Accenture on Sustainability in the Chemical Industry
Sustainability is an integral part of becoming a high-performance business. With the known implications of global climate change, companies are moving toward a low-carbon economy to meet the requirements of consumers and policy makers. This includes improving energy efficiency, reducing emissions, and cutting down on water and waste consumption. Accenture has recommended a short list of principles and guidelines to help chemical companies manage the short-term challenges and help companies succeed in the long-run. These 4 principles are:
1. Go Where the Money is Companies should invest in areas that will increase their market share and attract investors. This means investing in green and eco-friendly products and operations. Not only do these operations reduce costs and help the environment, but there is an actual market for them. According to two Accenture surveys, consumers continue to prefer “sustainable” products over other products.
2. Align cost reduction with sustainability action To decrease costs and increase their attractiveness in the market companies should implement initiatives that reduce environmental impacts and operational costs. By aligning sustainability with cost reduction companies increase customer satisfaction, decrease their carbon footprint, and increase margins.
3. Building intangible assets The formula is easy: more intangible assets equals a higher market value. Many companies are using sustainability to build close relationships with key stakeholders and competitors to become more attractive in the market. By building these relationships companies are increasing the transparency of their sustainability actions and their impact. This helps companies influence the direction of public debate and helps them prepare for new environmental regulations.
4. Win the loyalty of consumers and employees To win the loyalty of consumers companies should remember all good things come at a price. To make your product attractive it should be both environmentally friendly and affordable for the customer. In regards to employees, many companies are seeing trends of sustainable strategies playing a critical role in attracting and retaining top talent. Engaging employees in sustainable movements and plans helps increase attract potential employees and increases the loyalty of current employees.
These principles, outlined by Accenture, offer a valid point of reference for sustainable actions. In the chemicals industry sustainability can play an important role in market image. In the public eye chemical companies are wasteful and environmentally harmful. By displaying successful sustainable efforts, companies can positively position themselves and turn sustainability efforts into profitability.
To read the full study by Accenture visit: http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/library/uuid/d081ca74-2f2e-2f10-dbac-cdc1df8d4dea?QuickLink=index&overridelayout=true&53575422051513
Use the comment space below to reflect on the following questions:
Have company sustainability efforts affected your employment decisions? How has sustainability impacted the chemical industry and do you see sustainability impacting chemical companies in the future?
I think it is still very hard to "sell" sustainability projects within firms. It still comes down to bottom lines. Most chemical firms are commodity businesses, (with specialty chemicals kind of being the exception). Commodity businesses are mostly driven by costs. Any sustainability project has to show at least break even potential. At break even potential it must have significant PR or marketing value to win support and funding over other cost cutting measure.
What is harder to price into sustainability projects, (I kind of hate this concept as to me a sustainability project is just another project), are all the project intangibles that are always hard to price in as a benefit to any project.
What are the savings of possibly avoiding an environmental accident that might never happen and which can be mitigated by various controls. Or what is the savings by being a good neighbor and avoiding new burdensome regulations and laws?
Is an entire plant make over to institute a whole new production process for "green" or sustainability reasons really going to fly if it doesn't also save money, not just break even?
Folks are realizing environmental considerations are way more important today then they have ever been. It does make selling some projects easier. But the bottom line is still the primary driving force outside of mandatory governmental regulations.
Consumers are even willing to pay a bit more I think today for "green" products. Unfortunately chemical firms rarely sell to consumers. They primarily sell to other manufacturers and they are usually always going to be low cost oriented with the exception being where very high quality/purity products are required, (pharma, food, some electronics manufacturing).
So personally, my feeling is that for chemical firms, unless it's required by law/regulations, any sustainability project is just another project that better bring a cost reduction along with it. Otherwise, it'll be a very tough sell.
Thanks for the blog and the article reference. It could give more ammunition for folks trying to get this kind of project funded.
FF
Thanks for your feedback. I fully agree that sustainability initiatives must have a postive business case while believing that this is ver often the case. As far as those initiatives refer to material and energy efficiency sustainability and economic goals are alligned anyway given tha fat that 60 - even 80% of cost of goods manufactured are spent on these.
I also agree that negative impacts of desaster or non-compliance are not really suitable to justify a business case. Those things simply must not happen - full stop. But of course cost efficiency to achieve compliance with environmental, safety and product related regulations and to avoid any kinds of incidents is a driver for sustainability initiatives given the fact that regulations increase in number and complexitiy and that products and technical systems also are increasingly complex to be managed safely.
The big question for me still is what is the economic value of greener products. How much options a commoditiy producer really has to differentiate and how much are customers really willing to pay more for a more-ecofriendly product. Regarding commodities I recently red an article about Bayer Material Sciences who plan to make foams out of carbon dioxide based on Polyol switching feedstock from cruide oil to carbon dioxide emissions. This is a nice example how to differentiate in commodity business. Regarding greener products in specialty chemicals - now I guess that those products are not always more expensive. However the number of customers willing to pay more is limited I am afraid and the additional budget those would spend as well. If this will not change over time (but I think that it will) the bsuiness opportunity is limited here. More interesting of course is the business opportunity resulting from sustainability as a need which manifest in demand for new working materials for production and storage of renewable energies, plastics to be used for energy savings (reduction of weight, insultation) and many more opportunities you can think about.
I think the key difference between a specialty chemical and a commodity chemical is that with commodity chemicals, it is relatively easy for the customer to switch vendors. Hence the price point is much more critical for the seller. In specialty chemicals, the customer may only have a single source supplier with the quality and or service required and it makes it much harder to switch. The ability for the vendor or supplier to introduce green initiatives and pass that cost on is slightly easier due to having typically higher margins and a more captive customer base.
I agree that all companies will continue to pursue (and should!!!) green initiatives. Lets up they do!
FF