Aaloak Singh NegiPGPM710_01

SUSTAINABILITY IN CHEMICAL INDUSTRY

INDUSTRY MENTORS

Mr. S G Choudhary

(Chief Sustainability & Technology Officer)

Tata Chemicals Ltd.

TABLE OF CONTENTS

What is sustainability?

Need for sustainability

Benefits of sustainability

Global reporting initiative

Sustainability Matrices & GAP

The chemical industry

Sustainability in chemical industry

Sustainability Initiatives by chemical industry

Challenges

The Five sustainability principles

Sustainability spending

Sustainability consulting

Conclusion

WHAT IS SUSTAINABILITY?

The way a company or organization creates value for its shareholders and society by maximizing the positive and minimizing the negative on social, environmental issues and stakeholders to …

Grow Revenue

Reduce Cost

Manage Risk

Build Intangible Assets

Current status of chemical companies’ sustainability: Highlights from Accenture and American Chemistry Council research, © 2010 Accenture

THE TRIPLE BOTTOM LINE

“SUSTAINABILITY” is a path forward that allows humanity to meet current environmental, economic, and societal needs without compromising the progress and success of future generations.

Sustainability in chemical industry: Grand Challenges and research needsNational Academy of Sciences

The Triple Bottom Line, Savitz AW, Weber K, 2006, First Edition

Economic Environmental Social

Sales, profit, ROI Air quality Labor practices

Taxes paid Water quality Community impacts

Monetary flows Energy usage Human rights

Jobs created Waste produced Product responsibility

…NEED FOR SUSTAINABILITY

6.7 billion people on earth

1.9 billion are living in abject poverty

975 million people are malnourished

865,000 deaths per year worldwide directly attributed to outdoor air pollution (WHO)

1.5 million deaths per year result from unsafe water, inadequate sanitation or hygiene

Non renewable energy sources are fast depleting

Population & poverty data : World Bank, August 2008

THE REALITY OF A RESOURCE-CONSTRAINED WORLD

While skyrocketing oil prices are a well-known reality for all companies…

$/Ba

rrel

1985 1990 1995 2000 2005 2011

19.55

26.72

61.06

86.84

27.58

26.00

Oil Prices per Barrel, 1985 – 2011

Source: inflationdata.com

…less well known is the rapid depletionof a broader set of natural resources

Year

s

28

21

17

37

Copper Lead Silver Tin

Years Until Resource Depletion*

Source: Fast Company.

*Resource depletion is defined as the complete exhaustion of the resources existing in nature. Calculation assumes that current consumption levels are maintained.

..BENEFITS OF PURSUING SUSTAINABILITY FOR ORGANIZATIONS

Reduce energy, waste and cost

Differentiate yourself

Sidestep future regulations

Create Innovative new products or processes

Open New markets

Attract and retain talent

Improved Image

Reduce legal risk

Provide a higher quality of lifeThe business guide to sustainability, Hitchcock D, Willard M, First south Asian edition, 2008

FINANCIAL RETURNS FROM A SUSTAINABILITY STRATEGY

Globally North America

Europe Asia-Pacific

73%

61% 62%

87%82%

69%

82%74%

Cumulative Stock Performance (2004-1007)

Carbon LaggardsCarbon Leaders

Tota

l Ret

urn

With the notable exception of Asia, companies successful in minimizing their carbon emissions experience a 10 – 30% improved performance in shareholder returns

Source: Innovest Strategic Value Advisors, Carbon Beta and Equity Performance, 2007.

Carbon leaders surpassed the financial performance of carbon laggards by an annualized rate of return of 3.06%.

INVESTMENT EXPECTATIONS & RETURNS

Continued pressure for near-term payback on sustainability investments suggests energy efficiency projects should be a core component of early sustainability investments

Source: Corporate Executive Board Research, Survey for Corporate Sustainability Executives, 2007.

Energy Sa

vings

Waste Sa

vings

Where have you seen the greatest benefit from your sustainability investments?

Product

Innovation

Corporat

e Branding

Raw M

ateria

ls Sav

ings

41%

23%

18%

6% 6% 6%

Water S

avings

n=17.

Effectiveness of Sustainability Investments

INDIRECT RETURNS FROM SUSTAINABILITY INVESTMENTS

Sustainability strategies serveas a recruiting draw for top talent…

…and improve productivityand loyalty of existing employees

Source: 2002 GlobeScan International Survey, MORI.Source: Stanford Graduate School of Business, Survey of 800 MBAs from 11 Top International Business Schools.

Impact of Sustainability on MBA Job Decisions

76.9%

$5500

Percentage of Respondents Willing to Forego Income to Work for a Firm with a

Credible Sustainability Strategy

Average Annual Income They

Would Forego

80%

70%

Employees Who Felt Greater Motivation and

Loyalty toward Company Due to Sustainability

Initiatives

Committed to Sustainability

Values

Sustainability Impacton Employee Motivation

1%

Sustainability Impacton Employee Productivity

NotCommitted to Sustainability

Values

….IF YOU DON’T

Liability of pollutants

Supply problems with raw materials and energy

Attacks on your image

Legal risks

Bad mouthing of your product

Being closed out of certain markets

The business guide to sustainability, Hitchcock D, Willard M, First south Asian edition, 2008

The Bhopal Tragedy :case in point

GLOBAL REPORTING INITIATIVE

The Global Reporting Initiative (GRI) is a network-based organization that pioneered the world’s most widely used sustainability reporting framework

GRI’s core goals include the mainstreaming of disclosure on environmental, social and governance performance

The Reporting Framework sets out the principles and Performance Indicators that organizations can use to measure and report their economic, environmental, and social performance

Sustainability reports based on the GRI Framework can be used to demonstrate organizational commitment to sustainable development, to compare organizational performance over time, and to measure organizational performance with respect to laws, norms, standards and voluntary initiatives.

SUSTAINABILITY MATRICES & GAP

Practicality

Proportionality

Flexibility

Reversibility

Competitive NeutralityAIChE sustainability Index, Dow Jones Sustainability Index, Standard and Poor Ethibel Sustainability Index provide auditable frameworks and metrics

A Roadmap to Sustainability: Indian Industry Case Study, Mr. Sanjay Choudhary, CTO, Tata Chemicals Limited,Third Annual India Chemical Industry Outlook Conference, Growth and sustainability in Chemical Industry- Post Recession 17-18 Feb 2010 Mumbai

COMPANIES FOLLOWING SUSTAINABILITY

Italy

Malaysia

Brazil

SA

Japan

Canada

USA

Australia

France

Ireland

Belgium

Norway

Denmark

Sweden

Spain

Neterlands

Unite Kingdom

Germany

Switzerland

Finland

0 10 20 30 40 50 60 70 80 90

4.8

5.2

5.9

17.7

17.9

19

19.8

20.8

23.4

30.2

32.8

33.1

33.1

56.6

63.4

64.5

68

75.2

82.4

84.9

Dow Jones Sustainability Group Index: percent of eligible companies in index

…THE CHEMICAL INDUSTRY

Oil & Gas

Petrochemicals

Pharmaceuticals

Dyestuff

Paints

Agrochemicals

Inorganic Chemicals

Fragrances & Flavours

Polymers

Explosives

The chemical industry converts raw materials (oil, natural gas, air, water, metals, and minerals) into more than 70,000 different products

Chemical Industry is by far considered the most polluting one

As a major energy user as well as enabler of energy and emissions-saving solutions the chemical industry has a significant role in mitigating climate change.

The chemicals industry is a significant user of coal, petroleum products and natural gas, both as a source of energy and as feedstocks for many of its products.

Chemical industry’s products, processes and research capabilities contribute to conserving energy, delivering energy more efficiently, developing renewable resources and reducing greenhouse gas (GHG) emissions.

Significant improvements achieved in energy efficiency over the past decades - production increased by more than 50% since 1990 & GHG emissions have fallen by more than 20%, mainly by switching from coal to gas powered facilities and in investing in combined heat and power (CHP) plants

CHEMICAL INDUSTRY & SUSTAINABILITY

A Roadmap to Sustainability: Indian Industry Case Study, Mr. Sanjay Choudhary, CTO, Tata Chemicals Limited,Third Annual India Chemical Industry Outlook Conference, Growth and sustainability in Chemical Industry- Post Recession 17-18 Feb 2010 Mumbai

SUSTAINABILITY IN CHEMICAL INDUSTRY

Courtesy: Accenture and American Chemical Council white paper on sustainability in chemical industry, 2010

Value chain positioning

and profitability.

SUSTAINABILITY ACCOMPLISHMENTS

Sources: 2009 ACC survey of 27 companies’ sustainability practices; Accenture Analysis

SUSTAINABILITY: CURRENT FOCUS

REPORTING AREAS

DRIVING AND MEASURINGPROGRESS

Sustainability governance

Engaging customers

Partnering with organizations and institutes

Engaging the organization’s employees

ENGAGING CUSTOMERS

LEVERAGING PARTNERSHIPS

SUSTAINABILITY INITIATIVES BY CHEMICAL COMPANIES

Energy Use

Revenues from Non- Depletable Resource

Environmentally Smart Market Opportunities from R&D Effort

Products that Reduce Greenhouse Gas Emissions

Products that Protect People

Water Conservation

Fleet Fuel Efficiency

Community outreach

Education Commitment

SUSTAINABILITY INITIATIVES BY CHEMICAL COMPANIES

Care for the community

Inclusion

Alternative fuels

Clean development

Energy Efficiency

Green Products

Resource Optimisation

Habitat conservation

Water resources

Eco-impact

SUSTAINABILITY INITIATIVES BY CHEMICAL COMPANIES

Developing sustainable communities

Ensuring safety and promoting health

Nurturing people , Fostering Talent

Conserving Water

Managing Energy Efficiently

Consuming Resources Responsibly

Responsible Governance

CHALLENGES IN CHEMICAL INDUSTRY

Courtesy:Sustainability in the Chemical Industry: Grand Challenges and Research Needs - A Workshop ReportNational Academy of Sciences

HURDLES TO ACHIEVING BUSINESS IMPACT

Cross-silo coordination proves to be the greatest hurdle for sustainability initiatives

Source: Corporate Executive Board Research, Survey of Corporate Sustainability Executives, 2007.

n=19.

What is the most difficult task in building and executinga sustainability strategy at your company?

Cross-

Silo Coordinati

on

Current F

ootprint A

nalysis

Communication/R

eporting

Business

Case Deve

lopment

Risk/O

pportunity

Assessm

ent

26%

16% 16%11% 11% 10%

Goal Setting

10%

Internal E

ducation

New Mark

et Identifica

tion

Strate

gy Deve

lopment

0% 0%

Hurdles to Effective Implementation of Sustainability Initiatives

OWNERSHIP OF SUSTAINABILITY RESPONSIBILITIES

Despite the cross-functional nature of sustainability issues, most tasks are centralized within the firm

Source: Corporate Executive Board Research, Survey of Sustainability Executives, 2007.

CentralizedDecentralized

70%

30%

67%

33%

52% 48%

30%

70%

Strate

gy Deve

lopment

Communication/R

eporting

Supplie

r Complia

nce

Identification of C

ost Sa

vings

or Reve

nue Opportu

nities

n=27.

Are the following sustainability initiatives centralizedor decentralized within your organization?

Centralization of Sustainability Activities

ORGANIZATIONAL HOME OF SUSTAINABILITY INITIATIVES

Source: Corporate Executive Board Research, Survey of Corporate Sustainability Executives, 2007.

Sustainability initiatives are most effective when housed in the CEO’s office

n=44.

Ineffective

Moderately Effective

Highly Effective

Frequency and Effectiveness

CEO’s Office

Corporate Strategy O

ffice EH&S

Corporate Responsib

ility O

fficer

Supply

Chain

Decentra

lized in

BUs

Cross-Fu

nctional Ta

sk Fo

rce

Corporate Communications

CTO

Real Esta

teLe

gal

36%

16%

11%

7% 7% 7% 7%

2% 2% 2% 2%

EffectivenessFr

eque

ncy

More than 67% of firms that house sustainability initiatives in the CEO’s office see that home as highly effective, perhaps due to the importance of cross-silo coordination to ensure success.

THE SUSTAINABILITY PORTFOLIO

What needs to be done, when and where?

Beyond Greening: Strategies for a sustainable world, Stuart L. Hart

THE FIVE SUSTAINABILITY PRINCIPLES

Growth: Go where the money is

Profitability: Align cost reduction with sustainability action

Positioning for the future: Build intangible assets

Longevity: Ensure relevance in a sustainability-conscious world

Consistency: Win the loyalty of consumers and employees

RECOMMENDS

Accenture and American Chemical Council white paper on sustainability in chemical industry, 2010

SUSTAINABILITY SPENDING

2010 2014

67.3

140.2

28

60

Globally US

Figures in billion US $

Sustainability spending is will grow at a CAGR of 15% globally from US $67.3 billion 2010 to US $140.2 billion in 2014

Source: Verdantix Ltd., UK

SUSTAINABLE BUSINESS CONSULTING SPEND

2010 2014

17

28

Sustainable business consulting spend will grow at a CAGR of 13% globally from US $17 billion 2010 to US $ 28 billion in 2014

Figures in billion US $

SUSTAINABILITY CONSULTING

Solaron Sustainability Services

Emergent Ventures

Environment Resources Management

SustainAbility

BlueSky

Accenture

Mckinsey

Bain & Co.

Booz Allen Hamilton

AT Kearny

Boston Consulting Group

Ernst & Young

With the growing focus on sustainability many sustainability consulting firms have emerged.

Also, the leading business consulting firms have their own sustainability practise

CONCLUSION

Sustainability is a matter of survival not choice

Chemical Industries are focused on Sustainability as a strategy

Sustainability Consulting is here to stay and thrive

THANKS!