Sustainability in Chemical Industry Aaloak Singh Negi PGPM710_01
Industry Mentors Mr. S G Choudhary (Chief Sustainability & Technology Officer) Tata Chemicals Ltd.
Table of Contents What is sustainability? Need for sustainability Benefits of sustainability Global reporting initiative Sustainability Matrices & GAP The chemical industry Sustainability in chemical industry Sustainability Initiatives by chemical industry
The Triple Bottom line “SUSTAINABILITY” is a path forward that allows humanity to meet current environmental, economic, and societal needs without compromising the progress and success of future generations. Sustainability in chemical industry: Grand Challenges and research needs National Academy of Sciences The Triple Bottom Line, Savitz AW, Weber K, 2006, First Edition
…Need for sustainability 6.7 billion people on earth 1.9 billion are living in abject poverty 975 million people are malnourished 865,000 deaths per year worldwide directly attributed to outdoor air pollution (WHO) 1.5 million deaths per year result from unsafe water, inadequate sanitation or hygiene Non renewable energy sources are fast depleting Population & poverty data : World Bank, August 2008
Oil Prices per Barrel, 1985 – 2011 Years Until Resource Depletion* 86.84 37 61.06 28 $/Barrel Years 21 26.72 27.58 26.00 17 19.55 1985 1990 1995 2000 2005 2011 Copper Lead Silver Tin Source: Fast Company. Source: inflationdata.com The Reality of a Resource-Constrained World …less well known is the rapid depletionof a broader set of natural resources While skyrocketing oil prices are a well-known reality for all companies… *Resource depletion is defined as the complete exhaustion of the resources existing in nature. Calculation assumes that current consumption levels are maintained.
..Benefits of pursuing Sustainability for organizations Reduce energy, waste and cost Differentiate yourself Sidestep future regulations Create Innovative new products or processes Open New markets Attract and retain talent Improved Image Reduce legal risk Provide a higher quality of life The business guide to sustainability, Hitchcock D, Willard M, First south Asian edition, 2008
Financial Returns from a Sustainability Strategy Carbon leaders surpassed the financial performance of carbon laggards by an annualized rate of return of 3.06%. With the notable exception of Asia, companies successful in minimizing their carbon emissions experience a 10 – 30% improved performance in shareholder returns Source: Innovest Strategic Value Advisors, Carbon Beta and Equity Performance, 2007.
41% Where have you seen the greatest benefit from your sustainability investments? 23% 18% 6% 6% 6% Energy Savings Waste Savings Product Innovation Corporate Branding Raw Materials Savings Water Savings n=17. Investment Expectations & Returns Effectiveness of Sustainability Investments Continued pressure for near-term payback on sustainability investments suggests energy efficiency projects should be a core component of early sustainability investments Source: Corporate Executive Board Research, Survey for Corporate Sustainability Executives, 2007.
Sustainability Impacton Employee Motivation Sustainability Impacton Employee Productivity Impact of Sustainability on MBA Job Decisions $5500 80% 70% 76.9% 1% Percentage of Respondents Willing to Forego Income to Work for a Firm with a Credible Sustainability Strategy Average Annual Income They Would Forego Committed to Sustainability Values NotCommitted to Sustainability Values Employees Who Felt Greater Motivation and Loyalty toward Company Due to Sustainability Initiatives Indirect Returns from Sustainability Investments Sustainability strategies serveas a recruiting draw for top talent… …and improve productivityand loyalty of existing employees Source: Stanford Graduate School of Business, Survey of 800 MBAs from 11 Top International Business Schools. Source: 2002 GlobeScan International Survey, MORI.
….If you don’t Liability of pollutants Supply problems with raw materials and energy Attacks on your image Legal risks Bad mouthing of your product Being closed out of certain markets The Bhopal Tragedy :case in point The business guide to sustainability, Hitchcock D, Willard M, First south Asian edition, 2008
Global Reporting Initiative The Global Reporting Initiative (GRI) is a network-based organization that pioneered the world’s most widely used sustainability reporting framework GRI’s core goals include the mainstreaming of disclosure on environmental, social and governance performance The Reporting Framework sets out the principles and Performance Indicators that organizations can use to measure and report their economic, environmental, and social performance Sustainability reports based on the GRI Framework can be used to demonstrate organizational commitment to sustainable development, to compare organizational performance over time, and to measure organizational performance with respect to laws, norms, standards and voluntary initiatives.
AIChE sustainability Index, Dow Jones Sustainability Index, Standard and Poor Ethibel Sustainability Index provide auditable frameworks and metrics A Roadmap to Sustainability: Indian Industry Case Study, Mr. Sanjay Choudhary, CTO, Tata Chemicals Limited, Third Annual India Chemical Industry Outlook Conference, Growth and sustainability in Chemical Industry- Post Recession 17-18 Feb 2010 Mumbai
Companies following sustainability Dow Jones Sustainability Group Index: percent of eligible companies in index
…the chemical industry Oil & Gas Petrochemicals Pharmaceuticals Dyestuff Paints
The chemical industry converts raw materials (oil, natural gas, air, water, metals, and minerals) into more than 70,000 different products
Chemical Industry is by far considered the most polluting one
Chemical Industry & Sustainability
As a major energy user as well as enabler of energy and emissions-saving solutions the chemical industry has a significant role in mitigating climate change.
The chemicals industry is a significant user of coal, petroleum products and natural gas, both as a source of energy and as feedstocks for many of its products.
Chemical industry’s products, processes and research capabilities contribute to conserving energy, delivering energy more efficiently, developing renewable resources and reducing greenhouse gas (GHG) emissions.
Significant improvements achieved in energy efficiency over the past decades - production increased by more than 50% since 1990 & GHG emissions have fallen by more than 20%, mainly by switching from coal to gas powered facilities and in investing in combined heat and power (CHP) plants
A Roadmap to Sustainability: Indian Industry Case Study, Mr. Sanjay Choudhary, CTO, Tata Chemicals Limited, Third Annual India Chemical Industry Outlook Conference, Growth and sustainability in Chemical Industry- Post Recession 17-18 Feb 2010 Mumbai
Sustainability in chemical industry Value chain positioning and profitability. Courtesy: Accenture and American Chemical Council white paper on sustainability in chemical industry, 2010
Sustainability initiatives by Chemical companies Energy Use Revenues from Non- Depletable Resource Environmentally Smart Market Opportunities from R&D Effort Products that Reduce Greenhouse Gas Emissions Products that Protect People Water Conservation Fleet Fuel Efficiency Community outreach Education Commitment
Sustainability initiatives by Chemical companies Care for the community Inclusion Alternative fuels Clean development Energy Efficiency Green Products Resource Optimisation Habitat conservation Water resources Eco-impact
Sustainability initiatives by Chemical companies Developing sustainable communities Ensuring safety and promoting health Nurturing people , Fostering Talent Conserving Water Managing Energy Efficiently Consuming Resources Responsibly Responsible Governance
Challenges in chemical industry Courtesy: Sustainability in the Chemical Industry: Grand Challenges and Research Needs - A Workshop Report National Academy of Sciences
Hurdles to Effective Implementation of Sustainability Initiatives What is the most difficult task in building and executinga sustainability strategy at your company? 26% 16% 16% 11% 11% 10% 10% 0% 0% Cross-Silo Coordination Goal Setting Internal Education Strategy Development Current Footprint Analysis Risk/Opportunity Assessment Business Case Development Communication/Reporting New Market Identification Hurdles to Achieving Business Impact Cross-silo coordination proves to be the greatest hurdle for sustainability initiatives n=19. Source: Corporate Executive Board Research, Survey of Corporate Sustainability Executives, 2007.
Centralization of Sustainability Activities Are the following sustainability initiatives centralizedor decentralized within your organization? 70% 70% 67% 52% 48% 33% 30% 30% Supplier Compliance Communication/Reporting Identification of Cost Savings or Revenue Opportunities Strategy Development n=27. Ownership of Sustainability Responsibilities Despite the cross-functional nature of sustainability issues, most tasks are centralized within the firm CentralizedDecentralized Source: Corporate Executive Board Research, Survey of Sustainability Executives, 2007.
Frequency and Effectiveness 36% More than 67% of firms that house sustainability initiatives in the CEO’s office see that home as highly effective, perhaps due to the importance of cross-silo coordination to ensure success. Effectiveness Ineffective Moderately Effective Highly Effective Frequency 16% 11% 7% 7% 7% 7% 2% 2% 2% 2% EH&S Supply Chain Real Estate Legal CEO’s Office CTO Decentralized in BUs Corporate Responsibility Officer Corporate Strategy Office Cross-Functional Task Force Corporate Communications Organizational Home of Sustainability Initiatives Sustainability initiatives are most effective when housed in the CEO’s office n=44. Source: Corporate Executive Board Research, Survey of Corporate Sustainability Executives, 2007.
The Sustainability Portfolio What needs to be done, when and where? Beyond Greening: Strategies for a sustainable world, Stuart L. Hart
The five sustainability principles Growth: Go where the money is Profitability: Align cost reduction with sustainability action Positioning for the future: Build intangible assets Longevity: Ensure relevance in a sustainability-conscious world Consistency: Win the loyalty of consumers and employees RECOMMENDS Accenture and American Chemical Council white paper on sustainability in chemical industry, 2010
Sustainability Spending Sustainability spending is will grow at a CAGR of 15% globally from US $67.3 billion 2010 to US $140.2 billion in 2014 Source: Verdantix Ltd., UK
Sustainable Business Consulting Spend Figures in billion US $ Sustainable business consulting spend will grow at a CAGR of 13% globally from US $17 billion 2010 to US $ 28 billion in 2014
Solaron Sustainability Services Emergent Ventures Environment Resources Management SustainAbility BlueSky With the growing focus on sustainability many sustainability consulting firms have emerged. Also, the leading business consulting firms have their own sustainability practise
Conclusion Sustainability is a matter of survival not choice Chemical Industries are focused on Sustainability as a strategy Sustainability Consulting is here to stay and thrive