Sustainability tools strengthen chemical supply chain

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30 March 2009 00:00  [Source: ICB]

Forging a green chemical supply chain involves deep scrutiny and collaboration

INCREASED REGULATIONS, cost optimization measures, and rising consumer concern about business ethics are driving chemical companies to delve deeply into the sustainability of their supply chain.

German chemical group BASF says its customers and investors are increasingly interested in the sustainability of their supply chain. The same sentiment was echoed by US-based Dow Chemical.

"We are a critical component of our customers' supply chain," says Dow spokeswoman Stacey Siler. "Many of our customers increasingly want to know that we are addressing challenges such as climate change and are socially responsible."

One of the company's ongoing efforts involves redesigning its supply chain networks, such as maximizing equipment loading and increasing the use of product exchanges and swaps to help lower mileage and reduce the company's carbon footprint. Dow has also customized transportation channel networks, which saves millions of dollars in energy costs.

"Improving financial performance and managing chemical safety across our supply chain are core competencies and imperative to meeting Dow's 2015 Sustainability Goals," says Siler. "Dow is constantly evaluating new technologies such as RFID [radio frequency identification] and GPS [global positioning system] to create new opportunities to further optimize energy usage and resource conservation."

BASF has been evaluating and identifying high-risk suppliers through its Safety Matrix program, which was established several years ago.

The program systematically assesses the environmental, health and safety standards, as well as the labor and social standards of its suppliers and business partners.

"We choose suppliers not only based on economic criteria but also include their performance in the fields of environmental and social responsibility when making our decisions," says Tanja Castor, sustainability manager at BASF.

"We try to demonstrate to our customers that our established sustainable supply chain management is risk-based and therefore appropriate to not only minimize our risks but also the risks of our customers," Castor adds.

BASF also held supplier days in China and India last year to train suppliers on the company's requirements in the areas of environment, safety and social standards. Another recent BASF project, says Castor, is its 1+3 program in China, where the company shares information on sustainability standards with its partners in the value chain.

"The project aims to inform small and medium-sized enterprises about successful new methods of sustainable entrepreneurship," she adds.

HAND IN HAND
Collaboration seems to be the keyword for chemical suppliers when it comes to implementing a sustainable supply chain.

Like Dow and BASF, Dutch specialty chemical firm AkzoNobel notes the importance of collaboration in providing a seamless, integrated material flow from supplier to customer while upholding sustainability standards at the same time.

"Sustainability helps build a new level of partnerships not just based on product development but based on sharing knowledge and expertise in order to accelerate transformation," says Andre Veneman, director of sustainability at AkzoNobel.

It takes time, he adds, before the business case of sustainability is understood by all parties along the value chain.

"However, once suppliers and customers meet and start traveling together on the pathway to sustainability, then innovation processes accelerate. It's a change process - you need to select and engage enthusiastic and motivated people to embark on the journey," says Veneman.

Bena Halecky, US-based Procter & Gamble (P&G) Chemicals' product supply director, emphasizes the need to establish trust and long-term relationships with key partners.

"This is to ensure that they share our passion and commitment to sustainability," says Halecky. "One of our key operating principles is to seek business relationships with suppliers who share our values and then promote the application of these high standards among those with whom they do business," she adds.

P&G says it has already made significant and measurable improvements in many key areas of its supply chain as part of its 2012 Sustainability Strategies and Goals program. Some of these include reductions in the use of energy, waste disposal, water usage and overall emissions.

According to Veneman, one of AkzoNobel's key initiatives is to deliver products that are competitively priced and at the same time have significantly smaller environmental footprints. The company defines these products as "ecopremium" products or solutions.

"Each function from investment decisions to sourcing, research and development, and marketing contributes to this target," says Veneman. "Along the value chain, we have concrete programs in place to deliver ecopremium solutions to our customers."

THIRD PARTIES WELCOME
Third-party certification as a marketing and assurance tool has been proliferating within various sections of the chemical supply chain as customers and investors increasingly ask for proof of their sustainability commitments.

With its customers asking for data, Siler says Dow places tremendous importance on its Global Reporting Initiative (GRI), which provides an exhaustive reporting context for sustainability performance in Dow's enterprise. Dow earned an "A+" for its 2007 GRI report, as well as the highest rating for its sustainability report by theUS-based anaylst network the Sustainability Investment Research Analysis Network.

In terms of assessing sustainable product and processes, several companies now have their own tools, such as carbon footprinting, life cycle analysis and eco-efficiency analysis, although most say they are not averse to procuring third-party certification if needed.

"Third-party certification of ecopremium products is not a primary goal but for specific product ranges and customer groups, we have ensured third-party certification," says Veneman. "Our pursuit of third-party certification will depend on the value that this process brings to our operations, customers, and consumers," notes Halecky.

BASF, meanwhile, says its annual report, which is verified by external auditors, regularly publishes the level of implementation of its sustainable supply chain management.

CLOSING THE LOOP
The cradle-to-cradle (C2C) philosophy of designing chemicals that can harmlessly decompose or be reused and regenerated infinitely is considered as one of the holy grails for a sustainable supply chain. But is it impossible to reach?

Not so, says Michael Braungart, one of the pioneers of the C2C concept and cofounder of US consultant MBDC (McDonough Braungart Design Chemistry). Braungart heads MBDC's European equivalent, EPEA (Environmental Protection and Encouragement Agency), based in Germany. Both firms offer C2C certification.

"The main goal of a C2C design is not as much to certify that a product is good, but to motivate the chemical industry to get their innovation out into the market," says Braungart. "With C2C, we make chemistry attractive. We can help large companies to transform better molecules and make profits out of them."

AkzoNobel's director of sustainability, Andre Veneman, agrees and says C2C is a natural step towards developing a higher percentage of sales from the company's "ecopremium" products.

"For us, C2C is not about certification but about next steps in innovation," says Veneman. "It stimulates out-of-the-box thinking towards logistics, mobility, packaging - and more importantly it shapes new ways of cooperation with business partners who also want to accelerate their drive towards sustainability."

Previous C2C certification was mostly geared towards finished products, but MBDC launched its new C2C Approved Ingredient certification in January, which assesses the sustainability of product ingredients for human and environmental health, as well as their recyclability or compostability.

The certification, according to MBDC vice president of technical operations Jay Bolus, makes it easier for manufacturers to create ecologically intelligent products by choosing materials at the design stage that meet key sustainability criteria for material health and material reutilization.

"The point is, we don't want to create valuable chemicals from nonrenewable feedstock and just throw them away in a landfill, incinerator or somewhere where their inherent value gets lost. If there are some ways that these chemicals can be recaptured and reused, that will be ideal," says Bolus.

C2C certification is one of the many options that Procter & Gamble (P&G) Chemicals is considering, says P&G product supply director Bena Halecky. "Aside from the Life Cycle Assessment approach, we are already incorporating C2C principles within our environmental safety process." Dow Chemical says it is also assimilating all types of sustainability practices and concepts such as C2C, eco-efficiency and green chemistry.

BASF sustainability manager Tanja Castor says the company would recommend C2C in its eco-efficiency analysis if this were the best option for the whole life cycle of a product. "However, very often these alternatives are not the most sustainable ones due to efforts of the recycling steps, the usage of unsustainable materials and so on," adds Castor.

Read Doris de Guzman's Green Chemicals blog

By: Doris de Guzman
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