b u s i n e s s mm \ !>v

SUSTAINABLE DEVELOPMENT Chemical companies face trying task in moving efforts forward

Paige Marie Morse C&EN Houston

Say the words "sustainable develop­ment" in most chemical industry of­fices and you are likely to observe a

response of glazed eyes, furrowed brows, and inattentive expressions. Maybe even a vague look of recognition of something heard before, but nothing more.

It is a fuzzy concept," says Garrity R. Baker, senior director of international af­fairs at the Chemical Manufacturers Associ­ation (CMA). "You are not going to find an extensive understanding and a thorough discourse about sustainable development taking place in a lot of companies."

As defined in 1987 by the United Na­tions' World Commission on Environment & Development, "sustainable develop­ment meets the needs of the present with­out compromising the needs of future generations." These words formed the ba­sis of the 1992 UN Earth Summit in Rio de Janeiro and many smaller meetings since then. However, actual progress toward the implementation of this concept has been notably underwhelming.

A 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 reduced profits, but viability as well.

"Eventually, you are going to figure out how to integrate sustainable develop­ment into your business," says Dawn Rit-tenhouse, director of sustainability at Du­Pont. "Or you are not going to be in busi­ness very long."

To its proponents, sustainable devel­opment is not just another environmen­tal program. Its intent goes beyond such approaches, taking a broader and longer term view of the impact of society's growth and development.

"It is a concept that acknowledges that there are limits imposed by natural sys­tems," says John S. Willson, vice president of the environment, health, and safety glo­bal practice at management consulting firm Arthur D. Little (ADL), Cambridge, Mass., "and that if we don't do something differently, future generations are going to suffer with respect to the kind of living standards that they enjoy."

From a business perspective, sustain­able development is often separated into three interdependent areas: economic, environmental, and social. Shell Chemi­cals refers to these as the three pillars of sustainability.

In their 1998 book, "Eco-Efficiency:

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 ef­forts at several chemical, energy, and con­sumer products companies with a focus on emission reduction, resource conserva­tion, and financial strength. The term eco-efficiency was developed during the Earth Summit, and its implementation has oc­curred primarily through the World Busi­ness Council for Sustainable Development, cochaired by DeSimone and Popoff.

One advantage of the comprehensive scope of sustainability is that it can unify disparate views on a variety of environ­mental issues, dissolving some of the po­larity in this contentious arena.

"That is the importance of sustainable development," Popoff tells C&EN. "It has forced people to say, If my favorite issue is biodiversity, and your favorite issue is energy or climate, maybe I am willing to compromise at the margin on my issue, if you will do the same."

The key to sustainable development is in balancing the economic concerns with the environmental and social issues. At Formosa Plastics Corp. Texas, the phrase "keeping the balance" is used to capture the need to weigh each component of sus­tainability, says Ken Mounger, vice presi-

DuPont conducts sustainable agricultural research at its Chesapeake Farms on Maryland's eastern shore.

AUGUST 3, 1998 C&EN 13

b u s i n e s s wm"

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

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

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.

dent and general manager. The Texas-based 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

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."

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

14 AUGUST 3, 1998 C&EN

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 pas 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.

The timing was similar at DuPont: "It began in 1989 when Edgar S. Woolard Jr. was CEO," says Rittenhouse. "The envi­ronment became a major focus within DuPont. In 1994, we created a new safe­ty, health, and environment commit­ment" that incorporates sustainable de­velopment. Rittenhouse's role, as an "in­ternal consultant" for the concept, was created soon after.

Although focused on the petrochemi­cal side of the industry, Shell Chemicals has also been through significant reorgani­zation in recent months and has emerged with a stronger focus on safety and the en­vironment. The company's 1997 health, safety, and environment report discusses the importance of sustainable develop­ment, saying it "is high on the Shell Chem­icals agenda," and includes a candid inter­view on the topic between the company's new executive vice president for portfolio and sustainable development, James Smith, and a leading environmental activ­ist, John Elkington, chairman of London-based environmental consulting group SustainAbility.

For most chemical companies, their efforts in health, safety, and environment have been directed toward Responsible Care. This 10-year-old CMA initiative has broad support from most U.S. chemical companies and is now being adopted by several foreign companies as well (C&EN, May 11, page 13).

Responsible Care focuses primarily on safe chemical plant operations, with the intent of minimizing worker, public, and environmental exposures to hazardous chemicals. Although many of the pro­grams in Responsible Care fit well with sustainability, it is not a topic that CMA discusses with its member companies.

"Quite frankly, I have not wanted to muddy the waters and detract from the task of fully implementing Responsible Care by getting into fuzzy debates about sustainable development," explains CMA's Baker.

CMA has been participating in the dis­cussion at an international level. As a member of the International Council of Chemical Associations, CMA participated in the preparation of a January 1996 po­sition paper on sustainable development. The paper discusses the important role of the chemical industry in achieving sus­tainability goals because of the industry's strength in innovation and the impact of its products on the quality of life. Other members of this council include chemi­cal associations from Mexico, Canada, Ja­pan, Australia, and Europe.

Some companies suggest that CMA and its Responsible Care efforts could move toward sustainability efforts.

"Certainly, everything that is being done in Responsible Care is compatible with a sustainable world," says Solutia's Pierle. "But I also believe that the con­cepts of Responsible Care will have to be extended to fully include the concepts of sustainable development."

A great advantage of Responsible Care over sustainability efforts is that much of a company's progress can be measured. Companies are able to record changes in waste emissions and the number of envi­ronmental releases and employee injuries, and they can provide this information to local communities to show improvement. Such quantification is not possible for most sustainability efforts, particularly for efforts in the societal arena.

"We have comprehensive measures of our economic and safety performance,"

Online sources of information about sustainable development Organization Web site

Business for Social Responsibility www.bsr.org

Center of Excellence for Sustainable www.sustainable.doe.gov Development

European Chemical Council www.cefic.be

Organization for Economic Cooperation & www.oecd.org/subject/sustdev/ Development (OECD)

World Business Council on Sustainable www.wbcsd.ch Development

World Resources Institute www.wri.org

Information provided

Consulting services, business tools, and workshops on practices for sustainable business

Department of Energy-sponsored site with details on sustainable development programs for communities

January 1996 International Council of Chemical Associations position paper on sustainable development

November 1997 report on sustainable development from the High-Level Advisory Goup on the Environment to the secretary general of OECD

Examples of sustainability projects at 3M, Dow Chemical, and S. C. Johnson

Policy research and technical assistance on environmental development issues

AUGUST 3, 1998 C&EN 15

says Shell s Smith. Measures tor environ­mental performance are in place, but they need to be enhanced and standard­ized 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 pro­gram to determine sustainability metrics.

But having the ability to show safety and environmental improvement is criti­cal for chemical companies, says Dow's Popoff. You have to have a base of per­formance and improvement to deal with." Much of Dow's sustainability ef­forts have focused on eco-efficiency, an approach that encourages close observa­tion of emissions, releases, and other en­vironmental measures as well as captur­ing cost improvements. This method allows firms—and their local communi­ties—to chart their progress, but some criticize its narrower scope.

"The current reality is that most chemical companies are looking at Re­sponsible Care, eco-efficiency, and waste reduction as their response to sustain­ability," 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 stan­dards and not simply push Responsible Care to the next incremental step."

In addition to the challenge of measur­ing progress in new sustainability pro­grams, some companies find that existing metrics often contradict their intent. At DuPont, projects targeted at more effi­cient 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 Rit-tenhouse. In the polyester films business, that meant making thinner films while achieving the required properties, and changing the pricing structure to in­clude a premium for decreases in mate­rial 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 num­ber of cars painted, not the number of gallons consumed.

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 auto­motive 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 turn­ing to external sources, either to partici­pate 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 sustain­ability and to provide suggestions on necessary actions. The panel, whose members include volunteers from vari­ous industries and backgrounds, meets twice each year. It recently commented on the company's plan for an ethylene glycol plant, currently under construc­tion in Scotford, Alberta. "The panel's comments prompted the design team to rethink various aspects of the project," says Smith, "and brought about environ­mental improvements and made the project more sustainable."

Shell Chemicals' parent, Royal Dutch/ Shell, is also soliciting input from sourc­es throughout the world on its recently released report entitled "Profits and Principles—Does There Have To Be a Choice?" The report reviews the compa­ny's performance from economic, envi­ronmental, and social perspectives-including a two-page analysis of these efforts by environmental activist Elking-ton—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 corpo­rate restructuring. Most chemical compa­nies are showing a lot of interest—ADL re­ports that its recent executive meetings on the topic have the most and highest man­agement-level attendees—but not all com­panies are ready to act.

The companies that are acting now are early leaders. And participating early is what most companies need to do, accord­ing to Dow's Popoff, because the supply of the world's resources is limited.

"The options early in the decision pro­cess 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 ex­ecutive 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 man­date 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 AlliedSig-nal—where he was most recently presi­dent of the polymers division—and be­fore then 16 years at GE Plastics.

One of Bulriss' first acts was to estab­lish a new organizational structure con­sisting of four divisions—polymer addi­tives, performance chemicals, water treatment, and energy chemicals and ser­vices—plus a supply-chain function.

In picking leaders for these divisions and other key functions, Bulriss has re­lied heavily on people he's known at both former employers.

To head the polymer additives divi­sion, 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: Mar­shall 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 pro­file hire was Mark Tomkins, named vice president and chief financial officer ef­fective Aug. 10. Tomkins worked in a

16 AUGUST 3, 1998 C&EN

LUI-J LJJ^-4