the near-zero emissions buildings we are planning to the BREEAM Excellent standards we are looking to implement. At Greenfield Baneasa, we just got the permit to implement geothermal energy that will not only cut down on carbon emissions but will also reduce costs and turn us into a more affordable community. We are also probably the first real estate developer to have built a public school and a public garden inside our community. A year ago, we also brought public transport to Greenfield Baneasa: there are two lines that were introduced in order to reduce traffic within the community. We are also planning to add a magnetic train. Imagine how much time our residents are saving by having a school there, how much more quality time families can spend together instead of sitting in traffic. And this actually reduces traffic in the entire city, not just in our community,” Constantin Sebesanu explained.

FINANCING GREEN PROJECTS

Financing green projects in Romania is the job of both commercial banks and public institutions, which are complementing each other. “We invest our money in strategic sectors where commercial banks are not yet ready to invest because of commercial risks or various other factors, but also because unlike us, commercial banks are profit-driven. Our financing is actually very competitive; we are the cheapest solution on the market in terms of

financing and we also provide longer tenures. You can repay a debt over a much longer time compared than you would to a commercial bank. Usually when we support the public sector, in this case communities, municipalities or counties, we can go up to 40 years, depending on the economic lifecycle of the project. When we support the private sector, considering the type of investments we are involved in, the cyclical nature of business, and the dependence on the market, we can only go up to 12-14 years,” said Lara Tassan Zanin, Head of the EIB Group Office in Romania. ”The EIB has a history of more than 25 years in Romania and it is contributing to an average of 1 percent of GDP every year, meaning around EUR 1.3 billion, of which half goes to the public sector and the other half to the private sector. In the public sector it's a mix of national agencies, supporting education, transport, energy, and all other sectors to which we can contribute. In the case of the private sector, we support both large corporations and SMEs, through intermediated lending via commercial banks,” Lara Zanin explained.

But it is not easy to find green projects in which to invest. Why is that? “The first and most important answer is related to the political commitment. You know better than I do that there is a high rotation rate at the government level, in both the central and local offices, while the projects the EIB tends to support usually require long-term financing, which means a long-term commitment to prepare the project, implement it, and take it to the very end. When ministers change three times a year, it's hard for us to maximise our potential in this country, because we have to start from scratch every time and reconfirm commitment from the top,” Zanin noted.

“The second source of difficulty comes from planning, and I think this is very relevant to the topic of sustainable communities. There is no commitment to planning, especially to urban planning. When we talk about sustainable communities, we talk about a multilayer, multidisciplinary type of planning which goes from energy efficiency to sustainable mobility or other related technologies that can benefit from this type of investment. Now, more than ever, if you want to build sustainable communities, you need to have smart planning and to remain committed to it,” the EIB representative argued.

TRANSPORTATION AND MOBILITY

tics at ING Bank Romania, said that commercial banks are committed to financing sustainability projects. “Transportation, mobility, and automotive are sectors of interest for us as a bank, both globally and locally. And making these sectors sustainable, including from a credit portfolio perspective, is of the utmost importance. We are globally committed to reducing the carbon footprint of the lending portfolio that we have committed towards these sectors, in line with the provisions of the Paris Agreement. We are on track with this strategy (through the Terra project), and the progress is published on the bank's website,” said Huma. “We are very interested in getting involved in these types of projects, and we would also like to see as many projects as possible in Romania that encourage the sustainable development of both the automotive sector and the transportation/mobility industry. In order to see more projects in transportation and mobility, it would be helpful to first set up a legal framework to help project development and implementation, and we are really looking forward to that happening,” Adrian Huma added. ING Bank recently launched a green loan for the acquisition of electric and plug-in hybrid cars, with a special interest rate that is 2 percent lower than the market standard and with very light qualification conditions: no advance, no CASCO insurance, no leaving a car key at the bank; clients only need an invoice from the dealer to certify that the car they are purchasing is an electric or hybrid plug-in.

“I think the first condition to integrating green cars into a smart city is having those green cars and having that smart city. The number of green cars around us is growing, but the total number is still small, for various reasons, including high costs and lacking infrastructure. We also have a chicken or egg-type dilemma here. The more developed the infrastructure, the more people will choose to buy such cars, and vice versa. If there are enough cars, then more investments will be made in infrastructure projects,” Huma concluded.

The Environmental & Sustainability Summit was organised by Business Review with the help of Gold Partners Bayer, Bergenbier, Impact Developer & Contractor, ING, and Vastint; Silver Partners BRD Groupe Societe Generale, CMS, EY, Garanti BBVA, Restart Energy; Event sponsors Dentons and Volta; and Sustainability Partner FEPRA.

Energy sector ready for transformation

The recent rise in the prices of oil, gas, and power has shown us how vulnerable we all are in the face of disruptions on the energy market and how important it is to have sustainable energy production and consumption. The industry needs new investments in green energy projects to prepare the electric grid of the future, which should be able to support large-scale charging infrastructure for electric vehicles, while companies need to adopt sustainable practices and build better waste management systems. All these crucial topics were covered at Business Review’s Environmental & Sustainability Summit, a Zero Emissions event organised with the support of FEPRA.

By Aurel Constantin

“The Romanian energy sector is in the middle of a complex transition period, which is why I consider ‘stable’ to be a relative term, and I think ‘evolving’ would be more appropriate. To meet environmental targets and the needs of the economy, our energy sector must accelerate its transition to more sustainable production sources, better software integration, and smart grid development. These elements will provide more energy and autonomy for Romania in the future,” said Valentin Bargau, Chief Investment Officer at Restart Energy. There is a lot of interest in renewable energy projects in Romania right now. The trend has accelerated over the last year and a half and it is expected to go even further due to US and European green initiatives. “In line with this trend, Restart has around 550 MW’s worth of solar projects in various stages of development and we will begin activating them next year,” Bargau added. The transformation of the Romanian energy sector may cause social issues, as some people could lose their jobs or be forced

to find new ones. Nevertheless, the transition to greener power production systems will happen, with the help of European funds.

“The energy transition will be a long process, and it will not be easy. And if things aren’t done in the proper way, it could also be very painful. I see three challenges that need to be addressed: funding, social issues, and technological barriers. When it comes to funding, the energy transition (like any other transition) comes with

a cost. For the Romanian economy, which is dealing with significant budget imbalances, getting the money will be a real challenge. But at the same time, we have a great opportunity: about EUR 80 billion are waiting for us in Brussels and our only job is to take this money and use it correctly,” said Catalin Velescu, General Manager & Founder at Volta Grup.

If Romania manages to tap into these European funds, about EUR 10 billion – or 5 percent of GDP – will be available every year. But we have to move fast to develop projects that are aligned with the EU objectives outlined in the Green Deal and Fit for 55 plans. “The best news is that yes, we have the technologies to reach 100 percent green electricity. And what’s more, they are becoming cheaper and cheaper. We have always believed that clean energy was more expensive than ‘dirty’ energy. We have wind, solar power, geothermal, biofuels, hydropower, storage, and, of course, hydro-

gen. The more we use these technologies, the cheaper they will become,” Velescu explained.

“The prices of wind and solar power have declined exponentially, to levels that nobody had anticipated. Since 2010, these prices have fallen by 90 percent, and the process will continue. Today, solar and wind are the cheapest ways to produce energy in new capacities almost everywhere in the world. From Mexico to Chile, from the UK to Spain, we’ve seen bids of 2 cents/kwh for solar and

"Europe’s goal of becoming the first carbon neutral continent by 2050 requires a huge effort from the business environment, public authorities, and the financial system, through a holistic and collaborative approach. In this equation, the role of banks is essential if we take into account the fact that addressing the risks of climate change alone, requires a volume of public and private investment of about EUR 60 billion over the

next 10 years,in Romania," Iuliana Tiba, BRD - Groupe Societe Generale

wind energy generation,” the Volta Grup representative added.

But we are still experiencing increases in electricity prices. “We expect the price of electricity to remain volatile, so it is difficult to make an accurate prediction, but I believe that the price of energy in general will continue to grow, due to various factors – political, economic, and geopolitical. It is time for us to realise that the green transition has a cost and that this cost will be reflected by future energy prices,” Velescu argued.

RENEWABLE ENERGY PROJECTS

The importance of renewable energy projects has never been higher, as they could allow us to no longer depend on natural gas imports or prices. “These projects (including hydro projects) are crucial to the sustainable energy transition. In 2020, renewables accounted 24 percent of Romania’s total energy consumption, and the government has set a 30.7 percent target for 2030. This can be achieved through a further development of renewable energy sources, up to a total installed capacity of 7 GW,” said Elena Vlasceanu, Counsel at Dentons.

“At the same time, in order to achieve fully green power production, there are a number of technical challenges to overcome (not only in Romania’s case, but also in highly developed countries like Germany), one being the balancing of the National Electricity Grid. But in order to reach such target, the grid has to be refurbished and upgraded to a smart grid, while the fluctuating power production from RES (Renewable Energy Sources) should be stored or somehow balanced in order to match the stability of conventional sources. The storage of green energy in batteries or other storage solutions is also a path to the future. Until these problems are solved, the EU aims to use gas and nuclear power as transitory sources, as they pollute less than other conventional sources such as coal and oil,” Vlasceanu explained.

The development of green energy projects also needs to be analysed in the context of the European Green Deal, which aims to transform the EU into the first climate neutral continent by 2055.

“Hydrogen should also rise as a worthy power source, with stability being its biggest advantage. During the last years, the debates on the use of hydrogen have evolved considerably, and the connection between hydrogen and renewable energy has been put into a broad context. To this extent, it is known that hydrogen may lead to the growth of the renewable energy market and boost the discovery of renewable solutions. There are various ways to ensure the supply of clean hydrogen, but Romania currently lacks a regulatory framework regarding the use of hydrogen in electricity production. According to its Recovery and Resilience Plan, Romania intends to develop a National Strategy for Hydrogen, based on which the legislation required for investments in this field would be enacted,” Vlasceanu said.

MEETING NEW CO2 STANDARDS

The European Union is planning a significant reduction in CO2 levels for the coming years, but it will not reach its targets easily. “The EU has done pretty well so far, having met its previous target (i.e. -20 percent by 2020) ahead of schedule. The Union’s estimates indicated a 32 percent reduction by 2030 based on current and planned reduction measures, which is clearly not enough if it wants to achieve a 55 percent reduction. This will require additional efforts and resources and more significant changes in the transport and other difficult-toabate sectors. However, considering what has been achieved so far and the commitment demonstrated by the European Commission and Parliament so far, we can be reasonably confident that the EU has a good chance to achieve its more ambitious targets,” explained Massimo Bettanin, Partner at EY Climate Change & Sustainability Services in Central and Eastern Europe.

“Romania is in a very good position to achieve its CO2 targets. As per the Integrated National Energy and Climate Plan, a 50 percent reduction compared to 1990 levels is targeted by 2030 (page 49). This plan was approved before the Green Deal, at 10 percent above

the EU’s initial 40 percent target, and it will need to be updated to match the Green Deal. Also, Romania is among the EU countries that depend most on coal/lignite for electricity production. Phasing out lignite has significantly contributed towards CO2 reduction and will continue to do so. The recently approved Recovery and Resilience Fund has clear milestones for phasing out lignite,” said Bettanin.

FINANCING GREEN PROJECTS

The transition will need to be carried out at the company level. Turning into a sustainable business, which includes economic, environmental, and social objectives, involves a process of internal transformation that includes rethinking relationships with suppliers and consumers, making customers aware of the need for an efficient use of natural resources, a reduction of the ecological footprint, as well as accounting for potential changes in consumers’ preferences and demands.

“It may involve investments in innovation, new technologies, in the acquisition or development of new skills or support services for defining transition strategies or compliance with new requirements. All this generates cost for the company, but long-term commitments may be reflected in cost reductions (due to low consumption of natural resources or low prices), the emergence of new sources of income (e.g. from the recovery of waste or by-products, the creation of industrial symbioses, etc.), the penetration of new market segments or geographical areas or obtaining a competitive advantage and better positioning on the market. It is difficult to quantify the costs associated with an organisational transition towards a sustainability agenda, but there are certainly benefits for a company that adopts such a model,” said Iuliana Tiba, Environmental, Social, and Positive Impact Financing Director at BRD Groupe Societe Generale.

According to Tiba, research has shown that reducing “cost-toimpact” leads to increased profitability, stronger resilience, and higher financial attractiveness. Worldwide, ESG (Environmental, Social & Governance)-focused companies have not only seen higher returns, but stronger earnings growth, dividends, and recognition from their customers and consumers. Moreover, in the long run, it is also a question of survival for many businesses, in the context of an expected transition to a green and inclusive economy.

“Banks are ready to finance responsible companies or projects. Europe’s goal of becoming the first carbon neutral continent by 2050 requires a huge effort from the business environment, public authorities, and the financial system, through a holistic and collaborative approach. In this equation, the role of banks is essential if we take into account the fact that addressing the risks of climate change alone, according to a recent report on green financing from the National Committee for Macroprudential Oversight, requires a volume of public and private investment of about EUR 60 billion over the next 10 years, in Romania. Our role is to participate in this economic effort, design new financial products, finance businesses that are meeting requirements, but also disseminate good practices and accompany our clients in this process of transformation. Activity in this area is still in the early stages, and there are also big challenges ahead for both banks and companies,” said Iuliana Tiba. Commercial banks are providing financing solutions for sustainable businesses and, according to ING Bank, clients’ openness can be demonstrated by the high number of financing deals closed in the first 6 months of the year. “There is certainly an appetite, and the demand can only grow from here. In the first 6 months of 2021, we brokered 133 sustainable deals at the group level, more than we brokered over the whole of 2020,” said Claudiu Sabau, Head of Client Coverage at ING Bank Romania. Sustainability was seen as rather “exotic” until recently, but lately it has become a recurring topic in talks with clients. “To provide an analogy, we can think of a high speed train that has just left the station and it’s starting to accelerate, but it’s going to take some time before it reaches cruising speed. Companies that don't take this seriously may find themselves in the unfortunate situation of no longer being able to finance projects or refinance existing debt on their balance sheet a few

years from now. Sustainability is not something that happens overnight and it’s not always black or white, as certain sectors will be impacted more than others. At ING we strongly believe in a collaborative approach where we stay close to our clients, we provide constant advice, and facilitate their transition to a less carbon-intensive business model through the financing we provide,” Claudiu Sabau explained.

STOPPING RESOURCE WASTE

Big changes are underway, being driven by both European authorities and by consumers wanting to be more environmentally-friendly. “We’ve built up an economy using oil & gas and natural resources and promoting unlimited consumption. The period we are entering, however, is one when we are becoming aware of the fact that resources are finite,” said Gus Schellekens, Partner and Head of Sustainability for EY Climate Change & Sustainability Services at EY Romania.

“Consumer attitudes will change attitudes among economic operators. It may seem like a small thing, but it is very important” said Ana Radnev, Head of Finance at CMS Romania. But change will not come easy. “We're in a paradigm where we're trying the same things that haven't worked for the last 20 years. We keep hoping that local authorities will start seeing the world differently overnight, that they’ll build a separate waste collection infrastructure overnight, that they’ll begin to access European funds that are no longer available,” argued Ionut Georgescu, CEO at FEPRA.

“At the moment, I think that Romania just needs a bit of will – and when I say will, I am referring to entrepreneurship. There are companies that want to see more than what is happening right now and I think that at this time, Romanian entrepreneurs should imagine a system in which we, as corporations and as entrepreneurs, could get in direct contact with citizens who are both consumers and waste generators and try to redesign our waste management practices,” he added.

Romania is lucky to be a member of the European Union, which is pushing us towards sustainability and a circular economy. “The best indicator is the way Romanian citizens see the circular economy and address environmental and social issues in this area. Last year, FEPRA and ISOP conducted a study to find out how citizens perceived certain market realities, and it turned out to be a very interesting study, albeit a bit difficult to understand. It was about 200 pages of analysis on demographics and other indicators, but the result was overwhelming,” Georgescu said. In recent years, issues like waste management, clean air, and green cities have started to attract a lot of interest from citizens, many of whom are looking to get more involved. “This study showed us that citizens were actively involved, and not just at a theoretical level. One of the questions was whether Romanians were willing to pay more for certain products that are indeed sustainable, organic, green, and a large share of respondents said yes. There’s still a long way to go from saying you’d do something to actually doing it, but we’re starting to see more and more products on supermarket shelves that are organic, have reusable packaging, use less plastic or more glass. And the more such products appear on the shelves, the more consumers will be demanding them,” the FEPRA CEO argued. “There's another important thing to note here, which Romanians need to understand as well. What are the real costs of a product? Are all costs included in the products we buy? The answer is categorically no! If we took into account all the costs and environmental impact of a product, we would better understand the impact of our consumption – a cup of coffee is a very good example for this exercise. Dozens of litres of water are consumed for a small cup of coffee. Water is used for irrigation, by people picking the coffee beans, in the washing process, in the production process, and so on. It all adds up to dozens of litres for a single cup of coffee. Hundreds of litres for a T-shirt, hundreds of litres for a piece of meat,” Georgescu noted.