The odd couple: how Germany’s Greens embraced business

Announcing her campaign as the Green party’s first-ever candidate for chancellor in April, Annalena Baerbock did not start her speech talking about rescuing rainforests or endangered animals. Instead, she offered to help save German business.

Baerbock’s “pact with industry”, aimed at supporting the country’s businesses through the climate change transition, reflects just how much her party’s relationship with the corporate world has changed. Not so long ago, most Green party politicians ignored business — and were ignored by it. Now, ahead of Germany’s pivotal September 26 election, rarely a week goes by without Baerbock speaking to a captain of industry.

“The markets of the future will be climate-neutral,” she told the party conference in her first campaign speech. “The question is not whether this will happen, but who will do it best. I want [Germany] to be at the forefront.”

In the popular imagination, the Greens may spark memories of rabble-rousing protesters outside nuclear plants, or sweater-knitting hippies. But a three-year reckoning process means the eco-party and German business are both cautiously changing their stance, eyeing the possibility of moving from adversaries to allies. The relationship is central to the Greens’ pitch that they are fit to lead Europe’s largest economy when Angela Merkel ends her 16 years at the helm.

Isabell Wolfgramm of the Federation of German Industries says it shows how the relationship has changed: “Ten years ago, we could never have imagined the Greens proposing a pact between industry and politicians.”

Heightened consumer concerns over climate change have forced businesses to engage with the Greens. And the growth in ESG investing has made shareholders much more active in pushing environmental change on to companies. During the 2017 campaign, “if you as a Green politician rang a company up, they would say: ‘Don’t come now — maybe after the election’,” says Oliver Krischer, deputy chair of the Green parliamentary group. “Now, I can’t fit in all the appointments.”

For some businesses, it is a true conversion. For others, a grappling with political reality. The Greens attracted just 8 per cent of voters in 2017, but are now poised to snag between 16 per cent and 19 per cent of the vote. The party’s chances of claiming the chancellery are slim. They are third in the polls, with the centre-left Social Democrats now ahead of Merkel’s centre-right Christian Democrats.

But there is a strong likelihood that they will enter the next coalition government, and climate neutrality — achieving net zero emissions — will top their agenda. They propose a €500bn spending spree over 10 years for public infrastructure, plus Baerbock’s “pact,” which would ask businesses to sign a contract for government funding in exchange for transforming to sustainable models.

To do this, the Greens want to relax Germany’s constitutionally enshrined restriction on new borrowing, the so-called debt brake, putting them at odds with the fiscally conservative CDU and SPD. Yet a future coalition would have to engage with Green proposals — which are bold, but not unstudied.

For months, leading Green politicians met chief executives, economists, finance ministers and central bankers in preparation for the campaign.

The process, says Danyal Bayaz, finance minister in the Green-led state of Baden-Württemberg, taught the Greens the necessity of making their goals economically palatable to business.

“What we have learned is that businesses are very willing to transform their companies [for climate neutrality] . . . But, and it’s an important but, it has to be a profitable business case for them,” he says. “This is an idea that has been sucked into the DNA and thinking of the Green party.”

No longer enemies

The model for Germany’s national Greens is the country’s prosperous southern state of Baden-Württemberg. A heartland of the car industry and home to Daimler, Porsche and Bosch, it was also the first German region with a Green-led government.

The conservative state had been a CDU stronghold since the end of the second world war. But the Greens gained power almost by fluke in 2011, after the disaster at Japan’s Fukushima reactor sparked a backlash against nuclear power, long championed by the CDU, and it lost control of the state.

A decade later, the Greens are still in power, partly due to the popularity of their local leader, Winfried Kretschmann, an avuncular septuagenarian who speaks in the thick local dialect. But it is also down to local pragmatism.

Central to this quest to better understand business was Fritz Kuhn, a silver-haired founding member of the 40-year-old Greens, and former mayor of Stuttgart. Living in a state where the car industry employs one in every 10 workers, he says, forced him to think about how to combine environmental and economic interests if the party was going to survive and even thrive.

“We can’t think in terms of enemies,” Kuhn says. “Enemies have to be fought . . . Partners have to be convinced.”

For Kuhn, this process began in the mid-1980s. He requested meetings with businesses across the country, from family Mittelstand companies to Siemens and Volkswagen. He came away from those talks arguing that unless they properly confronted climate change, many companies would lose out in the next cycle of business innovation. He synthesised this approach with a slogan coined in 2000 that many Greens now see as one of their most potent, “Be in the black with Green ideas.”

Yet, Kretschmann’s appointment as Baden-Württemberg’s premier in 2011 was tough. Other states tried to capitalise on the anxieties of businesses faced with the prospect of a local government run by the Greens. “One [state] took out newspaper ads saying: ‘Entrepreneurs, you’re better off coming to us’,” says former aide Rudi Hoogvliet who now represents the region in the Bundesrat, the upper house of the German parliament.

After Kretschmann was quoted in the mass circulation newspaper Bild as saying he wanted fewer vehicles, the chair of one major carmaker rushed to the politician’s office to demand an explanation. Kretschmann insisted his point was misrepresented, and that he only cared about reaching zero emissions. “The chief executive said: ‘Oh — well, zero emissions is also my goal’,” Hoogvliet says. “That one sentence turned into a conversation.”

For years, the Green-led government in Baden-Württemberg struggled to make progress with the carmakers. Enjoying a healthy demand, driven by consumers in China, they made little progress towards sustainability targets proposed by Kretschmann in their initial meetings.

It was not enough, say some Green politicians privately, that companies knew that change was needed. There had to be a cost attached to fully motivate them.

Change came in the form of Germany’s “Dieselgate” scandal, when carmakers were discovered in September 2015 to have manipulated their engines to cheat on emissions scores. In the aftermath, the industry began to look more seriously at electric vehicles.

“That’s the big step that the automotive industry had to take,” says one car company executive. But in return, businesses wanted the Greens to recognise that major industries needed support, and that if regulations pushed them to relocate to other countries with looser emissions policies, it wouldn’t help the climate.

“[The Greens] have started to see us not as part of the problem, but part of the solution,” says the executive.

In 2017, the Greens in Baden-Württemberg launched a “strategic dialogue” to expand the production of electric vehicles. They brought in not just carmakers and suppliers, but academics and civil society too.

“Our idea was not to make Baden-Württemberg the most climate neutral place in the world,” says Hoogvliet. Instead, he says that his state, which produces 0.3 per cent of global emissions, can have a far bigger impact by focusing attention on successful collaboration between Greens and business. “We want to demonstrate that a leading industrial region can pursue a coherent climate protection policy that actually works in favour of the economy,” he adds.

One concrete development of those talks is a joint venture, half-funded by the state, between Porsche and battery maker Custom Cells to create an electric race car. Torge Thönnessen, the start-up’s chief executive, says his goal is to develop longer-lasting and faster-charging battery cells than competitors such as Tesla, while also reducing their carbon footprint.

He describes the change in approach by the Greens as a transition from a hardline environmental party to “a party of the bourgeoisie”. “Their goals haven’t necessarily changed, but they have become less radical,” he says. “They will aim not for revolutionary, but evolutionary development.”

Listening campaign

Baerbock and her co-leader Robert Habeck have encouraged the national party to follow Baden-Württemberg’s lead. And while not all members support the move, most celebrate the pair for bringing the party into the mainstream. Even left-leaning dissenters are keeping quiet, in the hope that the shift will get the Greens into government. Party membership in the past six months has jumped more than 10 per cent to 120,181.

One of the first things the party leaders did when they took control in 2018 was to enlist the help of members with financial expertise, like Bayaz, the regional finance minister, who worked at Boston Consulting Group before entering politics.

Bayaz began inviting financial experts and economists to speak. At the same time, the party co-leaders began a “listening tour,” with Habeck focusing on regional finance ministers and central bankers while Baerbock targeted business and industry leaders.

In April, Baerbock was ranked as the most popular party leader among chief executives polled by Wirtschafts Woche, at 26 per cent approval. Her support subsequently fell away and dropped behind the CDU and Free Democratic party leaders following local media reports that she embellished her CV and was accused of plagiarism.

Yet, even those sceptical of the Greens’ business conversion agree the outreach was successful. Joe Kaeser, former chief executive of Siemens, spoke at the party’s last conference. “Baerbock earned respect with the way she engaged with business leaders,” says Matthias Berninger, a lobbyist at pharmaceutical company Bayer, and a former Green politician. “They have done a good job . . . not just talking about business, but talking with business.”

Like nearly every other executive interviewed, he remains suspicious the Greens will introduce emissions regulations and wealth taxes that could stifle companies. Bayaz admits additional regulation would be an important aspect of Green party policy, but says it is necessary to encourage innovation.

Several Green party leaders say that after holding frank conversations in private, they are often disappointed to then see their policies criticised by the same executives. Some business figures acknowledge a lingering reluctance to publicly acknowledge the Greens, due to long-established ties with the CDU, and the liberal FDP.

“Some of the challenges the Greens are facing aren’t because they’re doing the wrong thing — it’s because there are a lot of people who are basically partisan in the way they look at things,” one executive says. “They will support the CDU . . . no matter what.”

But that is slowly changing. It is no longer surprising to find business leaders voting Green, though the party still struggles to engage with lower income groups. “The companies have changed,” says Kuhn. “Today, the business community is much more ecologically conscious than the CDU.”

No room for compromise

Critics, including some progressive businesses, wonder whether the Greens have gone too far, conceding too much in return for too little. They point out that Baden-Württemberg, despite being Green-led, has achieved less than 35 per cent renewable energy usage — far less than neighbouring Rhineland Palatinate or even conservative-led Bavaria.

At the Fondium foundry, in the town of Singen near Germany’s southern border, co-founder Achim Schneider points to a cupola where molten iron sputters out in a cascade of orange sparks. Fondium — one of the biggest foundries in Europe — produces its iron cast work, mostly for German carmakers, by using a coal-based firing method that requires as much power each year as the entire city of 45,000 people.

He could make this firing process electric, but the state power grid needs a much higher percentage of renewable energy for that to be ecologically viable. “Otherwise, our footprint would get worse by double, which is ridiculous,” he says. “This needs to be understood by politicians — including the Greens.”

The Greens in Baden-Württemberg say they have struggled to move quicker due to conservative governing partners and because the state was more reliant on nuclear power than others — charges their critics dismiss as evading the party’s primary goals.

For 11 years, Paul Sigloch was a Green party member in the region, but he recently quit to help form the Klimaliste group pushing a tougher climate agenda. The state Greens ruled with the Social Democrats between 2011 and 2016, he says, and could have pushed more rigorous climate policies. He worries the same could happen now nationally.

“You can’t say, ‘we’ll make compromises here, compromises there’,” he adds. “There are no compromises. This is natural science, this is fact.”

Green leaders have invited other environmental activists, including those from Fridays for Future who have been critical of the shift in position, to discuss their approach. They argue there is no point imposing policies just for them to be rejected — not only by businesses, but the largely conservative voter base.

“We’re basically trying to square a circle,” Hoogvliet says. He may have a point. Nearly every person interviewed from business for this story said they now hope to see the Greens in government — just not leading it.

“I’m a little bit Green myself, yet I’m still reluctant to vote for them in the Bundestag. I don’t trust they’ll do a good job,” says Fondium’s Schneider. “Some of their ideas are pretty good — but I still see a socialistic footprint.”

Bayaz is not discouraged by the criticism. He recalls a recent meeting where an industry lobbyist stormed into his office to complain about several Green policy ideas.

“I told him, ‘This has been the Green position for years, why make a big deal now?’ And he said to me, ‘Because now I have to take you seriously’,” Bayaz recalls. “Sometimes it’s positive, sometimes it’s negative — but they are taking us seriously.”

Additional reporting by Richard Milne in Oslo and Victor Mallet in Paris