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JHuttner Bioploymers 2014
- 1. BUILDING A SUSTAINABLE BIOBASEDECONOMY? START WITH FEEDSTOCK Biopolymers 2014 Philadelphia May 12, 2014
- 2. o New opportunities& new challenges o The Walmart Effect: new models for action o Field to Market o Bioplastic Feedstock Alliance (BFA) o BIO o Certification considerations o Corn reconsidered Agenda
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- 4. o Industrial biotechnologyproducts moving toward commercial deployment o Consumer brand owners see them as a means to: o Reducing their supply chain carbon intensity o Reinforcing their brand sustainability attributes Positive trends converging
- 5. o Colors haveemotional content o Animals and plants do, too o Routine & regular NGO engagement o Claims are grounded & substantiated o They can move the market o P&G’s cold washing initiative Adapting to “brand” thinking
- 6. Leadership goals o Mission:“to refresh the world; to inspire moments of optimism and happiness; to create value and make a difference.” o Tagline: “Open happiness” o 2020 goal: sustainably source all of its key agricultural ingredients & work with WWF to implement its sustainability guidelines
- 7. Leadership goals o Mission:“to make sustainable living commonplace. We work to create a better future every day with brands and services that help people feel good, look good and more out of life.” o 2020 Goal: sustainably source 100% of its 10 key agricultural ingredients
- 10. o Prepare inadvance – anticipate the blind tackle o Land use change o Food security o Carbon debt & net emissions o Engage stakeholders relentlessly o Your friends may become fierce critics overnight o Get over it o Scale matters in the beginning o Gasoline: 136 Billion gallons (USA/year) o PET: 1 Billion gallons ethanol equivalent (No. America) Lessons from biofuels
- 11. The Walmart Effect: NewModels For Action
- 12. o The “WalmartEffect”: private contracting replaces global governance o “20-30 companies can change the world.” Paul Polman, Unilever CEO o “100 global brands can make sustainability happen.” WWF Public limits; private routes
- 13. o The SustainabilityConsortium o Sustainable Agriculture Initiative (SAI) o ISEAL Alliance o Bioplastics Feedstock Alliance (BFA) o BIO Sustainable Supply Chain Task Force o Field to Market Alliance for Sustainable Agriculture Voluntary initiatives to note
- 14. o Prepare gapanalysis of schemes & initiatives o Investigate potential collective action as needed Bioplastics Feedstock Alliance (BFA)
- 15. Objective: consider thechallenges of acquiring renewable raw materials to meet the highest standards of sustainability & cost effectiveness • Analyze major feedstocks o Corn, cane, sorghum, dedicated energy crops, soy, sugar beets, cassava & forest products • Compare certification schemes o Field to Market, ISCCPlus, RSB, Bonsucro, Working Landscape, CSBP, FSC, SFI, & ISEAL BIO’s Sustainable Supply Chain TF
- 16. • BIO willbe a catalyst for knowledge sharing & capacity building • BIO members will actively support efforts to bring continuous improvement to production agriculture • Members WILL prefer sustainably produced feedstock with o Performance indicators endorsed by a wide spectrum of stakeholders o Producers operating under robust sustainability schemes or BMPs developed for continuous improvement • Members WILL NOT use raw materials that are o Food crops in food insecure regions o Originate in areas of high conservation value Board adopted policy: highlights
- 17. o Sustainability criteriafor 10 commodity crops o Representing the entire supply chain with significant NGO engagement o Avoiding risk of de-commoditizing the supply chain o Effort to stimulate widespread innovation & adoption of best practices w/o regulatory drivers o Theory of change: o If growers are have access to data allowing them to compare their performance with others, they will alter their practices to be more efficient. Field to Market
- 18. Certification considerations For crops(plantation model) o Bonsucro o Forest Stewardship Council (FSC) o Sustainable Forestry Initiative (SFI) For direct sourcing o Sustainability criteria negotiated with your customer o Criteria translated into supply agreements o Cost of compliance can be shared Limitations (all) o Limited affect on shed level improvement o Transaction costs o Legitimacy
- 19. International Sustainability &Carbon Certification (ISCC Plus) o Global scheme covering all biomass forms for energy, biomaterials, & feed o Sponsored by the German gov’t ministry of consumer protection o Complies with EU biofuels directive (RED) & German sustainability ordinances Roundtable for Sustainable Biomaterials (RSB) o Global scheme covering all biomass forms for fuel & ,biomaterials o Complies with ISEAL’s “Good Practice Code” o Widespread support among NGOs Process/product certification schemes
- 20. Is this whatsuccess looks like?
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- 22. Corn vs. cane:cost comparison for biochemical use Proprietary analysis by Kyle Althoff based on FAPRI model forecasts
- 23. Luverne corn supplystudy, 2012 37% lower GHG emissions than US avg. John Sheehan, PhD, Univ. of Minnesota & Keith Paustian, PhD, Colorado State University Supply basin
- 24. Individual farm GHGfootprints Three big factors 1. Nutrient efficiency 2. No till 3. Manure use Reducing fossil emissions from fertilizer
- 25. • Sponsored byTCCC • Prepared by Univ. of MN & Colorado State Univ. • Review panel: o Keith Alverson, farmer, NCGA board o Joe Fargione, TNC o Suzy Friedman, Robert Parkhurst, EDF o Franklin Holley, Alix Grabowski, WWF o Mike Huisenga, WSP Environment & Energy o David Kolsrud, farmer/investor/coop pres. Scenarios for low carbon corn, March 2014
- 26. BMP findings: soilcarbon sequestration
- 27. o Nitrogen appliedat optimum rate reduces GHG emissions 46% over current practices with no effect on yield o Using no-till or strip till practices and optimum fertilizer rates accumulates or sequesters carbon in the soil at a significant rate o With the additional practice of replacing 50% of the synthetic nitrogen with manure effectively doubles the GHG savings Conclusions: BMP scenarios
- 28. o Create supplybasin of voluntary growers in the So. Dakota/MN/Iowa region o Share input-output data anonymously using FieldPrint Calculator & FTM indicators plus GHG o Engage a stakeholder group of environmental, regulatory & conservation opinion leaders o Report annually on performance The project in development
- 29. o Michael P.Vandenbergh, Vanderbilt University School of Law, “The New Wal-Mart Effect: The Role Of Private Contacting In Global Governance.” o Jody M. Endres, Univ. of Illinois Energy Biosciences Institute, “Legitimacy, Innovation & Harmonization: Precursors to Operationalizing Biofuels Sustainability Standards.” o Helena Chum, NREL & IEA Bioenergy Tasks 38 & 40 o Sheehan, et.al., ”Measuring the carbon footprint of Gevo’s Luverne, MN corn supply,” http://iree.environment.umn.edu/wp- content/uploads/2014/03/Gevo-final-report-1.pdf o Sheehan, et.al., “Scenarios for low carbon corn production,” http://soilcrop.agsci.colostate.edu/?p=2159 Acknowledgements & references
- 30.
Editor's Notes
- #3 In February, I published an opinion piece in the journal Industrial Biotechnology that received a lot of play and positive commentary. The piece was a call to action – a call on the industrial biotechnology sector to open its eyes to the great challenge it was facing and to step out of its comfort zone. The industry needs to actively engage and take responsibility for obtaining sustainable feedstock. We need to do this because it is a priori the right thing to do. But, we also need to do it to defend our social license in the face of significant criticism. Most importantly, we need to do it because the best customers are already working on it and we need to step up and take responsibility. If we don’t we are going to lose the future. I know this sounds scary and extremely difficult. It is. But I believe it is doable if we take some lessons from our recent history. We need to draw the proper conclusions from these lessons and take those insights directly into action. This is not an abstract call to action. There are substantive initiatives now moving that we can help succeed. In this talk, I will argue that by our actively engaging these important efforts we can win the legitimacy we need to succeed and win. In this talk, I will suggest a revised history of our recent past in biofuels and the lessons we might take from it. We’ll look at the sustainability challenge as defined by global brand owners and its implications for our industry. I will then share some interesting academic work that provides a theoretical framework for an action agenda and tell you about some really good work in progress with great opportunities for us to contribute.
- #5 Luckily for us, the current chaos and dissonance in the biofuels space is not affecting the emergence of significant new opportunities. Over the course of the last few years, two trends have converged and crystalized. Industrial biotechnology products (other than biofuels) are moving toward commercial deployment; and, second, consumer brand owners and retailers have concluded that these products can help them meet their sustainability goals. This is a great opportunity and we need to grab it and win. These new market opportunities and strategic alliances with companies like P&G, Coca-Cola, Unilever and Danone are very exciting but present new challenges. Our industry leaders are used to selling to investors and to policy makers. We are not so accustomed to the complex needs of big consumer packaged goods companies. These companies evaluate their suppliers on more than performance attributes. This creates a bit of a culture clash. After we meet price and performance criteria, we need to deal with risks that we had not been focused on, namely reputation risk. When we were selling primarily to investors and policy makers, our claims of improved environmental performance were accepted at face value. Not so with consumer brands. They will not risk their reputation on unsubstantiated claims. They have built huge but intangible value in their brands over decades. It is their most valuable asset and managing it is an advanced and subtle skill. It is every bit as esoteric as the skills we deploy.
- #6 In the work I’ve been doing recently with consumer companies, I’ve realized there is a lot about how they think and operate that is obscure to our companies. Global consumer companies have developed “brand” knowledge and deeply embedded it into their organizations from product development and innovation all the way through to advertising. Brand knowledge is an organization-wide expertise that supersedes specific technical knowledge. We love to talk about systems biology and protein engineering. But, can we talk or even understand someone who is talking about the emotional content of a color, a panda, a polar bear or a musical chord? I think it is more likely we dismiss this line of discussion as superficial and irrelevant. That attitude may be a limiting factor to our future success unless we address it.
- #7 Let’s look at two of the leaders in the brand space, Coca-Cola and Unilever. Listen to how they position their brand strategy: Here’s Coke: “To refresh the world; to inspire moments of optimism and happiness; to create value and make a difference.” Tag line: “Open happiness.”
- #8 And Unilever: “Our purpose: to make sustainable living commonplace. We work to create a better future every day with brands and services that help people feel god, look good and get more out of life.” These are bold aspirational statements with a lot of embedded value meaning. More than aspirational, both companies take great pains to make them real and tangible. Each has specific quantitative goals and active programs to engage stakeholders to define reasonable indicators. They go even a step further and work to create the capabilities of their supply chains to meet the high expectations they are setting. They transfer knowledge of best practices to small landholders and take other concrete steps to help move suppliers to more sustainable practices. P&G has a long history investing in innovation, evidence by their investment in Genencor in the early 1990’s to develop low impact detergent enzymes. Coca-Cola’s strategic alliance with Avantium, Gevo, and Virent is of course, an even more recent and compelling example.
- #9 15 billion bottles sold in 25 countries since 2009. World wide search for technology to replace the 70% of plant bottle still from petroleum. Jt development agreements with Aventium, Gevo, Virent. To make PTA (purifed teraphthalic acid) to add to the sugar cane derived 30% MEG (mono-ethylene glycol)
- #10 Long term alliance led to 3 million gallon supply agreement recently for use of algal oils in Unilever personal care products.
- #11 Let’s look briefly at the trajectory of biofuel development over the last six years or so. In the mid 2000’s, we benefited a great deal of early promise. You all know the story, energy independence, rural economic progress, reduced GHG footprint, etc. We rode a wave of great good feeling and institutionalized a 5-fold increase in biofuel blending mandates, from 7 billion gallons to 36 in the RFS2. That huge hockey stick really got peoples’ attention. All of a sudden, the prospect of a land rush juggernaut to build an industry to biofuel an insatiable demand for auto transportation had a logical and predictable affect. New analysis and arguments came forward about deforestation, carbon debt and land use change. Never mind these affects, real as they may be, apply more aptly to suburban sprawl, highway development and dietary choices – the fact is only biofuel development came under its power. Could we have managed this critique better back then? Maybe, but in our defense, we were completely surprised by this sudden rapid plunge from golden boy to goat. Biofuel’s reputation has never really recovered. Of course, there are other major trends creating huge headwinds for biofuel development, namely the rapidly falling demand caused by fuel efficiency improvements and economic sluggishness. I do not want to relitigate those issues. The point is: scale matters. Let’s face it, the biobased economy is a really new thing. It aims to redefine the world’s agricultural production system. In that context, the offer of using renewable carbon to replace fossil fuels while promising at the micro level is a terrible threat to many at the macro scale. We need to be cognizant of that as we move forward to exploit the new market opportunities of biochemicals and biomaterials. We need to keep the boundaries within sight and modest. We can do that because the market for biochemicals and biopolymers is much smaller. For example, the largest volume polymer in the world, PET fiber, is a pretty finite biobased opportunity. Most people are surprised to learn that 100% of PET in all of North America could be replaced by a biobased alternative with the equivalent of one billion gallons of ethanol capacity. That’s right, 10 typically sized plants in the United States could replace all of the fossil fuel derived PET in No. America. And, no one expects bio PET to achieve 100% market share. The lesson then is this: the world is a harsh place and you will upset a lot of big incumbents if you’re out to transform a key industrial sector like agriculture. So, step carefully and don’t overreach.
- #13 It is easy for critics to dismiss these efforts as green washing or worse. But, there is another more positive way to interpret the actions of these leading companies. The political sphere has utterly failed to address the challenge of sustainable development. Narrow political interests stand in the way of progress, whether it is the UN Climate Change initiative or the WTO, very little tangible progress has been made. Nevertheless, consumers and opinion leaders in civil society have increasingly clear expectations for more sustainable products. In the absence of any regulatory or policy regime to address these demands, global companies are among the few actors with the reach and market power to move things in the right direction. Unilever’s CEO Paul Polman says it will take the actions of only 20-30 companies to change markets. WWF has a strategy to get the world’s top 100 brand companies to do it. Whether it’s 20 or 100, the basic strategic observation is the same. There is no governance framework, legal regime or policy context that is capable of acting effectively to apply global environmental standards other than the collective action of global companies and global NGOs representing the interests of civil society. Michael Vandenbergh, an American professor at the Vanderbilt University School of Law, characterized this phenomenon. His 2006 paper entitled: “The New Wal-Mart Effect: The Role of Private Contracting in Global Governance” looked at the largest firms in eight retail and industrial sectors to describe a pattern of contract terms that imposed sustainability criteria on their suppliers covering a “complex mix of social, economic and legal incentives for environmental protection.” He concluded, on balance, this development is a good one and serves an important function in improving environmental performance, especially in global trade and sourcing agreements where there is lax regulation of exporting firms and markets that do not reflect consumer preferences for sustainably sourced materials. There is no better arbiter of consumer preferences than global consumer companies. Indeed, leaders help create and channel those preferences. This makes the effort of Coke and Unilever to use sustainability as a brand differentiation even more significant. Other companies will surely follow. Since our products contribute to the environmental performance of packaging and ingredients, we will benefit from the success of these initiatives. So, we better understand what’s going on and get involved.
- #14 To deal with this dynamic, leading industry players have organized peer group companies to bring progressive pressure on commodity producers to improve the performance of entire product sectors. This strategy is contributing to real progress and is evidence that 20-30 market leaders can indeed have a positive effect. In our space, WWF has organized thought leaders among global brand owners to address the need for sustainable feedstock. In June of last year, the Bioplastic Feedstock Alliance was announced. It was formed by Ford, Unilever, Nestle, Coca-Cola, Nike, Danone, Mondelez, P&G and Heinz. Sustainability experts in agricultural supply chains from these companies are collectively assessing the readiness of different feedstocks and schemes to assure high performance. Think of it this way. If there were sustainability obligations in government policy, everyone in a supply chain would know the expectations they had to meet. In the absence of policy to send market signals the supply chain is fragmented driving up transaction cost. Global food companies and brands want sustainable agricultural materials but how do they get the signal to growers without de-commoditizing the flow of raw materials? A number of voluntary initiatives have been conceived and initiated to fill this gap. They represent a new innovative model for translating a complex mix of environmental concerns into a coherent and practical program. Let’s take a close look at one in the United States, the Field to Market Alliance in the United States. Field to Market has been working for over six years across the supply chain to reach consensus about indicators of sustainable production agriculture for six US commodity crops: corn, soy, cotton, wheat, rice and potatoes. Over 50 corporate entities representing stakeholders from farmer producers to food companies and retailers to conservation NGOs are involved In 2012, they published a report analyzing the trends over 30 years, from 1980 to 2011, for the six crops looking at land use, soil erosion, irrigation water applied, energy use & GHG emissions. The report stands as a sort of baseline of the footprint of US production agriculture.
- #15 To deal with this dynamic, leading industry players have organized peer group companies to bring progressive pressure on commodity producers to improve the performance of entire product sectors. This strategy is contributing to real progress and is evidence that 20-30 market leaders can indeed have a positive effect. In our space, WWF has organized thought leaders among global brand owners to address the need for sustainable feedstock. In June of last year, the Bioplastic Feedstock Alliance was announced. It was formed by Ford, Unilever, Nestle, Coca-Cola, Nike, Danone, Mondelez, P&G and Heinz. Sustainability experts in agricultural supply chains from these companies are collectively assessing the readiness of different feedstocks and schemes to assure high performance. Think of it this way. If there were sustainability obligations in government policy, everyone in a supply chain would know the expectations they had to meet. In the absence of policy to send market signals the supply chain is fragmented driving up transaction cost. Global food companies and brands want sustainable agricultural materials but how do they get the signal to growers without de-commoditizing the flow of raw materials? A number of voluntary initiatives have been conceived and initiated to fill this gap. They represent a new innovative model for translating a complex mix of environmental concerns into a coherent and practical program. Let’s take a close look at one in the United States, the Field to Market Alliance in the United States. Field to Market has been working for over six years across the supply chain to reach consensus about indicators of sustainable production agriculture for six US commodity crops: corn, soy, cotton, wheat, rice and potatoes. Over 50 corporate entities representing stakeholders from farmer producers to food companies and retailers to conservation NGOs are involved In 2012, they published a report analyzing the trends over 30 years, from 1980 to 2011, for the six crops looking at land use, soil erosion, irrigation water applied, energy use & GHG emissions. The report stands as a sort of baseline of the footprint of US production agriculture.
- #18 A sustainable supply chain starts by developing performance criteria. These are the priority areas of impact, like GHG emissions, water, biodiversity, socio-economic conditions, etc., that are bear watching. Priorities are then reduced to indicators that can be measured quantitatively and reviewed on a regular schedule. This is standard stuff and should be familiar to anyone who’s read a sustainability report. Professor Vandenbergh’s Wal-Mart effect described how individual companies could be a catalyst for sustainable practice via their supply contracts wherein they specify certain practices or performance. The limit to this approach is apparent though when dealing with commodity crops or bulk chemicals. Imposing specific performance criteria by definition always narrows the number of suppliers and gives them pricing power over buyers. If you want apple juice or washing powders, for example, to meet criteria you alone have developed, apple juice bottlers and detergent manufactures would gladly comply. They say: “You want something different than everyone else in the market? Fine, but it will cost you extra.” This is rarely an acceptable outcome. Think of it this way. If there were sustainability obligations in government policy, everyone in a supply chain would know the expectations they had to meet. In the absence of policy to send market signals the supply chain is fragmented driving up transaction cost. Global food companies and brands want sustainable agricultural materials but how do they get the signal to growers without de-commoditizing the flow of raw materials? A number of voluntary initiatives have been conceived and initiated to fill this gap. They represent a new innovative model for translating a complex mix of environmental concerns into a coherent and practical program. Let’s take a close look at one in the United States, the Field to Market Alliance in the United States. Field to Market has been working for over six years across the supply chain to reach consensus about indicators of sustainable production agriculture for six US commodity crops: corn, soy, cotton, wheat, rice and potatoes. Over 50 corporate entities representing stakeholders from farmer producers to food companies and retailers to conservation NGOs are involved In 2012, they published a report analyzing the trends over 30 years, from 1980 to 2011, for the six crops looking at land use, soil erosion, irrigation water applied, energy use & GHG emissions. The report stands as a sort of baseline of the footprint of US production agriculture. FTM has also developed a rigorous, peer reviewed online tool, called the Fieldprint Calculator, to enable farmers to do detailed input output analysis of their farm’s performance. The tool provides information at the field level and allows farmers to view others’ performance at the county, state and national level. Farmers can also self-select into groups to compare performance anonymously with other producers. FTM’s operating premise or “Theory of Change” is this: If growers are presented with a comparison between their own success and that of their neighbors, they will desire to alter their practices to increase the efficiency of their farm system. With access to anonymous local and regional data, farmer facing supplier companies now have information that will help them innovate in ways that meet the needs for the entire supply chain. FTM aggregates the data from individual farmers and works with its member experts to constantly evaluate the data, means for improvement and to set program wide goals for continuous progress toward a more sustainable overall footprint for production agriculture. This provides a practical route for sourcing companies to meet their ambitious sustainable sourcing policy promises.
- #19 The last piece of the puzzle in developing a sustainable supply chain is certification. For those companies where de-commoditization is not a problem, i.e., where direct sourcing is possible. If you can identify your farmer suppliers and buy from them directly, you are in a position to engage your customers for guidance on the sustainability requirements they prefer and craft your supply contract to meet those criteria. The cost of compliance is clear and can be negotiated into your selling price.
- #20 Certification schemes are another way to provide some comfort to producers and end-user customers alike that they can develop products and markets with confidence that they are meeting high consumer expectations for sustainability. NatureWorks was the first biopolymer company to demonstrate this approach. They worked with Danone and Stonyfield to develop yogurt cups from PLA derived from cornstarch. They worked with ISCC and WWF to establish ISCC plus for biomaterial certification. Unfortunately, the certification landscape presents a complicated picture of overlapping, sometimes contradictory schemes. Furthermore, there is a lot of controversy surrounding some that cover feedstocks of interest to our industry.
- #21 Over the last five or six years, a number of biofuel certification schemes have been developed. But, even the best schemes are subject to doubts and controversy. Jody Endres, an American legal scholar and academic at the Energy Biosciences Institute at the University of Illinois described the challenges in a 2012 paper titled “Legitimacy, Innovation and Harmonization: Precursors to Operationalizing Biofuels Sustainability Standards.” Professor Endres looked at the principles applying to all certification schemes to meet basic international legal norms and expectations for legitimacy. The paper covers a lot of ground but most of the key arguments can be collapsed into the concept of legitimacy. No scheme has achieved socioeconomic legitimacy, that is – to be widely accepted as the principle means of demonstrating high sustainability standards that place labeled products squarely beyond reproach. The two principle biofuel sustainability schemes have completely opposite legitimacy problems. An ISCC certification secures compliance with the sustainability requirements of the EUs Renewable Energy Directive but does not have sufficient legitimacy with NGOs to protect biofuels from criticism and attack. The other scheme, Roundtable for Sustainable Biomaterials is widely supported by the NGO community but has a legitimacy gap of its own. It lacks cognitive legitimacy with producers. Producers don’t believe it is practicable. A third scheme, the Council on Sustainable Biomass, CSBP, failed to launch at all. As a result of these problems and others, biofuel certification has stalled. Which puts the biofuels industry in a real bind. At the moment, there is no obvious way for a biofuel producer or a group of producers to gain legitimacy with NGOs. This will inevitably be a problem for advanced biorefineries as the indirect land use critique and the treatment of biogenic carbon will burden their reputation once they move toward large-scale deployment.
- #26 “Cyber experiments” on detailed 3-year input output data from 35 farms with 2010 baseline Using CSU’s DailyDayCent model for simulating daily fluxes of carbon & nitrogen among atmosphere, vegetation & soil Hundreds of scenarios focusing on two management practices effecting GHG emissions Nitrogen fertilizer application rates & practice Tillage practices
- #29 End goals Help change the perception of corn in the USA Demonstrate to corn growers that high yields & eco-efficient performance are compatible & practicable Theory of change Farm level data from a large draw basin that is accessible, transparent, rigorous & engages a broad stakeholder group of influencers over time can change the conversation