As demand intensifies to reduce the use of carbon-based raw materials, companies are looking at how they can reduce consumption and find appropriate replacements.
To meet this challenge, a number of forward-thinking companies in the chemicals industry are developing strategies aimed at driving a successful transition to renewable alternatives. But how do companies successfully manage this transition? And, what are the challenges?
It is important to recognize that many of the carbon-based raw materials have been in development for over 100 years and have been refined over time to maximize economic efficiency. By contrast, renewable alternatives are often immature in their development and so struggle to compete commercially. Although this is often a temporary situation, this commercial bottleneck can stop many excellent projects from getting off the ground.
The availability of viable renewable alternatives is also a challenge. Despite significant media attention, biobased materials still only account for a very small proportion of the chemical industry’s feedstocks. So the challenge is to find, among the little that is being offered, those materials that can provide the win-win of sustainability and economic competitiveness. Furthermore, the majority of biobased materials available are first-generation feedstocks that are derived from food commodities, which presents its own challenges in terms of social acceptance. Moreover, they can be subject to some security of supply issues and price volatility. Finally, although demand for sustainable alternatives from end users is strengthening, they are generally unwilling to pay a premium for them.
Despite these challenges, there are a number of reasons why companies should be focusing on biobased alternatives at this time. Some renewable materials are becoming far more viable now and there are significant advantages for companies that are first to market with them. And while recent oil-price volatility has made the business case far more compelling for some renewables, we can’t yet be sure that prices won’t drop in the near future. But perhaps most significantly, any company that believes it is at the forefront of sustainable development, and wants to cut carbon across the full value chain, needs to take this matter seriously.
At AkzoNobel, a little less than 10% of our raw material spend is already biobased, and this puts the company among the industry leaders. To expand this even further, we have created a structured and disciplined strategy that focuses on working in partnership with selected companies in our value chain to make biobased products commercially viable. AkzoNobel and Solvay struck an innovative deal earlier this year for the supply of renewable-based epichlorohydrin in 2013–16. AkzoNobel, under the deal, will work to buy volumes of glycerine-based epichlorohydrin (Epicerol) indirectly via the epoxy resins it purchases from Solvay’s customers.
We also struck a deal this year with biotechnology company Solazyme to develop renewable oils sourced from algae. Under the terms of that deal, we will start product development this year with Solazyme, with a view to improving the environmental footprint of a number of our paints, coatings, and other products. We expect products to hit the shelves in 2014, with competitive prices based on Solazyme's cost of manufacturing.
Deals of this nature necessitate an open and collaborative approach. They require an ability to tap into the emerging science and technology developments taking place in the outside world. By engaging with people outside the company, you can uncover exciting new ideas and get those ideas to market much faster than would be possible through traditional R&D models.
However, establishing these kinds of partnerships is not easy and they require imagination to get them started as well as commitment to see them through. There need to be genuine mutual benefits to make the partnership work for all of the parties involved and a tailored approach taken for each partnership; no one size fits all.
In summary, businesses that are able to manage the transition to biobased materials successfully will ultimately stand to benefit. To achieve this, companies need to have the necessary vision to understand the long-term advantages of expanding the use of renewable alternatives and the ruthless efficiency to deliver this vision. This is not an easy road to take but a vital one to travel down in the long term.
Peter Nieuwenhuizen is director/future-proof supply chains, and Jos Keurentjes is RD&I director/open innovation at AkzoNobel.