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BUSINESS VALUE OF LCAAshok MenonSABIC Research and Technology Pvt. Ltd.21 June 2017

No. 1

WHY COMPANIES INCORPORATE SUSTAINABILITY & LCAIN THEIR BUSINESS STRATEGY

COMPANY STRATEGYPORTFOLIO CLASSIFICATIONPRODUCT DIFFERENTIATION

REGULATORY RISKSü EU ETSü INTERNAL CARBON PRICINGADVOCACY

SUSTAINABILITY PORTFOLIO ü GROWTHü MARGINS

SUSTAINABLE OPERATIONSü BOTTOM LINE SAVINGS

RISK MANAGEMENT | RETURN ON CAPITAL | GROWTH

Marketing and Sales

M&A

CAPEXSTRATEGY

INNOVATION

ACK; ACK; MckinseyMckinsey

No. 2

2025 STRATEGY – EMBEDDING OF SUSTAINABILITY

Technology & Innovation

Manufacturing & Operations

Large Capital Investments

Supply Chain & Logistics

Sales & Marketing

Sustainability isembedded acrossvarious processes &functions

No. 3

HOW IS LCA OF USE TO SABIC?

Technology development

Feedstock strategy

Marketing of sustainable products

Product development - Ecodesign

Megaprojects – sustainability assessment

Branding & Communication

Regulations & Advocacy

Production of petrochemicals via non-conventional routes,technologies (Cradle to Gate, Gate to Gate)

Evolving long-term feedstock strategy:e.g. coal vs. oil crude vs. natural gas vs. shale gas

Product environmental brochures and datasheets based ondetailed critical reviewed LCA studies

Design new materials or combination of materials formetal replacement in automotive.

Forecasting of Sustainability KPIs (Energy, GHG, materialloss & water intensities for new production plants incomparison to SABIC targets / baselines.

E.g. Data generated by LCA studies on SABIC products arepublished in sustainability reports, product brochures.

E.g. LCA studies can provide early indications of project risksrelated to environmental regulations.

Examples:

No. 4

0 1 2 3Qualitative -Life Cycle Thinking

Non-ISO

Industry, lit data & info

Hotspots, Project & portfolio steering

Quantitative –Screening LCA

Broadly based on ISOMostly industry, lit data

Hotspots, improvement ops

Quantitative –Screening LCA

Broadly based on ISOIndustry, lit data, some primary

Project screening, gate decisionsCustomer discussions

Quantitative –Full LCAFully ISO compliant*Primary data, high DQI

External ClaimsMajor investment decisions

* With critical review for external comparative claims

LCA LEVEL

INTERNAL

EXTERNAL

No. 5

THE QUALITATIVE ASSESSMENT (SCORECARD)

Environmental Score

-5 0 +5 > 50% worse neutral >50% better

Economic Score

Societal Score

Scoring by technologists 6 - 10 hours of training &

extended support

Product / Process vs Incumbent

Dimensions

How much better or worse compared to

incumbent?

3

12

Comparative

Environmental Scoring5 Life cycle stages 6 Impact categories

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No. 6

Env

ironm

enta

l S

core

Economic Score

Phase 1 Roll out & Baseline

IMPLEMENTATION RESULTS - PORTFOLIO ASSESSMENT

Phase 2Quality Assurance & Steering

Robustness of

Assessment

Data & tools to support scoring

Setting KPI targets

Ideation & portfolio growth

15+ Global R&D centres

500+ technologists

trained

800+ projects

assessed

First portfolio sustainability

map in 6 months!

Risk Adjusted Net Present Value of project

No. 7

OIL EXTRACTION

REFINING TRANSPORT FUELS

PETROCHEMICALS& CHEMICAL INTERMEDIATES PLASTICS

0%

100%

500 - 525 kg CO2/barrel

END OF LIFE

1 Barrel

• TWO LIFECYCLES FOR EXTRACTED CRUDE OIL

• EFFICIENT USE OF “FOSSIL C” à PRODUCTS à ENERGY, RECYCLE

SABIC OIL-TO-CHEMCIAL TECHNOLOGY: FEEDSTOCK STRATEGY

33%

SABIC Internal Screening Carbon-LCA.

No. 8

ADVANCED MANUFACTURING: FEEDSTOCKS

RENEWABLE PE

FROMANIMAL FATS

RENEWABLE PE

FROMPALM OIL

FATTY ACID

POLYETHYLENE

FROMNAPHTHA

LCA helped identify the most sustainable feedstock amongst

alternatives.

Helped win business.

Renewable diesel

Polyolefins?

Automotive fuel?

No. 9

SENSITIVITY CASES

46.5 45.042.9 41.4 39.5 39.1

0.0

10.0

20.0

30.0

40.0

50.0

Virgin HDPE Base Case -15% rHDPE

SABIC Solution - 35%

rHDPE

DEFRA Target 2020- 50%

rHDPE

10% Increase in Recycling Rates- 35%

rHDPE

10% Lightweight

Scenario- 35% rHDPE

IPC

C 2

007

GW

P 10

0a,

kg C

O2

eq. p

er fu

nctio

nal u

nit

Climate Change (IPCC 2007 GWP 100a )Virgin HDPE Base Case - 15% rHDPESABIC Solution - 35% rHDPE DEFRA Target 2020- 50% rHDPE10% Increase in Recycling Rates- 35% rHDPE 10% Lightweight Scenario- 35% rHDPE

50:50 AllocationApproach

Cradle to Grave

10% lightweighting can result in higher environmental savings compared to 50% recycled content or 10% higher recycling rates.

No. 10

GRANTA – CES MATERIAL SELECTION TOOL

E.g.: Exploration of material universe to identify material alternatives for Aluminum in automotive cross-beams. This tool also allows assessment of sustainability features

https://www.grantadesign.com/products/data/ecoselectorprops.htm

Evaluation of this tool for material selections for specific applications based on cost, functional properties & sustainability

No. 11

TRAVEL AT THE SPEED OF LIGHTER

SABIC innovations are reducing weight in nearly every interior area of the aircraft

1 KG REDUCTION PER AIRCRAFT= 2300 tons of fuel = 7200 tons of CO2

Typical f igures.

-12%versus PPMA/PVC

-40%versus Metal

-25%versus solid

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No. 12

FINANCIAL IMPACT OF THIRD PARTY’S EVALUATION

CUSTOMERS VALUE SUSTAINABLE SUPPLYCHAIN, AS SEEN VIA CUSTOMER INQUIRIESTHROUGH CDP, ECOVADIS AND ‘’TOGETHER FORSUSTAINABILITY (TfS)’’ INITIATIVES.HIGHER SCORE = HIGHER CHANCE OF BEING APREFERRED SUPPLIER.

*

* TfS is a subgroup of chemical companies that uses EcoVadis

No. 13

No. 14

LEGAL DISCLAIMER

The products and services of SABIC are sold and rendered subject to SABIC’s standard terms & conditions of sale(GTCS), which are available free of charge upon request, by post or digital. Standard terms & conditions other thanthe GTCS are dismissed and do not apply. Although any information or recommendation contained herein is given ingood faith, SABIC makes no warranty or guarantee, express or implied, (i) that the results or specifications describedherein will be obtained under end-use conditions, or (ii) as to the effectiveness or safety of any design incorporatingSABIC’s products, services or recommendations.

This presentation or document does not contain any calculation, estimate or other warranty or representation thatcustomers and third parties may rely on. Customers and third parties are responsible for making their own determination asto the suitability of SABIC’s products, services or recommendations for the customers’ particular intended use throughappropriate end-use testing and analysis, and compliance with applicable laws and regulations.

Except as provided in SABIC’S GTCS, SABIC shall not be responsible for any loss or damage resulting from any useof its information, products or services described herein and SABIC assumes no liability whatsoever in this respects.

Nothing in any document or oral statement shall be deemed to alter or waive any provision of SABIC’s GTCS or thisDisclaimer, unless it is specifically agreed to in a writing signed by SABIC.

No statement by SABIC concerning a possible use of any SABIC product, service or design is intended, or should beconstrued, to grant any license under any patent or other intellectual property right of SABIC or as a recommendationfor the use of such product, service or design in a manner that infringes any patent or other intellectual property right.