APLA ’20: Pandemic to speed up sustainability push as more hearts and minds join cause – execs

Jonathan Lopez

10-Nov-2020

LONDON (ICIS)–Unlike previous economic crisis, the pandemic-induced recession could help sustainable trends to develop quicker than expected as public opinions gain consciousness of the burden imposed on the Earth’s natural resources by industrialisation and consumerism.

The conquest of hearts and minds will be key to achieve noticeable success in both circularity trends – the glorious circle of reusing every material infinitely – as well as reducing carbon dioxide (CO2) emissions that are causing global warming.

The optimistic outlook came from petrochemicals producers in Latin America; executives from major companies took part on Tuesday in a virtual round table organised by APLA, the region’s trade group.

While a greener push may not benefit petrochemicals due to their energy-intensive, polluting characteristics, the sector remains convinced the materials its produces will be the enablers for both circularity and a zero-carbon economy.

The EU has pledged to make its economy zero carbon by 2050, and China has set out the target for 2060; US’ President-elect Joe Biden intends to take the country back into the 2015 Paris Agreement, from which it officially withdrew this year after President Donald Trump announced it in 2017.

MONEY WHERE MOUTH IS
A key reason for petrochemicals companies to be including more often pledges to decarbonise and make attempts to develop chemicals recycling and other circular production methods could well be related to money.

Increasingly, investors and financial institutions are seeking stocks that have sustainability in mind, said Pedro Manrique, vice president for commercial and marketing at Colombia’s energy and petrochemicals producer Ecopetrol.

“I think sustainability is a trend that is here to stay. While other crisis have put sustainability at the back of the priorities list, I think this crisis has brought the opposite – the move will accelerate and it is so broad-based that anyone could hardly stop it,” said Manrique.

“It matters to all stakeholders, but specifically to financial institutions. They are interested to see a company’s ESG [Environmental, Social, and Corporate Governance] indicators, and we are starting to appraise all elements around ESG: where we are where we want to be.

“Financial institutions are key for us as the providers of financing for projects.”

Sao Paulo-based Daniella Souza Miranda, Dow’s commercial vice president in Latin America, made another passionate plea for sustainability arguing that the confinements in 2020 – during the second quarter’s first wave peak, around 4.0bn people were put under some sort of lockdown – showed us how individual contributions matter.

The second quarter also showed how an idle aviation industry and low driving rates gave the Earth a much-needed respite from pollution; whether the clash between a functioning economy and a thriving environment is inevitable is still up for debate.

Dow has also committed to zero carbon emissions by 2050.

The individual experiences could also end up filtering up to corporates; the logistical nightmare caused by the pandemic’s first wave in the second quarter, for example, has convinced many in the industry that feedstock sourcing, as well as trade itself, is better managed in a regional level.

“Many things have changed over the course of the pandemic, but sustainability has not. Moreover, the waste we have generated [during confinements] has mostly been our waste, allowing us to see the problem, and we feel we have to be part of the solution,” said Souza Miranda.

“But we won’t be able to have circularity if the chemicals industry is not involved – we have the technical tools to do it.”

While chemicals recycling is still in its infancy, several chemicals companies have started up pilot projects to undertake on the endeavour; production processes, however, remain energy-intensive, putting a label on petrochemicals most ordinary citizens associate with the fossil fuels-burning industries linked to climate change.

Souza Miranda added that Dow intends to deliver all its products in recyclable packaging within 15 years.

Recycling rates is probably the sphere where the conquest of hearts and minds matters the most; recycling remains at low rates in most of the world, with exception of some European subregions, and the way forward presents itself as an uphill battle.

The Dow executive praised Brazil’s efforts “to bring new value” to the recycling chain by involving wider parts of society and not just producers, allowing “socially effective change” and demonstrating circularity can only be observed from the optic of its social, economic, and environment impacts.

Finally, a much-repeated trend which has been in place for decades but which way forward remains unclear: digitalisation.

Has the chemicals industry’s digitalisation gone as far as possible? Not at all, according to Dow’s executive, with many areas where more digital ways could yet be extended to.

“Digitalisation will accelerate; we wouldn’t have been able to survive these eight months [since the pandemic started] without it, but there is much more to do on digitalisation. In own internal processes, in the reliability of supply, in 2.0 manufacturing, as well as processes involving sales and how we relate to our customers,” said Souza Miranda.

“We in the chemicals industry are always very focused on raw materials; one of the main raw materials is data, which will be key going forward.”

LOCKDOWNS SCARS START TO HEAL
The pandemic has hit the Americas hard, with its largest countries – the US and Brazil – suffering the hardest health impact.

Economically, Latin America is expected to post heavy falls in GDP in 2020, while the recovery to pre-pandemic levels would take years.

The latest economic forecasts by the IMF issued in October projected a GDP fall of 8.1% in Latin American GDP in 2020; growth in 2021 is only expected at 3.6%.

Global stock markets rallied on Monday, however, after US-headquartered pharmaceutical major Pfizer said it is optimistic about a potential rollout of its Covid-19 vaccine by year-end as trials are progressing well.

The IMF said its own forecasts were subject to major changes as they contained an unusually large amount of uncertainty as they are largely dependant in both public health and economic factors.

An example of a slow return to normality came from Ecopetrol’s current operating rates, compared with those at the peak of Colombia five-month strict confinement started in March.

According to Manrique, the company was hit hard by the lockdown implemented on 22 March, with refinery rates soon falling to 50% as gasoline demand fell as much as 70%; he said, however, both indicators are running at pre-pandemic levels already.

Demand for diesel halved at the peak of the confinement, but is now at 85%, while the beleaguered aviation sector’s demand for jet fuel, which went as low as 10% of its normal patterns, is now at 50%.

“The worst month for us was April, but we have gradually recovered since then; we have mostly recovered the same levels than before the pandemic hit,” said Manrique.

NEW WAYS OF WORKING
The pandemic will also be remembered as the event that sped up home working and triggered new working practises; city centres and offices, which dominated social and economic life for most of the past 100 years in developed economies, may never look the same.

Patricio Gutierrez, CEO at Mexico’s petrochemicals producer Group Idesa, and Edison Terra, head of olefins and polyolefins for South America at Brazil’s major Braskem, said the last eight months have not only been a major change in scenery for employees, adding the relationship among colleagues has also changed.

The challenges for many working parents came from a sudden home schooling, with both their jobs and their children education’s turned upside down with no time to plan.

The fears of living through a global pandemic were compounded by the anxieties of a new family situation for many – too many factors that put together can easily overwhelm.

The change in the office culture would also bring, according to Gutierrez, the added advantage of saving costs, although home working is set to be regulated in coming years and employers may also be asked to chip in for home expenses related to work.

It may also bring other unintended consequences, he added.

“The challenge [about more generalised home working] will be how to measure people’s performance and how we can prevent – sorry to say it like this – people who may be inclined to abuse [by not working the established hours, for example],” said Gutierrez.

“The employees who are offered flexibility should also comply with their obligations, and that will give both the employee and the company a much greater sense of belonging. That will be our challenge ahead: people leading by example.”

The mental health consequences of the pandemic will only become apparent in years to come; Braskem’s Terra said he was personally involved in some mental health initiatives at the company once confinements started – it is important, he said, to know where the others stand in terms of family situation, and be understanding.

“We put in place psychological support for employees. This was a completely new, different situation for all of us – being home with kids, sharing the same environment as well as the technological resources. We [employees] were far apart but we became more participative,” said Terra.

“We now know some of our colleagues’ children, for instance, and this did not happen before. This may be the new normality and it may be a trend set to accelerate as we live more isolated lives.”

Focus article by Jonathan Lopez

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