Braskem Green Plastics The HR Challenge Case Study

Transcription

1 Braskem Green Plastics The HR Challenge Case Study This case was written by Heiko Spitzeck, Fundação Dom Cabral ( It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case has been compiled from publicly available sources, internal documents and interviews with Braskem executives such as Claudia Bocciardi (Director of Institutional Marketing), Jorge Soto (Director of Sustainable Development), Alexandre Elias (Director Renewable Chemicals), Marcelo Arantes (Vice-President Personnel and Organization) and Antonio Morschbacker (Director of Technology for Renewables). Further support has been received from Sonia Chapman, Mário Pino and Aline Mariscal Padeti 2016, Heiko Spitzeck, Fundação Dom Cabral No part of this publication may be copied, stored, transmitted, reproduced or distributed in any format without the permission of the copyright owner. 1

2 Braskem Green Plastics The HR Challenge HEIKO SPITZECK 1 It s early 2007 and Marcelo Arantes, VP Personnel and Organization of Braskem, was scratched his head. His colleague, Claudia Bocciardi, Director for Institutional Marketing was asking for help in order to capacitate the commercial team for the new Green Plastics business. However, he soon realized, that the challenge he faced extended beyond merely the commercial function alone. Braskem, Brazil s leading petrochemical company, had just announced the successful production of a green plastic which is made out of Ethanol. The process substitutes oil in the production of plastics, in this case polyethylene (PE) by a renewable source: sugarcane. Claudia Bocciardi, Director for Institutional Marketing recalls the challenges faced by the commercial team, trying to cater for the interests of potential clients: Our commercial teams were heavily questioned, mainly by clients in Europe. The big questions concerned the competition between sugarcane and food production, and the deforestation of the Amazon forest. Traditionally, the commercial staff of Braskem was used to sell commodities in a business-to-business (B2B) environment. The discussion between the clients purchasing departments, and Braskem s sales force usually centred on price, followed by quality and time. The new Green Plastics business, however, has led sales people to talk to potential clients marketing, sustainability and innovation directors. There the discussion shifted from price to risks along the value chain, how to prove the plastic is really made from sugarcane, and how to communicate the benefits of Green Plastic to the final consumer. Not all Braskem s sales people were fit for these challenges. Marcelo recalls: There was a clear challenge from the market on how to convince potential clients to spend a little more on Green Plastics for the reputational value it generates being a sustainable product. So team members needed negotiation and convincing skills. However, Marcelo realized that the Green Plastics team needed more than just sales people, because its business model was different from Braskem s traditional business: One challenge was to establish the qualification, people in the Green Plastic teams needed to possess. What are all the potential situations these people will face in the marketplace? How to organize the team and capacitate it to manage a new start-up business in Green Plastics? About Braskem Heiko Spitzeck, Fundação Dom Cabral All rights reserved. 2

3 Braskem is the leading Brazilian petrochemical company and the largest thermoplastics producer in the Americas. It operates 36 industrial plants in countries such as Brazil, U.S., Argentina and Germany. The company is listed on the Brazilian Stock Exchange BOVESPA and since 2005 has been included in its sustainability index (ISE BOVESPA). It is also listed in New York (NYSE) and Madrid. In 2006 the company was controlled by Odebrecht (38.6% of shares), Petroquisa (8.3% of shares) while the rest of the shares are on free float. i Table 1: Key financial performance data for Key Performance Data Net Revenue (R$ millions) 16,969 18,788 EBITDA 3,023 3,250 Net Debt Net Income In 2007 Braskem had the ambition of being among the 10 largest petrochemical companies worldwide in terms of market value. ii The company s Vision for 2020 is to be the world leader in sustainable chemistry, innovating to serve people better. In 2006 the company produced 6 million tons of chemicals and petrochemicals including Polyethylene (PE), Polypropylene (PP) and PVC. Within the value chain Braskem concentrates its strategy on basic petrochemicals and thermoplastic resins. For it s production it traditionally buys oil from companies such as Petrobras. The produced thermoplastic resins produced and converted by plastic converter companies into, for example, electronics and car parts, and packaging materials. Traditionally petrochemicals are a commodity business, in which strategic attention is directed to preserving margins and reducing costs. As research by Deloitte shows margins have shrunk and commoditization has increased in the chemical industry during the years iii This is why Braskem opted for a vertical integration, which led to a reduction of suppliers and to the consolidation of the sector. Figure 1: Braskem s location in the value chain iv 2 See Braskem 2009 Annual and Sustainability Report, p

4 COMPETITIVE INTEGRATION NAPHTHA CONDENSED GAS / ETHANOL ADDED VALUE COMPETITIVENESS EXTRACTION Raw Materials 1 st GENERATION Basic Petrochemicals 2 nd GENERATION Thermoplastic Resins 3 rd GENERATION Plastic Converters The green plastic Traditionally plastics such as Polyethylene are produced from oil and gas. Braskem has successfully produced Polyethylene made from Ethanol in a pilot plant, which in turn is made from sugarcane. It has thus substituted a non-renewable raw material (oil & gas) by renewable sources (sugarcane), which in turn can be considered a major sustainable innovation. The production of the pilot plant required an investment of U$ 5 million, and it reached a capacity of 12 tons annually. The product was used for tests with potential clients. Figure 2: The difference between traditional and green PE v 4

5 Traditional Sustainable Oil Polyethylene Gas Sugarcane based Ethanol The whole production cycle starts on the sugarcane plantations, which feed into distilleries, where sugar juice is fermented and distilled to produce ethanol. Through dehydration processes ethanol is transformed into Ethylene, a key ingredient in the production of plastics. Ethylene is polymerized into polyethylene (PE), which is then used by plastic converters in the same way PE made from oil. The production of 1ha of land results in 3 t of Green PE. For a production of 200,000 t of Green PE approx ha of land are needed, an area, which represents 0.02% of all arable land in Brazil. Sugarcane is mostly grown in Brazil s southeast region, far from the Amazon located in the northwest. Figure 3: From sugarcane to Green PE Metrics and Relations vi produces produce produce produce 1 Hectare of land 82,5 ton Sugar Cane 7200 l Ethanol 3 ton Green Ethylene 3 ton Green PE 5

6 During its growth sugarcane consumes CO 2 from the atmosphere. Research by Fundação Espaço Eco has shown that for each ton of Green PE roughly 2.5 t of CO2 are absorbed. In contrast to oil-based plastics, Green PE does not emit CO 2 in its production process and a production of 200,000 t of Green PE would avoid the emission of 920,000 t of CO 2, equivalent to the CO 2 emissions of 1 million cars per year. These characteristics are highly attractive for companies that want to avail themselves of a differentiating factor in sustainability, especially in regard to climate change. Potential clients are Natura, Danone, Faber-Castell, P&G, Coca-Cola, Johnson & Johnson as well as Nestlé. The Green PE is chemically identical with PE made from oil, which allows clients to use their existing production facilities and recycling technologies. Braskem calls this drop in as clients can simply drop the Green PE into their existing processes, an advantage compared to other available bio-plastics. The figure below summarizes the whole life-cycle of Green PE. Figure 4: The whole life-cycle of Green PE vii FROM CRADLE TO CRADLE Sugarcane The sugarcane crop metabolizes the CO 2 to produce sucrose Ethanol CH3-CH2OH At the distillery, the sugar juice is fermented and distillated to produce ethanol Ethylene CH2=CH2 Through the dehydration, the ethanol is transformed in ethylene Very Favorable Ecoprofile* Captures and Fixes 2,5 t CO 2 /t PE Recycling The green polyethylene is 100% recyclable (Mechanical / Incineration) * Preliminary Ecoeficiency Analysis (From cradle to Braskem gate) Fundação Espaço Eco 2007/2008 Carbon capture The green polyethylene is transformed in final products in the same unities already existents Green PE [CH2=CH2] The ethylene is polymerized in polyethylene production unities While all this sounds like a major sustainable innovation, there are, however, some issues of concern. By using sugarcane, Braskem involves itself with a completely new value chain based on agribusiness. The sector, and in particular the Ethanol business 6

7 has received criticism relative to social issues such as the displacement of food crops and the raising of food prices, occupation of indigenous lands, child and slave labour together with sub-standard working conditions. Additionally, environmental issues abound such as deforestation, expansion into conservation areas, water consumption and pollution, impacts on biodiversity, environmental degradation due to monocultures and sugar cane burning. viii The next step: Setting up a Team & Building Client Demand All the positive characteristics of Green PE production by a renewable source, favourable carbon footprint and drop-in are potentially very attractive to companies, pursuing a differentiation strategy and wanting to position themselves as sustainable companies. This applies above all to brand owners such as Nestlé, Danone, Coca-Cola, Procter & Gamble, which aimed to differentiate themselves for consumers sensitive to sustainability issues. Braskem s research showed that sustainability-oriented consumers are mainly located in Japan and Europe. Commercial staff needed to understand these markets and how their clients strategically addressed consumers sustainability interests. Braskem aimed to invest US$ 290 million into a green PE production plant with 200 kty ix capacity. If this investment in operations should pay off, Marcelo needed to build a high-performing team for the Green Plastics start-up within Braskem s existing organization. i See Braskem s 2006 Annual Report. ii See Slide No. 35 of his presentation O case Braskem at the ExpoGestão fair, iii See Deloitte (2010): The chemical multiverse Preparing for quantum changes in the global chemical industry, p. 6. iv Taken from Braskem presentation Sugarcane Based Polyoefins made by Rodrigo Belloli at the Biopolymer World Congress in Venice, April v Taken from Braskem presentation Sugarcane Based Polyoefins made by Rodrigo Belloli at the Biopolymer World Congress in Venice, April vi Taken from Braskem presentation Sugarcane Based Polyoefins made by Rodrigo Belloli at the Biopolymer World Congress in Venice, April vii Taken from Braskem presentation Sugarcane Based Polyoefins made by Rodrigo Belloli at the Biopolymer World Congress in Venice, April viii See Xavier C. V., Pitta F.T. and Mendonça M.L. (): A Monopoly in Ethanol Production in Brazil: The Cosan-Shell Merger; Goldemberg J., Teixeira Coelho, S. And Guardabassi P. (2008): The sustainability of etanol production from sugarcane, in Energy Policy 36 (6), p ; FAO (2013): Biofuels and the sustainability challenge, Trade and Markets Division, Food and Agriculture Organization of the United Nations, Rome. See also: (accessed ). 7

8 ix Kty = kilo tonnes per year. 8