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Aaloak Singh NegiPGPM710_01
SUSTAINABILITY IN CHEMICAL INDUSTRY
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INDUSTRY MENTORS
Mr. S G Choudhary
(Chief Sustainability & Technology Officer)
Tata Chemicals Ltd.
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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
Challenges
The Five sustainability principles
Sustainability spending
Sustainability consulting
Conclusion
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WHAT IS SUSTAINABILITY?
The way a company or organization creates value for its shareholders and society by maximizing the positive and minimizing the negative on social, environmental issues and stakeholders to …
Grow Revenue
Reduce Cost
Manage Risk
Build Intangible Assets
Current status of chemical companies’ sustainability: Highlights from Accenture and American Chemistry Council research, © 2010 Accenture
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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 needsNational Academy of Sciences
The Triple Bottom Line, Savitz AW, Weber K, 2006, First Edition
Economic Environmental Social
Sales, profit, ROI Air quality Labor practices
Taxes paid Water quality Community impacts
Monetary flows Energy usage Human rights
Jobs created Waste produced Product responsibility
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…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
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THE REALITY OF A RESOURCE-CONSTRAINED WORLD
While skyrocketing oil prices are a well-known reality for all companies…
$/Ba
rrel
1985 1990 1995 2000 2005 2011
19.55
26.72
61.06
86.84
27.58
26.00
Oil Prices per Barrel, 1985 – 2011
Source: inflationdata.com
…less well known is the rapid depletionof a broader set of natural resources
Year
s
28
21
17
37
Copper Lead Silver Tin
Years Until Resource Depletion*
Source: Fast Company.
*Resource depletion is defined as the complete exhaustion of the resources existing in nature. Calculation assumes that current consumption levels are maintained.
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..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 lifeThe business guide to sustainability, Hitchcock D, Willard M, First south Asian edition, 2008
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FINANCIAL RETURNS FROM A SUSTAINABILITY STRATEGY
Globally North America
Europe Asia-Pacific
73%
61% 62%
87%82%
69%
82%74%
Cumulative Stock Performance (2004-1007)
Carbon LaggardsCarbon Leaders
Tota
l Ret
urn
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.
Carbon leaders surpassed the financial performance of carbon laggards by an annualized rate of return of 3.06%.
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INVESTMENT EXPECTATIONS & RETURNS
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.
Energy Sa
vings
Waste Sa
vings
Where have you seen the greatest benefit from your sustainability investments?
Product
Innovation
Corporat
e Branding
Raw M
ateria
ls Sav
ings
41%
23%
18%
6% 6% 6%
Water S
avings
n=17.
Effectiveness of Sustainability Investments
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INDIRECT RETURNS FROM SUSTAINABILITY INVESTMENTS
Sustainability strategies serveas a recruiting draw for top talent…
…and improve productivityand loyalty of existing employees
Source: 2002 GlobeScan International Survey, MORI.Source: Stanford Graduate School of Business, Survey of 800 MBAs from 11 Top International Business Schools.
Impact of Sustainability on MBA Job Decisions
76.9%
$5500
Percentage of Respondents Willing to Forego Income to Work for a Firm with a
Credible Sustainability Strategy
Average Annual Income They
Would Forego
80%
70%
Employees Who Felt Greater Motivation and
Loyalty toward Company Due to Sustainability
Initiatives
Committed to Sustainability
Values
Sustainability Impacton Employee Motivation
1%
Sustainability Impacton Employee Productivity
NotCommitted to Sustainability
Values
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….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 business guide to sustainability, Hitchcock D, Willard M, First south Asian edition, 2008
The Bhopal Tragedy :case in point
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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.
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SUSTAINABILITY MATRICES & GAP
Practicality
Proportionality
Flexibility
Reversibility
Competitive NeutralityAIChE 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
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COMPANIES FOLLOWING SUSTAINABILITY
Italy
Malaysia
Brazil
SA
Japan
Canada
USA
Australia
France
Ireland
Belgium
Norway
Denmark
Sweden
Spain
Neterlands
Unite Kingdom
Germany
Switzerland
Finland
0 10 20 30 40 50 60 70 80 90
4.8
5.2
5.9
17.7
17.9
19
19.8
20.8
23.4
30.2
32.8
33.1
33.1
56.6
63.4
64.5
68
75.2
82.4
84.9
Dow Jones Sustainability Group Index: percent of eligible companies in index
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…THE CHEMICAL INDUSTRY
Oil & Gas
Petrochemicals
Pharmaceuticals
Dyestuff
Paints
Agrochemicals
Inorganic Chemicals
Fragrances & Flavours
Polymers
Explosives
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
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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
CHEMICAL INDUSTRY & SUSTAINABILITY
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
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SUSTAINABILITY IN CHEMICAL INDUSTRY
Courtesy: Accenture and American Chemical Council white paper on sustainability in chemical industry, 2010
Value chain positioning
and profitability.
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SUSTAINABILITY ACCOMPLISHMENTS
Sources: 2009 ACC survey of 27 companies’ sustainability practices; Accenture Analysis
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SUSTAINABILITY: CURRENT FOCUS
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REPORTING AREAS
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DRIVING AND MEASURINGPROGRESS
Sustainability governance
Engaging customers
Partnering with organizations and institutes
Engaging the organization’s employees
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ENGAGING CUSTOMERS
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LEVERAGING PARTNERSHIPS
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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
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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
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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
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CHALLENGES IN CHEMICAL INDUSTRY
Courtesy:Sustainability in the Chemical Industry: Grand Challenges and Research Needs - A Workshop ReportNational Academy of Sciences
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HURDLES TO ACHIEVING BUSINESS IMPACT
Cross-silo coordination proves to be the greatest hurdle for sustainability initiatives
Source: Corporate Executive Board Research, Survey of Corporate Sustainability Executives, 2007.
n=19.
What is the most difficult task in building and executinga sustainability strategy at your company?
Cross-
Silo Coordinati
on
Current F
ootprint A
nalysis
Communication/R
eporting
Business
Case Deve
lopment
Risk/O
pportunity
Assessm
ent
26%
16% 16%11% 11% 10%
Goal Setting
10%
Internal E
ducation
New Mark
et Identifica
tion
Strate
gy Deve
lopment
0% 0%
Hurdles to Effective Implementation of Sustainability Initiatives
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OWNERSHIP OF SUSTAINABILITY RESPONSIBILITIES
Despite the cross-functional nature of sustainability issues, most tasks are centralized within the firm
Source: Corporate Executive Board Research, Survey of Sustainability Executives, 2007.
CentralizedDecentralized
70%
30%
67%
33%
52% 48%
30%
70%
Strate
gy Deve
lopment
Communication/R
eporting
Supplie
r Complia
nce
Identification of C
ost Sa
vings
or Reve
nue Opportu
nities
n=27.
Are the following sustainability initiatives centralizedor decentralized within your organization?
Centralization of Sustainability Activities
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ORGANIZATIONAL HOME OF SUSTAINABILITY INITIATIVES
Source: Corporate Executive Board Research, Survey of Corporate Sustainability Executives, 2007.
Sustainability initiatives are most effective when housed in the CEO’s office
n=44.
Ineffective
Moderately Effective
Highly Effective
Frequency and Effectiveness
CEO’s Office
Corporate Strategy O
ffice EH&S
Corporate Responsib
ility O
fficer
Supply
Chain
Decentra
lized in
BUs
Cross-Fu
nctional Ta
sk Fo
rce
Corporate Communications
CTO
Real Esta
teLe
gal
36%
16%
11%
7% 7% 7% 7%
2% 2% 2% 2%
EffectivenessFr
eque
ncy
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.
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THE SUSTAINABILITY PORTFOLIO
What needs to be done, when and where?
Beyond Greening: Strategies for a sustainable world, Stuart L. Hart
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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
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SUSTAINABILITY SPENDING
2010 2014
67.3
140.2
28
60
Globally US
Figures in billion US $
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
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SUSTAINABLE BUSINESS CONSULTING SPEND
2010 2014
17
28
Sustainable business consulting spend will grow at a CAGR of 13% globally from US $17 billion 2010 to US $ 28 billion in 2014
Figures in billion US $
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SUSTAINABILITY CONSULTING
Solaron Sustainability Services
Emergent Ventures
Environment Resources Management
SustainAbility
BlueSky
Accenture
Mckinsey
Bain & Co.
Booz Allen Hamilton
AT Kearny
Boston Consulting Group
Ernst & Young
With the growing focus on sustainability many sustainability consulting firms have emerged.
Also, the leading business consulting firms have their own sustainability practise
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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
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THANKS!