Presentation on theme: "Sustainability in Industry: Benchmarks and Road Maps"— Presentation transcript:
1 Sustainability in Industry: Benchmarks and Road Maps Darlene SchusterDirector, Institute for SustainabilityNovember 2008
2 AcknowledgementsCalvin Cobb, Chair Institute for SustainabilitySubhas Sikdar, Chair Instiute for Sustainability 2008Golder and AssociatesBeth Beloff,Dicksen Tanzil,Abigail MartinIndustry Representatives to Center for Sustainable Technology Practices (CSTP) Sustainability Guide Task GroupCarol English, Cytec Industries, Inc.Charlene Wall, BASFDave Taschler, Air ProductsLafayette CollegeProfessor Javad Tavakoli
3 The Institute for Sustainability A community of sustainability “practitioners”Companies (Center for Sustainable Technology Practices)Professionals—industry and academic (Sustainable Engineering Forum)Youth (Youth Council for Sustainable Technology Practices)Organized under the American Institute of Chemical Engineers (AIChE)Professional membership organizationNon-profit 501c(3)
4 Overview of the Institute IfSPractitioners, students & companiesSustainabilityEngineering Forum745 AIChE members950 additional non-AIChE members$25 duesCenter for SustainableTechnology PracticesIndustry Group10 companies, growingAir Products, BASF, Cytec,Dow, FMC, HoneywellInterface Inc. ,Middough (WalMart)Youth Council onSustainable Sciences& TechnologiesPartnership w/ SustainUS9750 students, growingIncorporates sustainabilityinto undergrad research,sponsors awards & studentchaptersProjects of IfS1.Sustainability IndexPurpose of financial guidance,benchmarking & managementDifferential to other indicesPotential for high profitability2. ICOSSE Aug 09Mission: to serve the needs of and influence the efforts of professionals, academes, industries, and governmental bodies that contribute to the advancement of sustainability and sustainable development.
5 Triple Bottom Line: A Business View of Sustainability
6 “Sustainability is a path of continuous improvement, wherein the products and services required by society are delivered with progressively less negative impact upon the Earth”Defined by AIChE Institute for SustainabilityNovember ‘04-July ‘05 Grassroots Project, Earl Beaver, Chair IFS
8 How is your Company’s Sustainability Performance Viewed? By the community?By your shareholders?By your customers?Versus your peers?The AIChE Sustainability IndexTM
9 How is your Company’s Sustainability Performance Enhanced? Via the value chain?by corporate decision making?by job function?The CSTP Sustainability RoadmapA Process for Sustainable Decision Making
10 Purpose of a Sustainability Index Investment guidesEthical investment/SRILong-term return (“stock picks”)Stock market indicesStakeholder ratingsBenchmarks for company management
11 Examples of Financial SI’s Investment Guide?Market Index?Manage-ment Benchmark?Consult to Companies?DJSIFTSE-4GoodGS- SustainInnovest
12 An Example The Dow Jones Sustainability Index (DJSI) Investment guideIncludes only companies that meet DJSI criteria – governance, transparency, accountabilityStock market indexTrack market performance of DJSI componentsSubset of corresponding broader indexesDJSI World, subset of Dow Jones World IndexBenchmarkingInclusion, being sector leaderConsulting services through SAM – analysis and recommendations for companies who want to be included, improve ratings12
14 Reporting of Financial SI’s Dow Jones Sustainability IndicesInclusion (in or out), ‘Supersector Leaders’Individual company scores & analysis – to licensees onlyFTSE4GoodInclusion (in or out)GS SUSTAINRatings: leaders, average, and laggardsAnalysis for sector leadersenergy, mining & steel, food & beverage, pharmaceutical, alternative energy, environmental technologies, biotechnologyInnovestTop companies – sector leaders & Global 100 listRatings (AAA to CCC) and analysis, for investor clients only14
15 What a Company Can Get from Financial SI’s Dow Jones Sustainability IndexesBenchmarking with peers, advisoryFTSE4Good“Guidance and support” for companies to work towards inclusion in FTSE4Good – through EIRISGS SUSTAIN(none specific to sustainability and its ESG analysis)Innovest“Confidential custom benchmarking studies” for companies – operational efficiency and business opportunities per peer analysis15
16 Concept of the AIChE Sustainability Indexsm Based on the Wright Killen Refinery Survival Index (Oil and Gas Journal)Meant to fill a gap:Relies more heavily on quantitative performance indicatorsProvides a heavier weighting applied to various indicators of safety and environmental performance and to technological innovation towards SDAvailable to range of sectors, company sizeThe scoring: robust methodology designed to account for subjectivity in a transparent manner.Designed to avoid the ‘black box’ problem of other indicesIntended for executives and directors to manage company business linesGlobal, initially focusing on major chemical companiesPublication remains silent on individual company ratingsCompanies find it useful to benchmark themselves relative to a set of companiesResearch funded by United Engineering Foundation
17 Status Needs analysis completed in the Fall of 2005 Pilot study performed in 2006LaunchMethodology Published June ‘07Index for Fortune 500 CPI November ’07Additional pilots underway for Engineering Construction and Energy/ Power SectorsRequests to explore development of index from water resources, textile chemical manufacturersResearch funded by United Engineering Foundation
18 Advisory Panel Mission Advisors: to protect and promote the soundness, credibility and utility of the AICHE Sustainability Index™Advisors:International financial communityIndustrial sector expertsMediaNon-governmental Organizations (NGO’s)
19 AIChE Sustainability IndexTM for the Chemical Industry November 2007 Gray Shading = Ranges of individual company scoresBlue Line = Simple average of 11 representative companies
20 AIChE Sustainability IndexTM for the Chemical Industry November 2007
24 AIChE Sustainability Index for the Chemical Industry (Simple Average) September 2007 Gray Shading = Ranges of individual company scores
25 The AIChE Sustainability IndexTM Fall 2007Notes:For Sustainability Index methodology and data sources, see CEP, June 2007, ppCompanies included in the assessment are ____, ___, ____, …Strategic CommitmentEnvironmentalPerformanceProductStewardshipSafetyInnovation – meeting social needsValue-ChainManagement188.8.131.52.03.83.9
26 Elements of the Index Strategic Commitment Safety Performance Environmental PerformanceResource UseWaste & EmissionsEnvironmental liabilitiesProduct StewardshipInnovationProduct and service innovation – meeting social needsProcess innovationValue Chain ManagementEHS ManagementSupply Chain ManagementStakeholder EngagementThese are the new screening criteria Golder proposes based upon available information.
27 Unique Elements Strategic Commitment Safety Performance Environmental PerformanceResource UseWaste & EmissionsEnvironmental liabilitiesProduct StewardshipInnovationProduct and service innovation – meeting social needsProcess innovationValue Chain ManagementEHS ManagementSupply Chain ManagementStakeholder EngagementThese are the new screening criteria Golder proposes based upon available information.
28 Calculations Use Existing Data Sources Company reportsAnnual Corporate ReportsSEC 10-K FilingsSustainability/EHS ReportsGovernment AgenciesEPACSBU.S. Patent & Trademark OfficeCompany websitesMedia reportsIndependent NGO reports
29 Value Chain Management Details Environmental Management SystemCorporate level environmental management system – ISO14001, RC-14001, RCMS or EMAS certifiedFacility level environmental management system – ISO14001, RC-14001, RCMS or EMAS certified% certifiedIndication of presence/current effortSupply Chain ManagementPresence of a supply chain policies and procedures related to sustainabilitySustainability evaluation required of suppliersAudits of supplier practicesPolicies extended to suppliers’ suppliers
30 Value Chain Management Ideal Score of 7 Value-Chain Management—Project OrientationSystem in place to manage sustainability performance in operations and project deliverySystem in place to manage sustainability performance of sub-contractors and other suppliersSignificant number of projects demonstrate excellence in long-term environmental and social performanceValue-Chain Management—Product OrientationExternally recognized environmental management system in-place at the corporate level and at all major facilitiesPresence of company-wide supplier management policies and procedures related to sustainability, applied and enforced to all supply-chain entities with potentially significant impacts
31 AIChE Sustainability IndexTM Drills down, but remains broad enoughBased on public dataTargeted for managers and corporate executives, not investorsFocused onEnvironmental – performance metricsSafety – performance metrics (workplace, process)Product stewardship – mgmt system, historyValue chain management – mgmt systemSustainability innovation – initiatives, tools, resultsSocial performance and strategic management also coveredLess than other indexesBenchmarked to peers and best practices
32 How is your Company’s Sustainability Performance Viewed? By the community?By your shareholders?By your customers?Versus your peers?The AIChE Sustainability IndexTM
33 How is your Company’s Sustainability Performance Enhanced? Via the value chain?by corporate decision making?by job function?The CSTP Sustainability RoadmapA Process for Sustainable Decision Making
34 Supported by member companies CSTP formed in 2004 as part of the AIChE’s Institute for SustainabilitySupported by member companiesTailored collaborative projects and pre-competitive researchMonthly sustainability education “virtual” sessionsUtilize members to conduct project workProject: Development of Case studies and evaluation of Decision Support Tools in industrial UseProject: Focus Groups for Survey of Sustainability in the Chemical Industry (PriceWaterhouse Coopers)Project: R&D Checklist for SustainabilityProject: Sustainability Roadmap
35 BackgroundProject: EPA Grant 2005: Case Studies of Industry Decision Support tools for SustainabilityIdentified gaps & challengesGreat tools, not widely usedNeed for better integration of sustainability into business processesUnderstand context of management and technology decisions along value chainUnderstand key decision points, relevant SD considerations, and key functional areas/decision makers involvedNeed to understand the broader set of tools, approaches, and other resources to help integrate SD into the organization
36 Roadmap Structure & Organization Composite Checklist –Questions to guide sustainability consideration at each value-chain stageMain Page: OverviewKey corporate functions & resourcesSummary Table –Form to record answers, action plans, responsible parties, status and documentationScoring FrameworkHighlight issues and opportunities, updated at each stage
37 Potential for Improvement SD Roadmap Summary Table 192 Key Sustainability QuestionsWhere to ask them during process and product developmentWho should be included in the “answers?”
38 SD Considerations Resource Use Environmental Impact Health & Safety Energy use, material intensity, water use, land useEnvironmentalEnvironmental ImpactGHG emissions, air emissions, solid waste, (pollutant effects)Health & SafetyToxic reduction, hazards, process safetySocialSocietal ImpactWorkers’ well-being, local community impacts/QOL, global societal impacts/contributionsEconomic ImpactFinancials along value-chain (corporate, customers, …)Econ.ManagementInternal process, value-chain partnership, stakeholder engagementBusiness PerspectiveBusiness StrategyAlignment with business strategy, core values & competencies, market & regulatory drivers
39 Resource Use Energy Use How energy intensive is the feedstock? Which feedstock materials are the most energy intensive and are there energy-efficient alternatives?Can the feedstock be produced using renewable energy?Has energy consumption been optimized for the selected process?Can any byproducts be used as energy ?Will energy be saved or conserved in the distribution of this product vs. alternative products/processes?Will the use of this product save or conserve energy for the customer versus alternative products/processes?Would there be opportunities to use renewable energy in the production, distribution or use of the product/process?Are there alternatives for more energy efficient transportation/distribution system?Could the product be reused/recycled to reduce life-cycle energy use?Water UseHow water intensive is the feedstock? Which feedstock materials are the most water intensive and are there water-efficient alternatives?Has water use been optimized for the selected process as both a reagent and processing medium?Have water source alternatives been evaluated and considered?Have water quality considerations been aligned with use requirements?Will the product/process be more water efficient in production and use?Has water been reused and recycled appropriately?Have equipment and technology alternatives been evaluated for optimizing water use?
40 Elements of the Roadmap Value Chain StagesCorporate FunctionsCorporate functions to involve or consult at each value chain stage.(RACI Chart)Sustainability considerationsTools & Resources
41 Engaging Key Corporate Functions Value Chain StagesCorporate FunctionsCorporate functions to involve or consult at each value chain stageSustainability considerationsTools & ResourcesValue Chain AxisBusiness Strategy DevelopmentUpstream InputR&DIdea GenerationConceptScopingDefinitionDevelopmentScale upCommercializationProductionDistributionIndustrial Consumer UseCustomer UseEnd of lifeFacilityMolecule
42 Engaging Key Corporate Functions Value Chain StagesCorporate FunctionsCorporate functions to involve or consult at each value chain stageSustainability considerationsTools & ResourcesCorporate Functions Axis(each box represents a different corporate function that is critical to driving sustainability in the organization)Executive ManagementFinancialBusiness ManagementR&DEHSEngineeringManufacturing / OperationsLogistics / Supply ChainSalesCustomer Technical Service/SupportMarketingCommunicationsPublic RelationsHuman ResourcesLegalInformation Technology & Management
43 Sustainability Considerations Checklist along the Value ChainSustainability ConsiderationsValue Chain AxisSustainability ConsiderationsSpecific questions, applied and modified along the value chain whenever appropriate
44 Elements of the Roadmap Value Chain StagesCorporate FunctionsCorporate functions to involve or consult at each value chain stageSustainability considerationsTools & ResourcesTools & ResourcesPublicly available & in-house tools to support sustainability considerations along value chain
45 Scoring Framework Idea Genera-tion Concept Scoping Defini-tion Develop-mentScale-UpCom-mercial-ization
46 Using the RoadmapModel developed by CSTP member companies & associated consultantsNext step… validation of concept in use
47 Illustration of Roadmap “Evaluation of Biofuels Processing Plant—Upstate New York”.Reuse of existing brownfields sitePossible Feedstocks: Corn; WillowStages of Roadmap to Illustrate:Upstream Input Stage (show examples)Commercialization Stage (in progress)Provide feedback on criteria, questionsPartner with Lafayette College cross functional team
48 Process of Evaluation Our Hypothetical Company InformationLocated in upstate New YorkPurchases corn primarily from mid-western statesHas onsite corn ethanol refineryGrows willow biomass onsiteHas onsite willow ethanol refineryFocus of study:Not to consider the most sustainable industry possibleDeveloping a plausible vantage point to make comparisons between corn and willow ethanol
49 Test Case: Biofuels Plant Established process for biofuel from publicly available informationAnswered Roadmap questions based on internet sources & personal/professional opinion/insightsUsed publicly available information on willow and corn-derived feedstocksFocused on issues with sustainability and energy efficiency
50 Process of Evaluation Example Industries Corn EthanolWell developed industryStudies done by a variety of sources; data readily availableProduction plants already in operation across the US2 processes: dry and wet milling
51 Process of Evaluation Corn Ethanol Process Flow Diagram One of the biggest challenges in evaluating sustainability impact is to adequately consider the system boundaries. Too tight and you can miss a critical interaction. Too broad and you can do an adequate assessment of the problem.
52 Process of Evaluation Corn Ethanol Energy Balance
53 Process of Evaluation Corn Ethanol Facts about corn ethanolCostCorn$4.00 per bushelCorn ethanol$ $1.50 per gallonProductionUS production goals15 billion gallons by 2017Current production4.8 billion gallons of ethanol in generalDemand calculated to be 5.4 billion tonsEstimated production capacity6.183 billion gallons of ethanol in general from 113refineries in 20 states
54 Process of Evaluation Corn Ethanol Production Millions of gallons
55 Process of Evaluation Example Industries Willow EthanolIn developmental stagesMajority of studies done by SUNY ESFOnly one plant in operationMore energy/sf than corn
56 Process of Evaluation Willow Ethanol Process Flow Diagram
57 Process of Evaluation Willow Ethanol (Energy Balance)
58 Process of Evaluation Willow Ethanol Facts about willow ethanolCostsWillow biomass$50 per dry ton cellulosic biomassWillow ethanol$ $2.25 per gallonProductionUS production goals1 billion gallons per year by 2015Current production0.66 million gallons of cellulosic ethanol per year from Iogen in Canada
59 Upstream Input Questions Can feedstock price, availability and access be maintained over the long-term?Would customer/stakeholder concerns affect the future use of the feedstockAre there current or expected future regulatory drivers that may affect steady supply of feedstock?
60 Long-term viability of corn feedstock not likely to be maintained. Can feedstock price, availability and access be maintained over the long-term?Corn Feedstock expected to continue to see dramatic increase in demand resulting in increase in price.Increase demand for Corn Feedstock causing an increase in prices.Corn planted in 2007 saw a 113% increase over 2006Corn is in high demand as a food product as well.used livestock feed various livestockcorn syrup as the sweetener for most soft drinks. (Hargreaves, 2007)This competition will further limit access and raise prices.Corn feedstock price and availability can not be maintained if demand continues to increase. The limit for maximum corn production has nearly been reachedNew technology in feedstocks may cause drop in demand and price.Long-term viability of corn feedstock not likely to be maintained.
61 Can feedstock price, availability and access be maintained over the long-term? Demand for low-value timber, willow, has dramatically decreased in New York state recentlyCurrent growth rate exceeds removal by 317%. (Bower, 2007)Production potential of 188 million dry tons of willow in NYS by 2008Long term market should be stable (Bower, 2007)Willow feedstock shows very little fluctuation in price or availability.
62 How energy intensive is the feedstock How energy intensive is the feedstock? Which feedstock materials is the most energy intensive and are there energy-efficient alternatives?Corn feedstock production is heavily reliant on fossil fuels for the production of pesticides and fertilizers, operation of the equipment, and transportation.Short Rotation Willow Coppice (SRWC), the hybrid of willow used as biomass for energy, is much less energy intensive than corn. This is because willow has far fewer inputs.Other alternatives for cellulosic ethanol feedstock such as sugar cane, switchgrass and miscanthus have the potential to be developed as very low input crops, if suitable for the region – lower Net Energy Balance.Willow is more energy efficient than corn, but not necessarily the most energy efficient.
63 18. Would customer/stakeholder concerns affect the future use of the feedstock? Corn feedstock is being impacted by the concerns of outside political/private stakeholders.President Bush - by the end of the decade America will meet 20% of oil needs with renewable sourcesDemand requires 35 billion gallons of fuel primarily from corn ethanol, already effecting the allocation of fields to corn and the price of dairyIn % or 3.4 billion bushels of the corn crop is expected to be needed for ethanol, up 20% from 2006.With expected increase in demand, a shortage is expected in corn stockpiles going in to 2008, despite a billion bushel crop predicted for (Brahic, 2007)A recent surge in corn-based ethanol investment is encouraging growth. (Hasan, 2006)Interest and concern from political/private stakeholders will have a significant effect on how the corn crop is used in the future.
64 18. Would customer/stakeholder concerns affect the future use of the feedstock? Willow feedstock initially would be grown almost exclusively on land being leased to the producers via private land owners and farmers. (Pioneering Energy Crops..., 2000)Cooperation and the future of the feedstock are contingent on the confidence of landowners in the market for willow ethanol.Willow-based ethanol industrial scale is very dependent on interest from investors, customers and potential farmers
65 Would the new product or process reduce GHG emissions over the entire lifecycle? Plants sequester CO2 – Given the conditions of 0.25 tons ground C increase per hectare per year, “no net CO2” will be emittedFewer N2O emissions will be released in willow farming than is released in corn farming because of the fewer amounts of fertilizers usedShipment by train and truck is needed and will require more energy usage than shipment by pipelinesGHG emissions are increased because of long-distance shipment by diesel burning trucksWhile willow feedstock has less GHG emissions compared to corn, sequestration depends on farming conditions and GHG emissions in other life-cycle stages especially remain significant
66 Are there any demonstrated or anticipated changes to the marketplace or regulations that could affect environmental, societal or economic attractiveness?Increasing costs of fossil fuels and future regulatory and other constraints on GHG will make ethanol less expensive than gasolineBoth cellulosic (willow) and corn ethanol are heavily tied to the government through subsidiesIf political opinion and support were to be turned away from ethanol, this fledgling industry would have major issuesIf the US government drops its tariffs against sugar cane import equaling $1.05 per gallon ethanol, it would make the marketplace more challengingWillow ethanol can be very attractive in the long term, however the industry can only develop with the continuation of political support and subsidies
67 23. Are there current or expected future regulatory drivers that may affect steady supply of feedstock?Willow plant feedstockGrowth is currently exceeding the rate of harvestLittle or no competition for the feedstock among other industriesGreat abundance near the plant site. (Bower, 2007)Corn feedstock production was the most subsidized crop in America with an allocated $37.5 billion dollars in subsidies between 1995 and 2003 (Bryce, 2005)Huge financial burden will not be sustainable as alternative feedstocks are developed limiting the competitiveness and scope of corn as a feedstock. (Keeney, 2006)Great demand has caused the corn price per bushel to rise over 50% in less than two years. (Hargreaves, 2007)Future supply of corn feedstock is very dependent on how much land can realistically be used to grow corn, what the corn is to be used for, and how long the subsidies last.Variation in Regulatory drivers (outside of subsidies; e.g. water run off, fertilizer use and misuse) must be more fully understood and discussed with policy makers. Impact may have significant impact on supply of corn feedstock.
68 Sources & Documentation Using the ChecklistSummary TableQuestionSummary of FindingsAction ItemsResponsible PartiesPriority/ StatusSources & Documentation… CompletedLegend:High priorityMedium priorityLow priority
70 What the Guide DoesProvides list of considerations asked as questions by key decision makers at each stageAbility to score responsesTrack improvement to sustainability concepts through each stageProvides list of resources and tools
71 SummarySustainability Roadmap identifies key sustainability questions and criteria in a gated process/product development schemeUse of Roadmap in biofuels case illustration appears to be increasing the level of discourse on sustainability issues in a short time periodRoadmap offers a holistic framework for consideration of progress down the path towards sustainabilityFeedback is continually sought for improvement of the model
72 Sustainability: An emerging trend? All the benefits & blessings flowing from the use of the earth were held to be the rightful heritage of all generations“…treat the earth as though we are tenants, rather than owners”….we must leave behind ‘enough and as good’ for others”The Old Testament- Genesis & DeuteronomyJohn Locke, Two Treatises of Government, 1689“Then I say the earth belongs to each…generation during its course…no generation may contract debts greater than may be paid during the course of its own existence”Thomas Jefferson, 1789
73 2008 Projects (2009 continuation) Sustainability Guide (English—20 min)CSTP SUSTAINABILTY GUIDE (Cytec lead)Release of Version 1 November 18, 2008Version 2 Tools/scoring additionsRaising Awareness (BASF lead)Internal—Newsletter review of 08 and 09 needsSelect/approve Exchange topics for 093rd Party guidelines (FMC/Colgate/Packaging Institute)Survey plansSupply Chain Certification Issues TableBest Practices (Dow 2008, 2009?)Tools (Air Products)Publication of Tools to CSTP membersIncorporation into Sustainability Guide Version 2
74 2009 CSTP Proposed Projects Sustainability Guide (English—20 min)Biofuels Metrics Roundtable (John Carberry, lead; Federal Request)Total Cost Assessment/Full Cost Accounting Users Group (Request by GE, Toyota, FormosaWater Resources Workshop (Request by ASME)Academic Sustainability Roundtable (Request by U Michigan)Certification of Technologies for Carbon Management (request Chevron)Certification of Water Footprinting (10 minutes, overview by xxxx)NIST Metrics Data Sourcing (Request by NIST)Sustainable Supply Chain Forum (Colgate-Palmolive, Packaging World)Interaction with ACC research activities (Honeywell)More??? Eastman????