Sustainability is no longer just about compliance with regulators and with NGOs. With the customers and investors joining the long-term call for resource protection, this has become a hot topic of the board of directors of chemical companies. Sustainability also involves more issues than in the past, from water and food supply to climate change. But all of these concerns also have a major benefit. For many companies, the demand for sustainable products provides opportunities for revenue and profit, exceeding the costs involved.
Most chemical companies have realized this potential and have developed sustainable development strategies. But they have been trying to develop effective investment business cases. Compared with most other investments, their proposals are often smaller and often cannot be approved because the benefits are too "soft.". However, some companies' investment in sustainable development has achieved higher returns through higher profit margins. The key to success is to support the company's new products and services, have clear strategic aspirations, focus on the generation of key values, and strive to promote the change of the organization as a whole.
The interests of different stakeholders
Until 2000, the chemical industry had little demand for sustainability, in addition to the need to protect workers' health and safety and prevent environmental pollution. Since then, their ambitions have grown. The UN sustainable development goals released in 2015 include ensuring that the population has sufficient food, water and other key resources over the long term. In support of these goals, some governments have set strong sustainability goals and strengthened implementation.
With the help of NGOs, consumers and the public have also made their voices. Whether you operate a p-xylene plant in China or a methanol plant in the United States, your neighbors know your operations and are increasingly willing to participate in protests and boycotts. Retailers, as agents for consumers, have also stepped in, and Wal Mart and other giants ban chemicals such as triclosan from being off the shelf.
Finally, institutional investors increasingly regard sustainability as the investment standard. A 2014 report from the forum for sustainable and responsible investment found that sustainable development focused investments now account for nearly a fifth of managed assets. People's attention is mainly on energy stocks, but is beginning to shift to chemicals.
These trends also have a good side: they create the need for new products and services that address sustainable development challenges. Sustainability is likely to shift from a compliance issue to a source of income, at least for an important part of the chemical industry.
Develop sustainable development strategy
chemical companies are increasingly aware of this demand. In 2015, BCG and MIT Sloan Management review jointly conducted an annual survey on sustainable development in different industries, 85 percent of them reported that they had developed sustainable development strategies. That's more than any other industry, up 70 percent from 2009. Also in 2015, 95 percent of chemical executives said investors were more concerned about sustainable development performance - but only 36 percent said their companies had developed clear business cases or proven value propositions for sustainable development. That is up from 19 percent in 2009, but it also shows that many companies are still struggling to invest in sustainable development plans. (see BCG's article, "investors are more concerned about sustainability than many executives think," may2016).
In order to understand the experience of chemical companies in sustainable development strategy, we studied 15 chemical and petrochemical companies in developed countries and emerging economies. There are not only diversified companies but also key companies in the sample. Through interviews and other studies, combined with the insights of the BCG project, we have established a framework that can help chemical companies gain more value from sustainable development initiatives and investments. The framework consists of three steps: setting strategic objectives, clarifying business cases and driving results.