IHS Chemical Week


Sustainability: Focus Shifts from Cost Reduction to Profit Optimization

8:27 AM MDT | November 4, 2011 | By ALEX SCOTT

Thomas: Plastics from CO2.
Lohec: Pragmatic approach.
Van Beurden: Big in biofuel.
Hawkins: Collaboration is key.

Leading chemical makers continue to save costs through resource-efficiency programs, but they are also focusing increasingly on the development of sustainability-advantaged products. A new trend is also emerging, in which companies and their industry customers are not just targeting lower emissions but zero emissions.

Companies such as Bayer MaterialScience (BMS) and Braskem are developing products that could contribute to what is being dubbed the “zero economy,” in which production processes are carbon neutral or carbon negative. Meanwhile, multinationals such as Chevron, ExxonMobil, and Shell are meeting growing demand for energy in a substantially less carbon-intensive way, such as by producing biofuel as an alternative to fuels based on crude oil.

The pressure on chemical companies to be more sustainable increasingly is coming from the sector’s customers, according to the findings of a recent survey of 200 industry executives by CW in association with CSC (Falls Church, VA). Of those executives surveyed, 56% say their customers consider sustainable sourcing decisions an imperative or will have a high level of importance over the next two years. Regulatory compliance activities also remain a high priority. “We are seeing greater alignment of sustainability goals with energy-abatement plans and ISO 50001 certification as one of the most important goals for 2011,” says Chuck Deise, v.p./process industries at CSC.

BMS is one company aligning sustainability with energy abatement. “We don’t tease out sustainability as a separate function,” says Patrick Thomas, CEO at BMS. A key part of the company’s R&D efforts is the development of lightweight plastics for use in vehicles and aircraft, to save fuel. “Unless you are investing carbon well it is not going to work,” Thomas says. “There is much greater understanding down the supply chain of what is sustainable development.” Choosing the appropriate application for a material is crucial. “An example is rigid-foam insulation, which in its lifetime save 70 times the carbon invested in it,” he says.

BMS also has been developing tools to enable the company to manufacture more efficiently and save energy. One example is Structese, a proprietary software system that provides insights into a chemical process and calculates what possible energy savings can be made. Every process at BMS goes through a Structese analysis. “It is very rare that we can’t find a 10% saving,” Thomas says. “Every project has a payback of less than three years.”

BMS’s “Dream Reaction” center at Aachen, Germany is developing a catalytic process that uses carbon dioxide (CO2) for making polycarbonate. The aims of the Dream Reaction process fit with the zero economy concept being flagged by John Elkington, founder of SustainAbility (London), a long-established environmental consulting firm. Leading companies such as Procter & Gamble (P&G) and PepsiCo are, under the zero economy concept, seeking to avoid CO2 emissions altogether by adopting new approaches to production that deliver zero emissions. “This is where the Dream Reaction idea started,” Thomas says. BMS is at the pilot testing stage for the CO2-to-polycarbonate process “but there is no reason why it can’t scale up,” he says.

Rittenhouse: Market-facing goals.
Sauers: Step up in targets.
Chapman: Acting on water scarcity.

Elkington cites a 2010 study, A New Era of Sustainability, published jointly by the United Nations Global Compact and Accenture, in which 766 CEOs from around the world, including some from chemical companies, who say that they have already “embedded” sustainability into their businesses. Elkington questions whether the CEOs have really embedded sustainability into their companies’ activities. “Properly understood, sustainability is not the same as corporate social responsibility—nor can it be reduced to achieving an acceptable balance across economic, social, and environmental bottom lines. Instead, it is about the fundamental, intergenerational task of winding down the dysfunctional economic and business models of the 19th and 20th centuries, and the evolution of new ones fit for the 21st century,” Elkington says.

Braskem in 2010 established a business strategy which pledged that by 2020 the company would be a leader in sustainable chemistry. It is developing step-changing technologies, including the production of polypropylene (PP) from sugars, that would qualify for the zero economy. “This is a big challenge,” says Jorge Soto, director/sustainable development at Braskem. The company has developed a fermentation process for manufacturing PP from sugar cane harvested in Brazil. IHS SRI Consulting estimates that, rather than having a carbon footprint of about 1.2 m.t. of CO2 per 1 m.t. of PP produced, as is the case for petrochemical-derived PP, Braskem’s BioPP will have a negative carbon footprint of 2.3 m.t., Soto says. Braskem plans in 2013 to be the first company to produce BioPP commercially. Braskem’s initial BioPP capacity in 2013 is already sold out at prices 30% higher than those of petrochemical PP, one analyst tells CW.

Braskem has been using life-cycle analysis (LCA) since 2005 to help determine the sustainability of its products. The company has carried out a LCA for its BioPP, verified by an external company, to show that sugar cane used in the production process is grown in a sustainable and socially responsible manner. “LCA can be used to make the best choices and for identification of new products such as ‘green’ polyethylene and PP,” Soto says. “Our clients are not so familiar with this tool yet.” The company is educating its customers in the plastics-converting industry about the sustainability of its new products. “We’re supporting them,” Soto says.

P&G, which sells $83 billion/year of products containing chemicals--such as washing detergents and shampoos--mostly to the consumer, views sustainability as a business imperative rather than a business opportunity. The company last year set out ambitious sustainability targets for 2020. They include powering its manufacturing plants entirely from renewable energy; using 100% renewable raw materials or recycled materials for all products and packaging; and zero consumer and manufacturing waste related to its products going to landfill. The company does not yet have a clear route to achieving these goals but it plans to make step-by-step progress, says Len Sauers, v.p./global sustainability at P&G. “Overall we are on track,” Sauers says. The company achieved in 2010, from a baseline of 2007, a reduction per unit of production of 16% in energy consumption, 57% in waste generation, 12% in CO2 emissions, and 22% in water usage. The company’s 2012 goal is a 20% reduction in each of these areas versus 2007.

P&G also set itself a goal in 2007 to generate cumulative sales of at least $50 billion by 2012 from products featuring less packaging, more product compacting, and more renewable raw materials. The company is four years into that program and so far has achieved approximately $40 billion in sales based on those criteria.

P&G, as part of its migration to 100% renewable or recycled material, announced recently that it was using sugarcane as packaging for some of its shampoo bottles. Other actions include installation of the firm’s first wind turbine and an increased use of solar panels. “We want to have zero manufacturing waste go to landfill, and we now have nine plants that have achieved this,” Sauers says. The company has 140 plants in total, with a further 15 being designed or built.

The key message from P&G’s customers, however, is that the performance of greener products should match that of existing products, at equal cost. “The mainstream consumer, about 70%-80% of the population, will not pay more and will not tolerate trade-offs in performance or cost,” Sauers says. “This is the consumer we target in our strategy. We have several sustainable products in the market with more on the way, and they provide the performance our consumers expect and do not cost more.” One example is Tide Cold Water washing detergent, which saves fossil fuel use by enabling clothes to be washed in cold water.

P&G has an environmental sustainability scorecard for its external business partners and suppliers. “We ask them to report key sustainability metrics, and we evaluate their progress year on year,” Sauers says.

The company rolled out an environmental sustainability supplier scorecard to approximately 400 suppliers during 2010, and increased that to 600 this year. “Some of these are chemical suppliers, and we ask them to report their greenhouse gas emissions, water usage, energy usage, and a few other metrics,” Sauers says. “Many of our business partners have said this made them look at things they never had before.” The introduction of the scorecard has prompted discussions and new ways of reducing the environmental footprint of the group’s suppliers, as well as that of P&G.

P&G pioneered the development of LCA in the 1980s. The company today applies LCA to all of its products. “This allows us to identify where can make the most meaningful improvements across the entire life of our brands, whether it is in the raw material stage, manufacturing, or disposal,” Sauers says.

Meaningful improvements in sustainability are also accelerating at Dow Chemical. “I really couldn’t be more optimistic about how sustainable development is being integrated throughout the Dow Chemical business,” says Neil Hawkins, v.p./sustainability and environment,health and safety at Dow. “We are really hitting our stride and it is [affecting] the top line as well as the bottom line. It also helps us to be more and more effective at delivering for our customers. The other big learning we have had is that collaboration is the key to really making dramatic progress. These are really good times for making fast progress,” Hawkins says.

Dow’s approach to sustainability is based on two main principles: that making products using fewer resources such as water boosts the bottom line; and that new, sustainable products can accelerate top-line growth. The company, among its sustainability targets, is seeking to generate 10% of its sales from “highly advantaged” sustainable products in 2015, compared with 3.4% in 2010. Dow is about 40% of the way toward achieving this goal. It also aims to develop by 2015 at least three breakthrough technologies to meet global challenges and to reduce energy intensity across the company by 25% in 2015, from a 2005 baseline. “In the past two years, in particular, we have seen dramatic improvements in resource efficiency,” Hawkins says. Sustainable products are “about meeting the external trends--the major challenges the world is facing of energy, feeding the world, and clean drinking water. We are using our science and technology, which is incredibly wide and deep, to focus on new [applications] that give us more growth and new growth opportunities,” Hawkins says.

Dow applies an R&D sustainability assessment tool to ensure it is allocating its R&D dollars more effectively for development of sustainable products. The tool is built on the principles of LCA. “Dow’s annual R&D spending of $1.8 billion is more than all the chemistry departments at U.S. universities combined,” Hawkins says. Water-desalinization systems are one area the company is focused on. Dow’s pledge, via new technologies, is to reduce the cost of desalinization of water by 35% by 2015 from a baseline of 2005. The company is also involved in the World Resources Institute’s (Washington, DC) Aquaduct project to measure and map water-related risks. Other companies involved in this project include Coca-Cola.

Meanwhile, Responsible Care initiatives including management systems remain “very important” today for Dow’s business. “It’s still a critical tool,” Hawkins says.

DuPont has been striving to reduce its environmental footprint for more than 20 years but since 2006, similarly to companies such as Dow Chemical and P&G, it has increasingly adopted “market-facing goals” including the introduction of sustainable products, says Dawn Rittenhouse, director/sustainable development at DuPont. “We are thinking about this as a business growth strategy rather than as a footprint reduction strategy,” she says.

DuPont products that reduce greenhouse gas (GHG) emissions for its customers or consumers, generated $1.6 billion in sales in 2010, more than double corresponding sales in 2009. DuPont is targeting sales from such products of $2 billion in 2015. Another of the company’s goals is to make $8 billion of sales from products derived from renewable raw materials in 2015, compared with $5.9 billion in 2007. The company generated $7.7 billion in sales from products derived from renewable raw materials in 2010.

Greener Technologies: Shell develops an energy-efficient process for the polycarbonate intermediate diphenyl carbonate.

Ellen Kullman, DuPont president and CEO, speaking at the Cefic annual assembly, held recently in Madrid, said that if DuPont does not make the changes necessary for it to become sustainable, it will not be around in 100 years’ time. “I don’t think there is a choice,” she says. “This is the new model and the [chemical companies] that embrace it will be the ones that are successful. It will take partnerships. We have to be a lot more transparent and cooperate to get the answers.”

DuPont has a team dedicated to LCA that is part way through a program to gather information along its key supply chains, “to work out where are the biggest levers” to press are to improve sustainability. The level of complexity associated with LCAs is not easy to handle but obtaining information from suppliers is becoming easier, Rittenhouse says.

One example of a greener product that DuPont has developed is a coolant for mobile air-conditioning units that has a global-warming potential four times that of CO2, which is replacing a coolant with a global-warming potential 1,200 times that of CO2. “We know something like that will have a huge impact across the whole supply chain,” Rittenhouse says.

Chemtura’s commitment to sustainability centers on a commitment to introduction of greener technologies across the company, says Chemtura chairman and CEO Craig Rogerson. Demand for greener products and technologies is increasingly a driver of demand, he adds. “Specialty chemical makers, by definition, should be providing solutions that meet a customer or market need,” Rogerson says. “That is what would lead you to develop greener applications or products.” Greener products do attract premiums when they meet desired customer needs, he adds.

Nearly all new product offerings in Great Lakes polymer additives unit are greener technologies. A key introduction is its Emerald flame retardant product line, a replacement for decabromodiphenyl ether (decaBDE), which is being phased out by producers. Other applications include brominated derivatives that can reduce mercury emissions in coal-fired power plants. In areas such as organometallics and lubricant additives, roughly 60%-70% of new product introductions are greener products.

Internal energy efficiency drives also remain a key effort and key driver on reduced GHG emissions. Such investments also have attractive financial payoffs, Rogerson says. The company recently announced plans to invest $10 million to upgrade its Naugatuck, CT technology center. The investment will generate $3.5 million-$4 million/year in savings from energy and other efficiencies. Rogerson says.

GHG accounting, as well as reporting, is a key component of Chevron’s efforts to manage its emissions as well as ensure regulatory compliance. High-quality data are critical in understanding trends and potential future liabilities, particularly as GHG emissions are beginning to have a monetary value, says Wes Lohec, v.p./health, environment, and safety and sustainability at Chevron. “A key challenge is assuring that the data included in the inventory are complete, accurate, relevant, consistent, and transparent,” Lohec says. “To help us achieve this objective, we developed a standard GHG protocol and a web-based GHG and energy-reporting system called CGERS, each of which has been implemented across the enterprise.”

Chevron provides energy from a broad range of sources. “While oil and natural gas will remain the world’s predominant sources of energy for a long time to come, we will need every energy source available to meet the growing demand of developing economies,” Lohec says. “We’re taking a pragmatic approach to renewable energy, pursuing and focusing on technologies that leverage our strengths: geothermal, advanced biofuels, solar, and energy-efficiency technologies.”

Chevron operates the largest geothermal energy portfolio in the world with capacity for 1.2 gigawatts of energy. The company also is investing in advanced biofuel feedstock and conversion technology, and it has formed a partnership with Weyerhaeuser (Federal Way, WA) to convert non-food derived cellulose into advanced biofuels. Chevron also has “an integrated and systematic way of managing water across the enterprise,” Lohec says. “We manage the potential risks from water using myriad processes and tools as part of an overarching environmental strategy, which includes responsible water management.”

One example of Chevron’s innovative approach in this area is the company’s recent collaborative project with the municipal wastewater company of Richmond, CA to bring 3.5 million gallons/day of wastewater onto Chevron’s nearby refinery site and treat it for use in the refinery. “This water is of such high quality after treatment in the new facility that it is being used to make steam, a critical component in many of the refinery’s processes,” Lohec says. The project has enabled Chevron to reduce significantly its consumption of freshwater at the refinery, by an amount equivalent to 25% of Richmond’s drinking water consumption.

ExxonMobil, meanwhile, recognizes fully the “need to meet the present energy [and chemical] needs without compromising future generations.” Sustainability is not a new concept for the company. “Frankly, it’s about doing the job right,” says Neil Chapman, senior v.p./polymers at ExxonMobil Chemical.

The company has been using LCA for several years. “We’re a strong supporter of LCA,” Chapman says. “It allows good science-based decision making.” ExxonMobil often uses LCA in response to customer requests for information about products and product development, he says.

The company has in place a system for evaluating the risks to its operations posed by water scarcity. “We are very conscious that a reliable supply of water is required,” he says. The company reduced its water use by 1% last year. Chemicals production requires water but its water requirements are relatively low compared with other industries. One example is polyester, which uses one unit of water compared with the same weight of cotton, which requires 1,500 units of water, Chapman says.

Green technologies are also a focus for ExxonMobil, which in 2009 announced plans to invest more than $600 million to codevelop biofuels from algae with biotechnology firm Synthetic Genomics (La Jolla, CA). “Algae is important because it’s a fuel source that doesn’t compete with food production,” Chapman says. ExxonMobil, however, is not seeking to become a major player in the biobased plastics market, which currently comprises less than 1% of all plastics produced. But the company is putting significant efforts into recycling and recovering plastics, Chapman says.

ExxonMobil generates a wide range of environmental-related data. The company produced 400,000 safety-data sheets in 2010 alone. It also has a variety of IT systems, some of which have been designed by SAP, to gather and manage data ranging from information about products, to statistics about plant and country-wide emissions. “At this company we believe measurement is key,” Chapman says. “We have put a lot of effort into the standardization of systems. Sustainable development has got to be based on the use of a whole set of metrics, not just one or two.” Only when this is in place can a company improve its environmental performance, Chapman adds.

Shell is growing its market presence in cleaner as well as renewable energy. The company is the world’s largest blender of biofuels, mixing 5 billion liters/year, says Ben van Beurden, v.p. at Shell Chemicals. The company’s activities in the biofuels field are “exciting but at an early phase of development,” van Beurden says. Shell formed a joint venture in Brazil last year with Cosan (Sao Paulo), one of the largest producers of biofuels in the world.

Shell views natural gas as a bridge between oil and renewable technologies. “We believe natural gas will play an essential role in managing the CO2 emissions caused by the world’s rising energy demand,” says Peter Voser, CEO of the Shell group. Shell’s chemicals business is also a prolific developer of more efficient processes, particularly catalytic-based technologies such as a recently developed low-energy process for making diphenyl carbonate, a polycarbonate intermediate.

DSM, meanwhile, has shifted its sustainability activities since 2006 from a set of corporate social responsibility (CSR) values to a system for generating value. The system is geared to providing sustainable technologies and solutions that are better than competing ones, says Fokko Wentjes, director/sustainability development at DSM. The company has for the past three years been named the most sustainable chemicals firm among those listed on the Dow Jones Sustainability Index (DJSI).

Evidence of DSM’s current sustainability strategy can be seen in the steady emergence of the company’s portfolio of so-called Eco+ products. About 87% of DSM products launched in the first half of 2011 were identified as Eco+. These are products with a superior environmental performance and competitive edge over existing products and services. They are rated according to the findings of a standard LCA. About 40% of DSM’s current products are Eco+. The company has a target to raise the level to 50% by 2015. “90% of what we do in R&D is related to reducing environmental footprint,” Wentjes says.

DSM is targeting an overall 20% reduction in CO2 emissions by 2020. The company reports its emissions, including GHG emissions, in two ways: at the corporate level and at the product level. DSM also is calling on its suppliers to reduce their emissions 20% by 2020. “We are looking at ways of cooperating with our suppliers on this,” Wentjes says. “Suppliers are coming forward with solutions. There is also a push from suppliers [to be greener].”

The trigger for greener products emerges from different sources and can come via a push from DSM, or from suppliers or customers. Transparency in the supply chain helps to identify opportunities for greener products. Recent successes include DSM’s introduction of a vehicle drive train that can reduce automotive CO2 emissions by 3-5 grams/100km driven.

DSM is pressing for the adoption of a biobased economy. The company is one of the leading developers of processes for making second-generation biofuels and biomaterials using a range of proprietary biotechnologies.

DSM, rather than spend huge amounts of money on being more sustainable, has developed its approach by “building a network,” Wentjes says. “You don’t need a large corporate body. You can quite easily energize people. It can take off by itself.” Meeting sustainability performance targets including reduced CO2 emissions also triggers financial bonuses for DSM’s staff.

AkzoNobel’s range of EcoPremium products are the brand equivalent of DSM’s Eco+ products. AkzoNobel generated 25% of its 2010 revenues from EcoPremium products, up from about 20% in 2009, and it is aiming to increase that to 30% in 2015. “It’s a challenge because it’s a moving target,” says Andre Veneman, corporate director/sustainability at AkzoNobel. “You lose some EcoPremium products because they become mainstream.”

EcoPremium products include Weathershield, a coating for buildings that reflects heat and reduces the need for air conditioning; and a low-friction coating for the hulls of ships, which reduces a vessel’s fuel consumption 7%-8%.

AkzoNobel assesses its products using a standard LCA and carries out eco-efficiency analysis, to determine products’ potential environmental and economic costs and benefits. “We need to be sure that we don’t work with homemade tools but are linked in,” Veneman says. The company began using LCAs in 1996 and has completed LCAs on 300 key value chains from cradle to gate as well as from gate to grave. “We think this is unique,” Veneman says. “With LCAs we have a much better understanding of our value chains.”

AkzoNobel has introduced a requirement that its thousands of suppliers sign the company’s business principles charter. This has helped AkzoNobel identify suppliers that pose an environmental risk, and pinpointed suppliers that are critical to the company’s operations and to which it can provide additional support. AkzoNobel works with its 300 largest suppliers to advise them on wastewater treatment systems and on possible ways for them to reduce their carbon footprint. “We are very happy with this program as it reinforces relations,” Veneman says. For AkzoNobel’s top-30 suppliers, including BASF and Eastman Chemical, the company tries to identify how jointly to accelerate innovation. This approach requires trust on each side. “We are past this stage, and yes we are already starting to yield the benefits,” Veneman says. “First we had to ask the question of whether we were willing to share information about our innovation,” Veneman says. “Suppliers have got used to it, but initially some Western companies found it difficult. Today we have high growth in the number of companies asking, ‘can you calculate our [environmental] footprint’,” Veneman says.

Scrutinizing the supply chain threw up some surprises, such as the discovery that only 7% of the carbon footprint of AkzoNobel’s coatings business is the result of its own operations with 93% coming from upstream and downstream activities. This high external loading is due partly to the energy-intensive processes required to manufacture coating intermediates such as solvents and resins. About 50% of the carbon footprint of AkzoNobel’s chemical activities were identified to be from AkzoNobel.

The company publishes its carbon emissions each quarter to show progress toward a five-year CO2 emissions goal. AkzoNobel aims to cut CO2 emissions 10% by 2015 and 25% by 2020, from a baseline of 2010.

Reducing carbon emissions also is a key activity for Süd-Chemie, which was acquired recently by Clariant. “One of the biggest environmental concerns we have is our carbon footprint, not necessarily as Süd-Chemie or Clariant. As an industry we have to be more aware of this,” says Hans-Joachim Müller, a board member at Süd-Chemie. “Efficiency is really the name of the game,” he says. At Süd-Chemie, GHG emissions are measured at the site level. The company attributes a carbon footprint to each of its products.

Süd-Chemie has extensive manufacturing operations in China and they are regulated by Order Seven, a key body of Chinese environmental legislation related to chemicals. The company, when managing its Order Seven activities, draws on its experience of the European Union’s Registration, Evaluation, and Authorisation of Chemicals (Reach) program, Müller says.

The company spends 3%-5% of its R&D budget on safety testing, most of which has been to ensure compliance with Reach classification. The company’s compliance with global legislation such as TSCA in the U.S. is based on a blueprint of the company’s activities related to Reach. It is spending a “significant” amount of money on compliance. “We do whatever we need to do,” Müller says.

LCA is not applied as a matter of course to new products the company is developing. This is because the catalysts it sells are used in the production of chemicals but not in the final product itself, Müller says. The company does, however, take its catalysts back and “we ensure that they go through approved recycling to get the metals out and then we can work with them again. It’s cradle-to-cradle,” he says.

The company does not track how much of its sales are related to sustainability. “It’s really part of the whole process, an integral part of our activities,” Müller says. However, the company is becoming more involved in products labeled as sustainable, such as its development of an enzymatic system for converting cellulosic biomass into sugars. Süd-Chemie’s enzyme system has been developed to convert C6 and C5 sugars into ethanol.

Süd-Chemie’s enzyme technology, together with technologies being developed by companies such as BMS and Braskem, have the potential to deliver a zero-emissions supply chain, which customers such as P&G increasingly are seeking. 

CSC's Chuck Diese and Stephen Bogart provide analysis of the 3rd Annual Regulatory Compliance and Sustainability Survey in a webcast chaired by Alex Scott. The webcast is available to view for free at Chemical Week following registration

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