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The Business Link to Sustainable Development," Livio D. DeSimone, chairman and chief executive officer of 3M, and Frank Popoff, chairman and former CEO of Dow Chemical, explain that sustainable development "means economic growth that does not deplete irreplaceable resources, does not destroy ecological systems, and helps reduce some of the worlds gross so cial inequalities." (Occidental Chemical CEO J. Roger Hirl reviewed tills bcx)k for C&EN, April 13, page 50.) The book describes sustainability ef"Eventually, you are going to figure Paige Marie Morse out how to integrate sustainable develop- forts at several chemical, energy, and conC&EN Houston ment into your business," says Dawn Rit- sumer products companies with a focus ay the words "sustainable develop- tenhouse, director of sustainability at Du- on emission reduction, resource conservament" in most chemical industry of- Pont. "Or you are not going to be in busi- tion, andfinancialstrength. The term ecoefficiency was developed during the Earth fices and you are likely to observe a ness very long." response of glazed eyes, furrowed brows, To its proponents, sustainable devel- Summit, and its implementation has ocand inattentive expressions. Maybe even a opment is not just another environmen- curred primarily through the World Busivague look of recognition of something tal program. Its intent goes beyond such ness Council for Sustainable Development, heard before, but nothing more. approaches, taking a broader and longer cochaired by DeSimone and Popoff. One advantage of the comprehensive It is a fuzzy concept," says Garrity R. term view of the impact of society's scope of sustainability is that it can unify Baker, senior director of international af- growth and development. "It is a concept that acknowledges that disparate views on a variety of environfairs at the Chemical Manufacturers Association (CMA). "You are not going to find an there are limits imposed by natural sys- mental issues, dissolving some of the poextensive understanding and a thorough tems," says John S. Willson, vice president larity in this contentious arena. "That is the importance of sustainable discourse about sustainable development of the environment, health, and safety global practice at management consulting development," Popoff tells C&EN. "It has taking place in a lot of companies." As defined in 1987 by the United Na- firm Arthur D. Little (ADL), Cambridge, forced people to say, If my favorite issue tions' World Commission on Environment Mass., "and that if we don't do something is biodiversity, and your favorite issue is & Development, "sustainable develop- differently, future generations are going to energy or climate, maybe I am willing to ment meets the needs of the present with- suffer with respect to the kind of living compromise at the margin on my issue, if you will do the same." out compromising the needs of future standards that they enjoy." The key to sustainable development is From a business perspective, sustaingenerations." These words formed the basis of the 1992 UN Earth Summit in Rio de able development is often separated into in balancing the economic concerns with Janeiro and many smaller meetings since three interdependent areas: economic, the environmental and social issues. At then. However, actual progress toward environmental, and social. Shell Chemi- Formosa Plastics Corp. Texas, the phrase the implementation of this concept has cals refers to these as the three pillars of "keeping the balance" is used to capture the need to weigh each component of sussustainability. been notably underwhelming. In their 1998 book, "Eco-Efficiency: tainability, says Ken Mounger, vice presiA major reason for the minimal action is that translating sustainability to the business world has proven to be very difficult. The concept is not easy to explain and is even harder to measure—two fundamental drawbacks for any business initiative. Companies struggle to interpret its intent and then to determine the implications of a sustainable business, finding, in most cases, that strategic changes are necessary for implementation. Several major chemical companies are latching onto this concept—including Dow Chemical, DuPont, and Monsanto— and their motivation is not altruistic but instead is based on sound business decisions. They are banking on the notion that such efforts will eventually be required of all companies, and, as in any other business area, it is important to be first. And for those companies that don't see that, the problem may be not only DuPont conducts sustainable agricultural research at its Chesapeake Farms on reduced profits, but viability as well. Maryland's eastern shore.
SUSTAINABLE DEVELOPMENT
Chemical companies face trying task in moving efforts forward
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AUGUST 3, 1998 C&EN 13
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Survey shows much work remains to be done Company interest in sustainable development is growing, but few firms show much progress toward its implementation, according to a recent survey of executives. Earlier this spring, management consulting firm Arthur D. Little (ADL), Cambridge, Mass., surveyed U.S. and European business executives on sustainable development—the concept that encourages efficient company operations while considering the needs of future generations. Nearly 500 executives responded, including 91, or about 20%, from the chemical industry. Other industry groups participating included energy and utilities (15%), pharmaceuticals (6%), metals and mining (6%), and general manufacturing (6%). One-third of all respondents were from the U.S. Several U.K. and Canadian executives also participated—at 18% and 17%, respectively—with the remaining respondents from other European countries. The survey focused on company efforts and expectations toward achieving a sustainable business environment. Almost all (95%) of the executives say sustainable development is important, but they indicate varying levels of company progress. Only 15% of chemical executives, versus 17% of the total
dent and general manager. The Texasbased affiliate of Taiwan's Formosa Plastics is in the early stages of understanding and discussing sustainable development, but, Mounger adds, "Sustainability is part of our long-term business strategy." At Solutia, that balance has been difficult to achieve since the company has become independent, says Michael A. Pierle, vice president for environment, health, and safety. "Most of the conversation around sustainability inside the company today is on the financial side, as you might expect for a new company. The conversation specific to environmental sustainability is more modest," he says. A startling distinction between sustainable development and typical environmental programs is the inclusion of economic considerations. This gives chemical companies a new perspective on environmental efforts, even allowing them to see possible opportunities. "The whole culture in dealing with environmental activities has been one of problems, not opportunities," says Gilbert S. Hedstrom, ADL's vice president of 14 AUGUST 3, 1998 C&EN
group, say they are "well down the road" in their efforts. Most say they are "making some progress"—40% of the chemical sector and 46% of group—or are "just beginning to explore"—32% of the chemical sector and 22% of group. Executives in the chemical industry and the group note that executives in European companies seem to take this issue more seriously than those in other parts of the world. Fully 82% of the survey group and of chemical executives agree that "real business value" can be achieved from sustainable development efforts. Another 14% of both groups indicate they "don't know," with the remaining 4% disagreeing that such value comes with sustainable development efforts. Eco-efficiency—the efficient use of economic and écologie resources—is the dominant method used by companies to derive real business value, as noted by 36% of chemical executives and 40% of the group. Competitive advantage is the next highest method for both groups, at 13% for the chemical sector and 10% for all. Both chemical executives and the entire group indicate that specific progress made in their companies was in the more traditional areas of pollution prevention, environmental auditing, and energy effi-
environment, health, and safety for the chemical industry. ADL's environmental business with the chemical industry has changed in recent years from acting as a counselor for CEOs after major incidents to being a partner in finding business opportunity that is truly sustainable. At Monsanto, CEO Robert B. Shapiro quickly saw the potential business advantages of a sustainable development focus. He reorganized the company to focus on life sciences, ultimately spinning off its chemical business as Solutia last fall. In an interview in the January-February 1997 issue of Harvard Business Review, Shapiro outlined his company's efforts. "We are trying to invent some new businesses around the concept of environmental sustainability," he said. "We may not yet know exactly what those businesses will look like, but we're willing to place some bets because the world cannot avoid needing sustainability in the long run." He added, "far from being a soft issue grounded in emotion and ethics, sustainable development involves cold, rational business logic."
ciency. Litde progress was noted in some of the new and more demanding areas such as performance measurement tools, design for environment, and life-cycle assessment. However, when asked to view sustainable development across the life cycle of their products, chemical executives note that product design R&D and manufacturing are the main areas where their company can make progress. The top two answers for the general group are product design R&D and sourcing. Several actions are necessary to implement a sustainable development approach in companies, according to the executives. Both groups highlighted vision and strategy, new technologies/ processes, and aligning and motivating staff as the areas where most changes will have to be made. Chemical executives agreed with the group that industry, not government, will have the most impact on making sustainable development a reality. "We are dealing with something that has a lot of interest at the [chief executive officer] level," says John S. Willson, ADL's vice president for environment, health, and safety. "But when it comes to actions so far, beyond eco-efficiency, they are hard to find." Complete survey results are available from ADL or can be viewed at the firm's web site at www.arthurdlittle.com.
Examples of Monsanto products that address sustainability include engineered seed products that repel or protect against insects and disease, thus reducing the need for insecticide and herbicide use. DuPont is in a similar situation, having increased its focus on life sciences in recent months (C&EN, May 18, page 5). The company has retained its chemical businesses as it focuses more on sustainable development issues, believing that its diverse businesses can benefit from each other. "We believe we can use an expertise in life sciences to affect the traditional chemical business," says Rittenhouse. "We can [use what we have learned] either directly, by being able to make some of the chemicals through biological processes versus traditional processes, or by developing new products within biotechnology that can transition from traditional chemistry." In comparison, the business translation of sustainable development appears to be more difficult for a traditional chemical company. "For companies in the life sciences area," says ADL's Hedstrom, "there is an
opportunity to look at these broad trends around population growth and resource depletion and consider them an opportunity, believing, for example, that biotechnology is part of the answer. It is extremely difficult for many chemical companies to grasp this issue and know what to do." Solutia is struggling with its new status, says Pierle. "The fit of sustainability was easier to visualize [at Monsanto]. The more difficult thing in the chemical industry—and with a lot of the initiatives that have been undertaken in the p a s t is seeing the direct business alignment with those issues," he says. However, corporate restmcturing may be necessary to obtain that alignment, according to Hedstrom. "Within the chemical industry, there has been extensive effort in integrating health, safety, and environment concerns with business operations. But I don't think that most chemical companies have looked at sustainable development as a way of realigning their businesses." Both Monsanto and DuPont have restructured their businesses in recent years as they integrated acquisitions and sold or spun off other businesses. As the corporate changes were made, the focus on environmental and social issues became stronger. In 1990, Monsanto created the "Monsanto Pledge," which specifically states its "commitment is to achieve sustainable development for those aspects of the environment where we have an impact [and] for the good of all people in both developed and less-developed nations." The pledge also contains specific goals toward achieving zero plant emissions, sustainable agriculture, and a halt to deforestation and declining biodiversity.
"Quite frankly, I have not wanted to The timing was similar at DuPont: "It began in 1989 when Edgar S. Woolard Jr. muddy the waters and detract from the was CEO," says Rittenhouse. "The envi- task of fully implementing Responsible ronment became a major focus within Care by getting into fuzzy debates about DuPont. In 1994, we created a new safe- sustainable development," explains CMA's ty, health, and environment commit- Baker. CMA has been participating in the disment" that incorporates sustainable development. Rittenhouse's role, as an "in- cussion at an international level. As a ternal consultant" for the concept, was member of the International Council of Chemical Associations, CMA participated created soon after. Although focused on the petrochemi- in the preparation of a January 1996 pocal side of the industry, Shell Chemicals sition paper on sustainable development. has also been through significant reorgani- The paper discusses the important role zation in recent months and has emerged of the chemical industry in achieving suswith a stronger focus on safety and the en- tainability goals because of the industry's vironment. The company's 1997 health, strength in innovation and the impact of safety, and environment report discusses its products on the quality of life. Other the importance of sustainable develop- members of this council include chemiment, saying it "is high on the Shell Chem- cal associations from Mexico, Canada, Jaicals agenda," and includes a candid inter- pan, Australia, and Europe. view on the topic between the company's Some companies suggest that CMA new executive vice president for portfolio and its Responsible Care efforts could and sustainable development, James move toward sustainability efforts. Smith, and a leading environmental activ"Certainly, everything that is being ist, John Elkington, chairman of London- done in Responsible Care is compatible based environmental consulting group with a sustainable world," says Solutia's SustainAbility. Pierle. "But I also believe that the conFor most chemical companies, their cepts of Responsible Care will have to be efforts in health, safety, and environment extended to fully include the concepts of have been directed toward Responsible sustainable development." Care. This 10-year-old CMA initiative has A great advantage of Responsible Care broad support from most U.S. chemical over sustainability efforts is that much of a companies and is now being adopted by company's progress can be measured. several foreign companies as well (C&EN, Companies are able to record changes in May 11, page 13). waste emissions and the number of enviResponsible Care focuses primarily on ronmental releases and employee injuries, safe chemical plant operations, with the and they can provide this information to intent of minimizing worker, public, and local communities to show improvement. environmental exposures to hazardous Such quantification is not possible for chemicals. Although many of the pro- most sustainability efforts, particularly for grams in Responsible Care fit well with efforts in the societal arena. sustainability, it is not a topic that CMA "We have comprehensive measures of discusses with its member companies. our economic and safety performance,"
Online sources of information about sustainable development Organization
Web site
Information provided
Business for Social Responsibility
www.bsr.org
Consulting services, business tools, and workshops on practices for sustainable business
Center of Excellence for Sustainable Development
www.sustainable.doe.gov
Department of Energy-sponsored site with details on sustainable development programs for communities
European Chemical Council
www.cefic.be
January 1996 International Council of Chemical Associations position paper on sustainable development
Organization for Economic Cooperation & Development (OECD)
www.oecd.org/subject/sustdev/
November 1997 report on sustainable development from the High-Level Advisory Goup on the Environment to the secretary general of OECD
World Business Council on Sustainable Development
www.wbcsd.ch
Examples of sustainability projects at 3M, Dow Chemical, and S. C. Johnson
World Resources Institute
www.wri.org
Policy research and technical assistance on environmental development issues
AUGUST 3, 1998 C&EN 15
LUI-J LJJ^-4 says Shell s Smith. Measures tor environ mental performance are in place, but they need to be enhanced and standard ized across industry. There is work to be done in developing sound metrics for the social element." Smith adds that the company is working to create measures comprising a triple bottom line' for the three pillars of sustainability." Shell is a member of the World Business Council for Sustainable Development, which has an active pro gram to determine sustainability metrics. But having the ability to show safety and environmental improvement is criti cal for chemical companies, says Dow's Popoff. You have to have a base of per formance and improvement to deal with." Much of Dow's sustainability ef forts have focused on eco-efficiency, an approach that encourages close observa tion of emissions, releases, and other en vironmental measures as well as captur ing cost improvements. This method allows firms—and their local communi ties—to chart their progress, but some criticize its narrower scope. "The current reality is that most chemical companies are looking at Re sponsible Care, eco-efficiency, and waste reduction as their response to sustain ability," says ADL's Hedstrom. "That's okay, but they are missing some of the point of it all. It is time for the chemical industry to rethink the next set of stan dards and not simply push Responsible Care to the next incremental step." In addition to the challenge of measur ing progress in new sustainability pro grams, some companies find that existing metrics often contradict their intent. At DuPont, projects targeted at more effi cient use of its products conflicted with corporate goals to produce and sell the largest volume of product and forced the company to rethink the way it defines its products. "We look at what functionality the customer is actually buying from us, not what product. Now the goal is not how many pounds, but how much value we are bringing into the business," says Rittenhouse. In the polyester films business, that meant making thinner films while achieving the required properties, and changing the pricing structure to in clude a premium for decreases in mate rial usage. In an automotive paint project with Ford, DuPont was able to reduce the amount of paint required to coat a car and is now paid by the num ber of cars painted, not the number of gallons consumed. 16 AUGUST 3, 1998 C&EN
However, this new focus requires that other companies participate. You need your suppliers and customers to also be thinking this way to be successful in changing the dynamics of the buyer/seller relationship," says Rittenhouse. "The auto motive paint project would not have worked if Ford did not want to do it also." As companies move forward with their sustainability efforts, many are turn ing to external sources, either to partici pate in projects, or to provide input to their efforts. Shell Canada Chemical Co. recruited a Sustainability Advisory Panel a few years ago to help its understanding of sustain ability and to provide suggestions on necessary actions. The panel, whose members include volunteers from vari ous industries and backgrounds, meets twice each year. It recently commented on the company's plan for an ethylene glycol plant, currently under construc tion in Scotford, Alberta. "The panel's comments prompted the design team to rethink various aspects of the project," says Smith, "and brought about environ mental improvements and made the project more sustainable." Shell Chemicals' parent, Royal Dutch/ Shell, is also soliciting input from sourc es throughout the world on its recently released report entitled "Profits and Principles—Does There Have To Be a Choice?" The report reviews the compa ny's performance from economic, envi ronmental, and social perspectivesincluding a two-page analysis of these efforts by environmental activist Elkington—and encourages readers to give feedback via reply cards or the Internet. The comments, says the company, will be "taken into account." By looking at sustainability, companies have turned their view outward, looking beyond their own boundaries after several years of intense internal focus and corpo rate restructuring. Most chemical compa nies are showing a lot of interest—ADL re ports that its recent executive meetings on the topic have the most and highest man agement-level attendees—but not all com panies are ready to act. The companies that are acting now are early leaders. And participating early is what most companies need to do, accord ing to Dow's Popoff, because the supply of the world's resources is limited. "The options early in the decision pro cess are much greater," he says. "When you are nose-to-nose with an issue, there is very little you can do except say Ί wish I [had] dealt with this earlier.'"^
Great Lakes team tackles restructuring Great Lakes Chemical's new president and chief executive officer, Mark Bulriss, has wasted no time installing his own ex ecutive team. High on their list of things to do is undoubtedly the completion of a restructuring announced last year. Bulriss, a chemical engineer, assumed the helm of the $1.3 billion specialty chemical producer in March with a man date to put it back on the growth path followed in the 1980s and early 1990s, but strayed from in recent years. He came from a five-year stint at AlliedSignal—where he was most recently presi dent of the polymers division—and be fore then 16 years at GE Plastics. One of Bulriss' first acts was to estab lish a new organizational structure con sisting of four divisions—polymer addi tives, performance chemicals, water treatment, and energy chemicals and ser vices—plus a supply-chain function. In picking leaders for these divisions and other key functions, Bulriss has re lied heavily on people he's known at both former employers. To head the polymer additives divi sion, Bulriss brought in C. Hugh Morton, a long-time GE Plastics executive, and to lead performance chemicals he recruited Louis M. Maresca, who also worked at GE Plastics during Bulriss' tenure. More recently, Maresca was general manager of Geon's resins business, an apparently tenuous position given Geon's planned polyvinyl chloride resins merger with Occidental Chemical. Existing Great Lakes executives filled the other divisional leadership roles: Mar shall Bloom, head of the firm's Bio-Lab unit, for water treatment; and Robert Hollier, head of its Osca unit, for energy chemicals. For other posts, Bulriss turned to former AlliedSignal colleagues. As vice president of corporate development and strategic planning he picked Richard Boehner, a former director of corporate development for AlliedSignal's specialty chemicals operations. Boehner had joined Great Lakes more than a year ago to assume a similar role under then-CEO Robert B. McDonald. Boehner left the company a few months later, but Bulriss enticed him to come back. Bulriss' most recent and highest pro file hire was Mark Tomkins, named vice president and chief financial officer ef fective Aug. 10. Tomkins worked in a
