INSIGHT: Sustainability becomes strategic for supply chains - video

03 May 2011 16:31  [Source: ICIS news]

By Elaine Burridge

LONDON (ICIS)--Sustainability was the key theme of this year’s 10th Annual European Bulk and Specialty Chemical Supply Chain Conference (Logichem Europe). No longer just a focus on carbon emissions and carbon footprints, sustainability is becoming increasingly viewed as a strategic business opportunity.

As the chemical industry emerges from what is arguably the worst economic recession since the Great Depression in the 1930s, companies have gone through a period of reducing costs and improving profitability.

Now, many are trying to build sustainability into their supply chains although, as Logichem Europe chairman Roger Moore, INEOS Styrenics’ European supply chain and customer service manager, noted, it was a little worrying to see how few companies had the topic on their agenda when he posed the question to the 270 delegates present.

Despite the often-aired view that sustainability has moved higher up the corporate agenda, it was clear that many companies were lagging behind leaders such as Dow Chemical.

The US-based company has set and published a programme of sustainability goals it intends to reach by 2015, providing quarterly updates as well as annual reports on its commitment to sustainability through its Global Reporting Initiative established in 2006.

“Is this a function of the size of Dow? Do smaller companies have difficulty in keeping pace?” asked Moore.

In contrast to Dow Chemical, Netherlands-based LyondellBasell is just taking its first steps in building a sustainability strategy.

Theo Zwygers, LyondellBasell’s vice-president, supply chain Europe, Asia and Middle East says that as businesses globalise further and present new challenges in the supply chain, they must think and plan further ahead.

He had a clear message of not trying to be everything to everyone. “Make only one choice; either service, cost or flexibility,” he said.

It was pointed out by several speakers at the event that organisations can take practical steps to boost sustainability at operational level. Increasing swaps with co-producers, more direct deliveries, maximising payloads, optimising back hauls, and converting to less hazardous materials were just some examples.

Supply chains have become increasingly complex too because of the move to globalisation and managing this complexity is a continuing challenge for chemical producers and logistics providers.

This issue has gained more visibility following the recent disasters in Australia, New Zealand, and latterly Japan.

Mark Ridge of logistics giant Agility said that companies will have to rationalise their position between complex and simple supply chains. Although complex supply chains may deliver more value they have greater exposure to risk and uncertainty.

Simplicity may not deliver the desired efficiency, but they are more likely to be robust, Ridge noted.

Uncertainty must be managed more effectively and companies must become more agile and flexible in their approach to crises.  Globalisation does bring benefits, but will the risks become too great and difficult to manage in the face of natural or man-made catastrophes?

Effective planning, and implementing standard processes and procedures, are vitally important and are still very valid issues for firms today.

As the economic climate has got tougher, collaboration between producers and logistics providers has moved closer, but there is still a divide between chemical and logistics firms.

Germany’s BASF espoused the virtues of partnering with customers and Dow Chemical said it was constantly looking to collaborate. But these views were in contrast to those of French transport provider Norbert Dentressangle.

Managing Director of Norbert Dentressangle, Herve Montjotin, said that despite pressure on supply chains creating the need for closer collaboration, there is still relatively strong resistance from chemical companies. He said: “Collaboration with logistics providers on operational aspects is not necessarily welcomed. There is room for improvement.”

Collaboration and innovation in the supply chain could also play a part in helping European chemical producers compete with the growth in Middle East capacities.

UK consultant Leslie McCune of Chemical Management Resources said that the large volumes of polymers and speciality chemicals coming out of the Middle East will provide opportunities to European players as huge investment continues in supply chain infrastructure and in new supply chain business models.

“The large volumes of polymers as well as increasing volumes of speciality chemicals will require different distribution chains, as well as the management skills and expertise that the Middle East does not have,” McCune said.

Goods and people will continue to move around the world, so having a sustainable supply chain and being environmentally responsible will become the normal expectation, just as health and safety is today.

By: Elaine Burridge
+44 20 8652 3214

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