TATA STRATEGIC MANAGEMENT GROUP

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1 Acting Green Philosophy to Results Chemistry and us Our lives and improving lifestyle are highly correlated with advances in the chemical industry; we consume, touch and interact with various chemicals throughout the day. However, in a public image study by the European Chemical Industry Council (Cefic), the chemical industry ranked 6 th out of the 8 industries surveyed. Electronics Food Automobile Pharmaceutical Electricity 61 Chemical 49 Petrol/Oil 39 Average: 58 Nuclear Energy 37 % of positive replies Fig 1: Public Image of Industries: Cefic survey EU The study highlighted water and air pollution, environmental damage, health risks and factory accidents as the most significant risks impacting perception. Industry Air Pollutants 1 Volume Discharge = Toxicity x Volume Industry Discharge Primary metals 11 Chemicals 100 Chemicals 100 Primary metals 99 Paper Products 90 Petroleum 3 Petroleum 66 Paper 16 Food Products 31 Fabricated Metals 11 Wood Products 3 Transportation Equipment 9 Transport Equipment 9 Industrial Machinery 3 Fabricated Metals 6 Electrical Equipment Textile Mills 3 Wood Products Electric Equipment 3 Food Products Industrial Machinery Textiles 0 Fig : Outside the fence discharges by the chemical industry Note: 1. Air pollutants include CO, NO X, PM 10, PM.5, SO, VOC. Indexed to chemical industry at 100 1

2 Based on data * for air pollution and toxic discharges, the chemical industry ranks amongst the highest vis-à-vis other industries; an indicator that highlights the need for a makeover. There are various ways of building a sharper, positive image. Some of the available mechanisms are establishing industry value through innovation, addressing current societal concerns through sustainability efforts, building a consumer interface through ingredient branding, and reinforcing industry credibility through effective communication. This is where green chemistry can help catalyze the industry into collective action. The Green thought process There has been a quiet movement brewing, asking consumers to demand green and manufacturers to supply green products. What is green chemistry? Simply put, it is a philosophy; a science based economically driven approach to environmental protection and sustainable development. It is chemistry for pollution prevention with reduction or elimination of hazardous chemicals and wastes. 1 The roots of green chemistry began with work done by the early proponents, Paul Anastas and John Warner. They propounded twelve tenets that form the basis of designing green chemical products and processes. Supplier Input Process Output Customer Manufacturers Distributors 1. Use renewable feedstock. Use of catalysts rather than stoichiometric reagents Consumers Environment Academia Universities & research institutions 3. Design less hazardous chemical synthesis 4. Avoid chemical derivatives 5. Maximize atom economy 6. Increase energy efficiency 7. Use safer solvents & reaction conditions 8. Prevent waste Regulatory Framework Government bodies & independent associations 9. Design safer chemicals/ products 10. Design products that degrade after use Control 11. Analyze in real time to prevent pollution 1. Minimize potential for accidents Fig 3: Tenets of Green Chemistry * US Environmental Protection Agency (EPA) 006 data

3 The view of green chemistry provided in Fig 3, lets us visualize the impact that green chemistry can have on suppliers and customers, and emphasizes the need for awareness and action at both ends of the chemical value chain. Increased regulation, cost optimization measures and rising consumer concerns about business ethics are driving chemical companies to delve deeply into the sustainability of their supply chain. 3 As per companies such as BASF and Dow Chemical, customers and investors have expressed interest in socially responsible activities being undertaken and initiatives to address challenges such as climate change. Benefits to industry The economic aspect of green chemistry is shown below through the impact on the triple bottom line. There will be costs involved in investing in R&D, setting up mechanisms for real time detection of pollution and minimizing the possibility of accidents. However, the overall benefits far outweigh these initial capital outlays. Economic Improved net profits Input Reduced raw material costs Triple Bottom Line Process Increased energy & material efficiency Reduced waste management costs Environmental Savings on Regulatory & compliance costs Damage due to negative press Litigations in case of chemical disaster Output Improved product quantity & quality Product differentiation Social Healthy satisfied workforce Community well-being Possibility to showcase Green efforts Fig 4: Benefits to industry by adopting Green Chemistry 3

4 Critical success factors TATA STRATEGIC MANAGEMENT GROUP There are four key drivers for green orientation. 1) Regulations In India, the governing bodies that regulate performance of chemical companies are Ministry of Environment & Forests, Central Pollution Control Board, Department of Chemicals & Petrochemicals and Indian Chemical Council. Some of the major regulations that have been framed include the Environmental Protection Act, the Hazardous Waste Management and the Chemicals Management Act. The European initiative for Registration, Evaluation, Authorisation and Restriction of Chemical substances (REACH) has put a new impetus on compliance for exporters; a similar momentum is required for the domestic market. The regulations and governing bodies to monitor it already exist in India. However, there may be a need for a quantum shift, both on monitoring and compliance. ) Financial incentives The green movement also requires incentives to drive change in priorities for investments. Easier market access, awards and recognition are some incentives that can help sustain this movement. The Green Chemistry Presidential Challenge, Society of Chemical Industry awards are some of the incentive programmes that recognize efforts in green chemistry. In India, the Indian Chemical Council (ICC) recognizes similar achievements with USD,000 cash award. 3) Voluntary action The biggest factor for success could be a marked behavioural change, a community led initiative. Without this, neither will regulations nor incentives have the desired effect. Responsible Care is one such voluntary initiative of the global chemical industry built around certain guiding principles based on green tenets. In India, the Indian Chemical Council is responsible for ensuring adherence to guidelines by its members. Responsible Care: Management Practice Codes Process safety code Employee health and safety code Pollution prevention code Emergency response code Distribution code Product stewardship code Under the product stewardship code, arguably the most important management practice, responsibility is undertaken by the principal manufacturer from cradle to cradle (CC) of the chemical product. The CC philosophy of designing chemicals that can harmlessly 4

5 decompose or be reused and regenerated infinitely is considered as the holy grail for a sustainable supply chain. 4) Technology - The availability of superior technologies at economic rates will enable more manufacturers attain better environmental compliance. For example, some of the leading green technologies which could be increasingly used in the manufacture of specialty chemicals are process intensification, ionic liquids, catalysis, energy sources and supercritical fluids. Technological interventions will be key to achieving better energy efficiency, reduction and re-use of chemical waste. Innovation not only in the field of chemistry but also in related areas including supply chain management such as Radio-Frequency Identification (RFID) and Global Positioning System (GPS) will further enable energy optimization and resource conservation. Consumer action While the responsibility of spending on green chemistry research and product development lies with the manufacturers, the onus for indirectly driving the cause lies with the consumers. Increasing consumer demand for environment friendly high quality products and awareness of chemical ingredients used is expected to drive the growth of green chemistry. The global bio-renewable chemicals market, which is reported to be USD 1.63 billion in , is further expected to increase to USD 5 billion by Consumer demand, government legislation and self driven approach has led SC Johnson, a leading company in the US for cleaning products, to rate the raw materials used in their products, as part of their Green List process. As part of their communication initiative, they also list all ingredients including dyes, preservatives and fragrances, which are not mandated to be listed by regulation. Through this self regulated mechanism, SC Johnson has been able to list down more than 95% of the raw materials used and this has resulted in a considerable drop in the usage of volatile organic compounds. Examples of green chemistry across the value chain Input stage Use of renewable sources for production of surfactants 5 Surfactants are important ingredients in a range of products, from pharmaceuticals and hygiene products to concrete. Research is currently underway to develop new sugar based surfactants; carbohydrates, fatty acids and fatty alcohols from renewable resources such as regular and oil crops are being used to generate bio-surfactants with the help of 5

6 microbial enzymes. Enzymatic synthesis provides a more selective production process than chemical synthesis, thereby reducing the number of process steps and formation of by-products. Process stage Minimizing use of solvents and reducing waste 6 Research on the use of microwaves to assist dry media reactions will help minimize use of hazardous solvents and prevent the environmental impact due to unsafe disposal. Companies are increasingly focusing on reducing waste management costs. For example, AstraZeneca realized that waste management costs, including cost heads such as materials, treatment and disposal, capital depreciation and labour, comprised almost 40% of total production costs. It was apparent that they could improve the environmental friendliness of their processes and bottom line by driving waste minimization. Further analysis showed that the least expensive form of waste management is to not produce it in the first place. The hazardous waste produced at their Huddersfield site reduced by almost 5% over four years leading to a cumulative savings of ~ USD 5 Mn. Output stage Degradable and reusable polymers In the 1990s, BASF developed a reusable polymer called Savant from nylon 6 fiber. Savant can be de-polymerized and reused. BASF initiated a take-back program for used carpets called 6ix Again. The recovered nylon 6 fibres can be de-polymerized and used for manufacturing Savant. Rather than down-cycling it into a material with less value, the used nylon is up-cycled into a product of high quality. Holistic approach to sustainability A case study One of the largest global chemical MNCs, DuPont, realized early the importance of green chemistry towards sustainability of the company and industry in general Environmental foot-print reduction goals Reduce greenhouse gas emissions Fleet fuel efficiency Reduce air carcinogens Global manufacturing site verification of environmental management Reduce water consumption 006 Market facing goals for sustainability 015 Increase R&D investments in programs with quantifiable environmental benefits Increase annual revenue from green products Introduce new products and services that help make people safer globally Fig 5: DuPont sustainability goals 6

7 The efforts started off in 1989 where it set well-defined, measurable goals for reduction of their environmental foot-print. They took the second leap in 006 where they committed to initiatives with market facing goals as part of their sustainability drive. DuPont annually tracks and publishes progress on its sustainability goals. This is an example of commitment to deliver green goals and openly sharing of actions, programs and progress on a regular basis. Green chemistry in India Green chemistry in India is at an evolving stage, however growing environmental concerns and increasing shortage of drinking water are providing impetus for the various industries, such as textiles, inorganic chemicals, specialty chemicals and petrochemicals to innovate in green applications. The textile industry in India is adopting microbial decolorization and degradation, exploring biodiversity for natural dyes and developing eco-friendly methodology for synthetic dyes. 7 Clariant, a specialty chemical major, designed a No Rinse process for discontinuous bleaching with benefits of saving time, water and energy. The first introduction of the process has met with enthusiastic response. Research is also underway within the Indian petrochemical sector. Hindustan Petroleum Corporation Limited (HPCL), a leading oil marketing company, has stated its intent to bring to market, green lubricants developed from renewable feedstock. Tata Chemicals, a leading Indian chemical company, has set up an innovation centre in Pune to focus on new and green chemicals technology. It looks at emerging areas such as nano-technology, fermentation and bio-fuels. The centre plays a dual role: greening existing businesses by researching biochemical processes that are more environmentfriendly/ energy efficient to make the same product, as well as developing new products. The Tata Green battery is another example of a holistic approach to tackling environmental issues. These batteries, due to their design and use of state-of-the-art technology, are built to deliver the highest level of performance while being 90% recyclable. The battery uses recycled lead and the polypropylene used for the casing is reused. Also, the use of calcium alloy helps to save water by reducing the number of times that a top-up is required. The manufacturing plant is designed to minimize effluent generation and extensive treatment of used water makes it suitable even for gardening. 7

8 Also, through a dealer take-back programme, approximately 70% of the batteries are recycled. An effective marketing campaign built around the green concept has helped the Tata Green battery create a strong foothold in the domestic battery market within two years of its launch. Way ahead The importance of ensuring an integrated approach to protect the environment cannot be overstated. Academia Industry Regulators Consumers Fig 6: Circle of Influence: Green Chemistry A unified programme, involving the various stakeholders, could be undertaken with the following key initiatives: 1) Industry-academia collaboration could be strengthened to enable focus on priority areas in green chemistry. Also, resources could be provided to enable technical universities to deliver green technologies/ products to market. ) Responsible Care requires industry to better measure their improvements in following the tenets of green chemistry, a mechanism of eco-audits could be one way of achieving the same. 3) Leading industry bodies such as ICC (a nodal agency promoting the growth of Indian chemical industry) could actively collate information on company basis and communicate to the stakeholders on a periodic basis. Due acknowledgement could be given to improvement at any scale which could help drive green chemistry. 4) Consumer forums could actively voice their demands for listing of ingredients in products and ensure industries deliver on their sustainability goals. It is rightly said that green chemistry is the conscience of chemistry. Going green is no longer a matter of if but when. An integrated approach will help the green philosophy achieve the desired results. 8

9 References 1. Upasana Bora, Mihi Chaudhuri and Sanjay Dehury, Green chemistry in Indian context Challenges, mandates and chances of success. Paul Anastas and John Warner, Green Chemistry: Theory and Practice 3. ICIS Chemical Business article, Forging a green chemical supply chain involves deep scrutiny and collaboration 4. Frost & Sullivan report citing demand for green chemicals 5. MISTRA, Greenchem Specialty chemicals from renewable resources 6. The Royal Society of Chemistry, Green Chemistry Journal June 000, Lean, mean and green chemistry can we have it all? 7. M Kidwai, Green chemistry in India 8. Respective company and association websites and annual reports About Tata Strategic Tata Strategic Management Group is an independent management consulting firm and is amongst the largest in South Asia. Tata Strategic has helped clients across multiple industry sectors and geographies create a competitive advantage and sustain superior performance. It offers innovative solutions for a variety of complex issues confronting business leaders, which include strategy formulation, performance improvement, organisation effectiveness and business optimization. Clients include MNCs, PSUs and leading Indian corporates. For further details please contact: Pratik Kadakia Practice Head - Chemical & Energy Tel no: pratik.kadakia@tsmg.com 9