The ventilation industry must take responsibility

Annual commentary 2023
by Carsten Jespersen, CEO

The year that has passed
KE Fibertec began the year 2023 with the largest order backlog in the company's history, and we expected a new year with double-digit growth rates as we have experienced in the previous two years. In the fall, we could see that there is an upper limit to everything, and overall, we now expect a reasonable single-digit growth in revenue, which hides the fact that some markets are still up to speed, while we are starting to see a slowdown in other markets.

One of the markets where things have gone really well is the Danish market. 2023 has been characterised by a high level of activity, where we have completed the delivery and installation of textile ducts for the large Fehmarn project in Rødbyhavn, we have delivered to the retail chain Normal's new distribution terminal in Horsens, to the renovation of Lalandia in Rødby and to a large number of padel halls around the country, just to name a few projects. We have also accelerated our in-house washing and aftersales service centre, including almost tripling the washing capacity in our new in-house laundry. This opens up the possibility of washing even very large quantities of textile ducts over two to four days, especially for large food manufacturers, and also for industrial customers who do not have a full spare set to change. Our documentation of hygiene and the ability to make small repairs in the same workflow has been extremely well received, and in 2024 we will further develop the concept. It is important to emphasise that KE Fibertec does not compete with our installer customers, but that we work together with them towards a common goal of ensuring clean and optimally functioning textile ducts for the benefit of energy consumption, indoor climate, lifetime and, not least, aesthetic appearance. As an industry, we have an obligation to ensure that our ventilation solutions actually perform as promised to our customers - not only at the time of commissioning, but also after five and ten years of use.

Sustainability as a business model
For KE Fibertec, sustainability as a business model is not only about the carbon footprint of our products, but just as much about circular economy (waste is a resource), using healthy materials and, not least, supporting relevant building certifications, among other things by means of dynamic EPDs. These four pillars are the backbone of KE Fibertec's sustainability strategy. Even though the development is sometimes very slow, there is a general consensus in the public that we no longer need to discuss why to choose sustainable products, now it is more about how to implement and document a sustainable solution. This is progress, after all. In our circular business model, KE Fibertec has in 2023 managed to enter into a cooperation agreement with Kvadrat Really to recycle textile waste from our Danish factories. As a "waste supplier", you have to think differently than in a usual supply chain collaboration. Sorting, packing, transporting and shredding waste materials is an expensive process, and by the time you have a new raw material ready for the production of, in this case, acoustic panels, a lot of resources have been used, adding to the cost of the circular product. Scaling is the way forward, and that means closer cooperation between one or more 'waste suppliers' and the 'circular customer' to keep costs down throughout the supply chain, even if it means inviting our competitors into the circle. By 2023, we will have recycled close to 35 tons of textile waste in addition to 8 tons of yarn waste, something we are incredibly proud of, even if we are not there yet.

In 2022, KE Fibertec participated in the Climate Ready Production Company programme under the Confederation of Danish Industry and the Danish Industry Foundation to gain the necessary insight into how we calculate, monitor and report the company's climate accounts. This has provided valuable knowledge, and like many other manufacturing companies, our biggest challenge is to reduce our so-called Scope 3 emissions (indirect emissions from suppliers, raw materials, disposal, etc.). 97% of KE Fibertec's total emissions come from Scope 3, and it will be a huge challenge to reach the goal of becoming carbon neutral by 2030 (Scope 1 and 2) and reduce Scope 3 emissions by a net 25% in 2030 compared to 2018. To achieve these ambitious goals, we have signed up for the Danish Industry Foundation and the Confederation of Danish Industry's new joint project, Decoupling 2030, which is all about decoupling revenue growth from increased Scope 3 emissions.

New dynamic product EPD finally ready
On 1 January 2023, a fundamental change was introduced in the building regulations. In all buildings over 1000 m², the client must provide documentation of the building's climate impact in the form of a life cycle assessment (LCA), which shows the climate impact from construction, operation and demolition over a period of 50 years. The new climate requirements in the building regulations also include an upper limit value for CO2 emissions of 12 kg CO2-eq. per m² per year.

Basically, KE Fibertec finds it positive that requirements are also set for the construction industry and not least for the manufacturers of building components. It has been difficult to get the authorities to define the requirements and methods we need to use for our customised solutions in order to deliver a dynamic EPD that helps the client document the climate requirements. From KE Fibertec's side, we are therefore proud that we have finally succeeded in obtaining a third-party evaluated EPD that also supports our new documentation for the DGNB and BREEAM building certifications in addition to the aforementioned requirements for an LCA in the building regulations.

Unfortunately, we have experienced a number of hurdles due to rules that are completely incomprehensible and often favour the companies that do nothing. In some cases, it is accepted that the manufacturer presents a highly inadequate EPD, for example, we have seen an EPD based on 1 m² of raw textile material. This calculation is very simple to perform and one might be led to believe that the textile in a textile duct is the most important ingredient. This is not the case. In a dynamically calculated EPD, the textile itself rarely makes up more than about 34-35%, aluminium hangers make up 50-52% and accessories such as zippers and nozzles and packaging make up the remainder. Is it fair that we should be compared to a competitor's third-party evaluated EPD, where only about a third of the total CO2 emissions have been documented?

Another example is the use of aluminium, which is by far KE Fibertec's largest single source. If you choose a Chinese-produced aluminium rail, it actually emits more than 20 kg CO2-eq/kg aluminium if coal power is used in the production at the aluminium plant and the rails are then transported to Denmark. Today, there are Scandinavian suppliers who can make a similar aluminium rail that is locally produced with emissions of 2.3-5.7 kg CO2-eq/kg aluminium. These suppliers' products should be rewarded when we submit our EPD, but unfortunately that's not how it works today. If the manufacturer cannot "disclose" their real emissions, they are allowed to apply an average database value of 10 kg CO2-eq/kg aluminium. Will it incentivise a manufacturer to choose an often more expensive subcontractor if they can get away with halving their emissions just by looking up a database? In our opinion, this is the wrong way to motivate manufacturers in the ventilation industry to take part in the green transition.

Expectations for 2024
We believe in a positive but also selective development in 2024. We see clear signs of a slowdown in the construction industry in some of our main markets. We need to adapt to the individual markets and develop new concepts. If there is a decline in new sales, there is a greater need for washing and servicing of the existing textile ducts. Our business model is strong with both our own weaving mill and our own in-house laundry along with a new service concept that we will introduce in early 2024, and we feel well prepared for a new and exciting 2024.

Merry Christmas and Happy New Year to everyone in the ventilation industry.