On The Scout For A Profitable Sustainability Business Case In Chemicals
Here we are. In the middle of the next big thing, although sustainability is far away from being new. Chemical companies are working for decades in sustainability, solving all kinds of problems. Seeing all the corrosion caused by the industry in the past years, makes it hard to believe, I admit. Plenty of companies are investing a significant amount of money and resources into sustainability, making astonishing progress, whereas others ride on the wave of non-transparency. It’s like in real life. Consumer, customer, political, but first and foremost, the public pressure is making this topic a top priority of these days. We are expecting 2 billion additional people living on this one planet by 2055. With this in mind it becomes extra worrying, that on August 22 2020, humanity used up all the resources that would have been available for the entire year, if we had used them sustainably.
A new thinking is inevitable.
Wait, what is sustainability again?
You, as a reader, might connect directly something to the question. We all have certain things in mind when this topic comes up, things like pollution, plastic, circular economy, mass balance and many more. Nothing wrong with it, but also not answering the question. The fact, that there is no definition for sustainability leads to missing standards, a flood of ISO certifications, tools, vendors and alliances. What one company defines as a standard, others do not consider to be enough. Same is with alliances and NGOs. You find lots of reasons, and most of them seem making sense.
The thing with the Triple Bottom Line
Yes. Another term one needs to understand. It describes the context between Economic Growth, Social Responsibility, and Environmental Stewardship.
It is fundamental to see these topics as integral part of any sustainability discussion. Looking at the big sustainability headlines of companies, one most likely find projects associated with Economic Growth. Such projects often are more tangible and deliver results in the near future than long term, and they are closer to the companies wallet. If you seek further, there will appear some projects aiming on Environmental Stewardship. In big companies, these topics often are driven rather isolated from each other, although they belong together and often overlap to each other. Also, many projects are not even recognized as sustainability effort, maybe also because a missing definition?
Good thing is that there is a lot of movement. More and more companies of every size are committing to more sustainability goals. A good start certainly is the 17 Sustainability Development Goals, released in 2015, show that there is some movement. Although some companies do not rely entirely on these goals, at least nobody I talked to questions the 17, very plausible goals we all have to tackle. A 2015 report from Boston Consulting Group issues, that 85% of the chemical industry reported having a sustainability strategy. That was more that 70% of an increase compared to 2005. And yet, only 36% said their company had developed a clear business case. The missing link between money spent and business opportunity gives all kind of levels in the hierarchy a hard time.
There are good chances to bring all three topics in harmony.
Invest versus spend
For a moment, imagine money would not be spent into sustainability, money would be invested. There is an army of entrepreneurs and investors out there watching out for companies who lift their voice and stand to their commitments. The reason companies haven’t met them could lie in the fact they are too busy with managing upcoming sustainability efforts, handling the daily business with all its complexity and challenges by thinking in processes and data fields.
“BlackRock Puts Climate at Center of $7 Trillion Strategy”January 14 2020, issued by Bloomberg
Seems to be a lot of money to make. In fact, a report published by the Business and Sustainable Development Commission in 2017, indicates there is a USD $12 trillion in new market opportunities, generating more than 380 million jobs in the process.
So how comes we aren’t moving in light speed already?
Throughout discussions and webinars, I understand that there are three main clusters which make it hard for companies to unleash their superpowers.
The missing transparency
A pain for ages now, is the missing supply chain transparency. In the meanwhile, we have reusable rockets (!!!), but we still lack in supply chain transparency. I know, it is complex. You easily find hundreds if not thousands of clips and short films on the internet or on streaming services, showing how deforestation, abuse of palm oil business, marina pollution, and more, cause obvious harm to our environment, and ultimately to every single one of us. Without having the transparency to clearly address the causers, it might take ages until we see the change, we are dependent on. Blockchain technology and many more solutions are helping companies to gain speed. Public pressure keeps rising and soon many more companies will understand hot to evolve a #Sustain4Profit mindset. Still a way to go.
A positive business case
It certainly depends on how you look at sustainability, once you have identified the Key Performance Indicators. Today, companies often are driven, reacting to customer demands, which by the way wasn’t always the case. Customer is king, more than ever. But data is the secret, and nobody wants to disclose too much of information. This leads to detailed discussions, rather on product line level than on a strategic one. Discussions keep being complicated, and sustainability data is widely not applicable due to missing standards.
Leaving the nitty gritty level and offer best practices, knowledge and experience, might be the missing spark to get it rolling. A study from the World Economic Forum states, that companies engaging in sustainability initiatives, are likely to see up to 20% increased revenue, 16% cost reduction and 30% increase brand value.
Monetization of sustainability efforts
A positive business case should go beyond the typical Return on Invest calculation, as there are plenty of new influencing factors, which might boost your case from spent money to investing money. This requires companies to embrace the full-blown Triple Bottom Line, to overcome internal silos and to measure the impact of measures to their brand value and to commit to do good – and to talk about it.
Down the road we’ll find proper organizations where the individual procurement soul and everybody else in the company, plays into the field, product strategies with clear prioritization rules to focus on what matters, a stakeholder and investor communication which differs from other projects, and of course market and region-specific sub-strategies to meet local demands. There are increasingly strong signals that companies, which demonstrate having a positive impact on the Sustainability Development Goals, ultimately stand to enjoy a range of benefits when it comes to access to capital.
Interestingly, sustainability, in all its complexity, is something all of us can find together. Be it data and technology specialists, scientists, visual and creative thinkers, really all of us! Can’t remember one challenge with such a scope of opportunities.
Author: Pedro Ahlers
About Pedro Ahlers: As Business Punk in the Chemical Industry at SAP Pedro Ahlers challenges the mainstream and goes unorthodox ways to always understand the why before answering to the how. Driven by trends and the big challenges in the industry, he helps chemical companies understand and apply the values of a digital transformation beyond products, features, and functions to increase business growth, customer loyalty, and satisfaction. He is obsessed with customers and human-centric change management to empower organizations and to boost user adoption. With 12 years of experience at BASF, the world’s biggest chemical company, Pedro brings together business and technology know-how.
Article has also been published in SAP blog.
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