INSIGHT: Multiple benefits from drive for sustainable innovation

By Heidi Finch

LONDON (ICIS)–There is a drive in the chemical industry for voluntary action in the field of sustainable innovation in order to gain competitive advantage by mitigating risks, identifying new opportunities and maximising growth potential, Arthur D Little consultants told ICIS this week

While there are regulatory requirements, such as cutting carbon dioxide emissions, using renewable energy, phasing out of certain technologies such as converting mercury cell to membrane technology, which are necessitating changes in the chemical industry for sustainability reasons, these are not the only examples, said Arthur D Little partner, Martijn Eikelenboom.

“We see that most of the [sustainability] action is voluntary (ie on top of legal requirements) and they [chemical companies] want to become better competitors.”

Chemical companies want to play a leading role and capture value in new emerging eco-systems such as re-using waste gases (ie carbon dioxide (CO2)) in order achieve a more sustainable world, he added.

Portfolio Sustainability Assessment (PSA) is a tentative name, albeit unofficial for the time being, used by Arthur D Little and chemical players involved in the Product Portfolio Steering project for Sustainable Materials set up by the World Business Council Sustainability Development (WBCSD).

The concept of portfolio sustainability assessment is gaining momentum in the industry. It is being used as a tool to identify which products, in which applications and in which regions are contributing to a more sustainable future and higher growth expectations. And also to identify those products which are not and are at risk of discontinuity or substitution.

For example, the chemical product bisphenol-A (BPA) is used in various applications, but the type of application is very important in assessing sustainability, said Eikelenboom.

When BPA is used in aluminium cans or baby bottles versus in coatings for windmills it has a different sustainability performance, he added.

In applications in cans, there are clear signals that the product is of concern for health related reasons, whereas in windmill applications, where there are not the sustainability concerns about human exposure, BPA is likely to experience above average growth rates.

In simple terms, PSA is a sophisticated tool, based on a detailed questionnaire, that chemical companies can use to ascertain and rate the sustainability of their products in certain applications and regions based on facts, said Michael Kolk, another Arthur D Little partner.

The ‘traffic light labelling’ of many portfolio sustainability assessment approaches provides companies with alerts about products, which are sustainable and those which are not. It can flag up which part of a company’s turnover and margin are at risk of potentially being banned or put on “a watch list” for sustainability reasons.

Hydrofluorocarbons (HFCs) were an example of a group of chemical products where red flag signals were appearing well before 2010, according to Arthur D Little. 

It is important to see the early signals in market across the globe to be able to act in good time and make any necessary changes in the portfolio for the sake of sustainability.  “If you wait till the legislation, then you are too late,” said Eikelenboom.

He said early planning is particularly important in the chemical industry, taking into account the lengthy lead times for making such changes.

Portfolio sustainability assessment helps to anticipate the future of a product in terms of environmental, health, economic and social sustainability. 

“PSA may provide a great deal of information to the innovation function,” said Kolk.

It allows chemical companies to link longer-term sustainability-driven trends to the entire product portfolio and helps with the strategic planning process, he added.

It thereby helps companies not only to identify sustainability risks but also encourages them to broaden their innovation scope from typically smaller short term improvements to larger and longer term decision making

PSA can encourage chemical players to look at other technology, which produces “greener” products and can help them with R&D planning and merger and acquisition (M&A) opportunities.

Changing to a new, more sustainable technology is an example of a larger, long term decision, which opens the door to healthier, environmentally more sustainable ie “greener” product opportunities.

Solvay is a chemical company that has embraced sustainable innovation for some time. According to Arthur D Little  it is was one of the early movers and, as such, its systems have become more sophisticated.

Solvay’s commitment to sustainable portfolio management (SPM) informs decision-making and helps executives create as sustainable. According to the consultants, it gives the Belgium-based company a competitive edge.

Aligning a chemical product portfolio with a relevant sustainability trends should lead to stronger, longer term growth, said Kolk.

Assessing the product sustainability of a company’s chemical portfolio with guidance from the WBCSD provides a robust framework to gauge sustainability, he added.

It also helps to instil confidence and credibility in the sustainability of a chemical company; is attractive to stakeholders and customers alike, and promotes good relations.

A further benefit is that it can help to attract talent, particularly from the younger generation.

Sustainable voluntary action in society has been gaining momentum and it makes sense for chemical players to tap into this. 

The NGO Urgenda took the Dutch government to court in 2015, claiming that the Netherlands was not doing enough to reduce greenhouse gas emissions.

It was the first time that human rights had been as a legal argument to protect citizens against climate change.

Urgenda won the lawsuit, although the Netherlands Government is making an appeal, said Eikelenboom.

Taking into account the growing sentiment for sustainability in the wider market, the drive by chemical players to assess product sustainability helps them to plan and better prepare for a more sustainable future. It boosts the potential for growth and provides a healthier and more socially sustainable future which everyone can benefit from.