Investing in Sustainability

DBH Group, an investment and service group engaged in international business with a focus on venture capital, flexible infrastructure and corporate business services will celebrate the 30th anniversary of its establishment next year. Its founder & Chief Executive Officer, Dr. Sándor Erdei talks to Diplomacy&Trade about the business model they pursue while keeping in mind Dutch business and other values and ideas like sustainable development and the circular economy.

When discussing the business model of the DBH Group, Dr. Sándor Erdei finds it important to recall how it all started. He conducted his MBA studies in The Netherlands in the early 1990s and the Group was established there in 1994. “We started by assisting companies from The Netherlands. I was happy that we were bringing in capital, creating jobs in Hungary. Then, I realized that once I had brought them into this country, it would be beneficial for all parties concerned to provide them with our local expertise. That's how the Corporate Business Services division of DBH was created, offering assistance in the fields of finance, accounting, tax advice, support monitoring, etc.,” he highlights.

A growing business
The CEO explains that “if companies come into the country, they don't want to sign up for an office for five years or ten years, but rather for six months or one year, because they don't know what the future will bring. We offered this flexibility when we brought in Dutch firms that wanted to establish their business here. As we got stronger, we started to do capital investments – again, typically with Dutch partners. Companies from The Netherlands came to Hungary and I joined them as an investment partner, adding my local knowledge. We then set up our own equity fund, which was established in 2010 in Budapest, starting to do business on our own: we assessed the market and started to invest in small businesses in general. Over the last 10-11 years, we have developed quite a few companies, most of which we have sold.”
The DBH Group has an active business relationship with The Netherlands. “We regularly make visits there, and obviously we all know that the Dutch are ahead of us, and I don't think we could copy paste their conduct of business here. However, it's always good to see fine examples in front of us, identify what they do well and apply this to our businesses.”

Serviced office, flexible business space
Dr. Sándor Erdei stresses that DBH Group’s new investments have been implemented in the same direction for the last three years or so, looking only at investments that have sustainable circular economy impact. “So, we have become quite selective, and now, we have programs that I think sooner or later will become established in Europe, even worldwide: sustainability is an important element in all of them. If you're a company with a hundred employees, what's been happening since the new coronavirus epidemic? You send, let's say, 50 people to home office with the other 50 people coming into the office: half of the staff stay 2-3 days at home, 2-3 days in the office. That's generally the trend. Thus, more and more companies realize that flexibility is a good choice, even though it might be more expensive per square meters than traditionally, but it's worth it.”
He adds that actually, DBH Group doesn't really calculate in square meters, but rather in workstation price. “We've done the math: in most cases, it's worth going for the flexible instead of the traditional solution. Interestingly enough, after the COVID-19 period, there's a change in our customer base as not only SMEs but more and more multinational firms, like Philips or Siemens – or BMW in Debrecen – choose this option. It is because they don't know how many they need today and how many they need tomorrow in terms of workstations, and for them, it's more important to be able to scale it up and down, having the flexibility both in space and time. There's a price to pay for our flexibility, but it's worth it. So, I think serviced office is a model for sustainability because you're using less, you're renting less, less will be built and therefore they carry a smaller footprint in the construction industry.”
The CEO underscores that everything is connected here – and it's not just trendy, it's increasingly the smart business decision that is much more advanced in Western Europe. However, the practice of serviced office is increasingly entering public consciousness in Hungary as well.

Hungary Goes 100% Circular on Tire
When it comes to sustainability in investment, one of the favorite topics in DBH Group management is the circular economy. “Everybody talks about how we're awash with tire rubbish. It used to go into the blast furnaces, be burned, buried, etc. Now that is no longer the way to deal with used tires. Instead, we should turn them into raw materials, which will then be turned into products again. We have found a technology for the recovery of tire waste and it is capable of turning 85% of used tires into basic materials: oil, carbon black, steel. The resulting oil is now green oil, which can be used to make plastics or any other products that could only be made from fossil fuels before. Carbon black can be recycled in the rubber industry, not to mention the many uses for steel. So, it's a wonderful example of the circular economy. We have the vision – under our slogan ‘Hungary Goes 100% Circular on Tire’ – to process, in a few years, all the automotive waste rubber in Hungary which produces 80,000 tons of waste rubber a year. With, say, six plants – so that we don't have to transport the tires far –, we could cover the whole country. All this does not require a huge amount of money, because this pyrolysis technology is Hungarian, and if it could be financed, at least in part, within a government program, it could be a huge thing in Europe. There would probably even be EU funding available for this,” the CEO highlights.
He mentions an agreement discussed with the chemical giant BASF, which is a strategic partner in this program. They are making new products out of the oil produced, replacing fossil-based raw materials and are willing to purchase the oil from new plants as well. “They want to be in the forefront in circular economy and I am proud that we are a strategic partner. Also, we have recently added another strategic partnership with Audi Hungaria so the key industry players recognize the importance of what we do for sustainable development,” he adds.

Helping water utilities
Another potential area of investment with sustainability in mind at DBH Group is the management of water utilities as they are in contact with a technology company that is working on the digitalization of water utilities. “There are a lot of problems with water utilities in this country, there is no investment in the sector, pipe systems, pressure regulators, etc. are outdated and many kilometers of pipes need to be replaced in the country. There is no money for that. However, with digitalization, if we could measure the pressure in the different sections of the pipe network by digitalizing the pressure regulators, then we could detect where there is a loss of water due to pipe cracks and thus, detect the possibility of a pipe bursting before such accidents would happen. We have a digital solution for this, which could be distributed in Hungary,” Dr. Sándor Erdei points out.
He believes that all these are good examples of what can be achieved in the field of sustainability in a way that makes business sense and also makes an impact.