Sustainable value of chemical companies

I’ve posted before about the sustainability value of certain chemicals based on their lifecycle analysis – from raw material sourcing to product use/disposal.

One recent report about that is a study initiated by the International Council of Chemical Associations (ICCA) last year. This study analyzed the life cycle carbon dioxide equivalent (CO2e) emissions of over 100 individual chemical products and their applications.

This time, a study published in December from Sustainable Value Research Ltd. assesses the sustainability performance of 9 major chemical companies — BASF, Bayer, Dow Chemical, DSM, AkzoNobel, Air Liquide, DuPont, Reliance Industries and Shell Chemicals — using their Sustainable Value approach over the period of 2004 to 2007.

Their approach assesses the companies’ sustainability performance based on their use of economic capital, environmental resources and social resources. Probably something that the Dow Jones Sustainability Index also do? Further explanation from the study says one way to determine their sustainability performance is by calculating their resource efficiency based on the cash flow generated by the company per unit or resource employed.

Another benchmark the study used is to calculate the weighted average resource efficiency of all the chemical companies assessed in the survey. Unfortunately, I’m not really good with financial calculations so anybody reading this study, feel free to explain it more clearly.

Anyway, the study’s analysis showed BASF and Air Liquide not only achieving their highest Sustainable Value criteria but also consistently achieving positive cash flow of at least more than EUR 1 billion compared to their peers. The Sustainable Value produced by the 9 companies ranges from EUR -2.3 billion (Dow, 2006) to EUR 1.6bn (BASF, 2006).

Aside from Dow, AkzoNobel and DSM are said to have produced negative Sustainable Value over the entire period, while values from Shell, Reliance, DuPont and Bayer fluctuated around the industry average during the entire period.

In conclusion, I guess BASF and Air Liquide gets more bang for their “green” bucks although I do have to remind the readers that the time period is a little bit dated given the fact that many companies zoomed in more closely towards sustainability activities and using their resources more efficiently starting 2008 when all hell broke loose.

It will be interesting to see if another study like this will produce a different result starting in 2008.

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