Profit-Planet-People How Sustainability Reshapes the Lubricants Industry Apu Gosalia Head Global Competitive Intelligence / Chief Sustainability Officer The Annual Congress of the European Lubricant Industry / Malta, 21-23 October 2015
Agenda Profit-Planet-People How Sustainability Reshapes the Lubricants Industry Global & European Lubricants Market Competitive Landscape Sustainability 2
Global & European Lubricants Market Development Global Lubricants Demand (Million Tons)* 36.0 35.8 35.2 35.1 35.4 35.6 34.5 32.0 2007 2008 2009 2010 2011 2012 2013 2014 3 *Without Marine Oils
Global & European Lubricants Market Development Regional Lubricants Breakdown Demand (Million Tons)* 36.0 35.6 23% 19% Eastern Europe 9% (10%) Western Europe 10% (13%) Africa 6% (6%) Middle East 5% (5%) 31% 28% Latin America 9% (10%) 2014 (2007) 46% 53% North America 19% (21%) Asia-Pacific 42% (35%) Asia-Pacific & MEA Americas Europe 4 *Without Marine Oils
Global & European Lubricants Market Development Regional Lubricants Demand 2014 : 2013 Variance (%) North America 1.4 Latin America -1.4 Western Europe -1.0 Eastern Europe -4.5 Middle East 4.0 Africa 1.1 Asia-Pacific 1.3 World 0.4 5
World Africa Asia-Pacific Global & European Lubricants Market Regional Per-Capita Lubricants Demand 2014 KG 20 15 10 5 0 North America Western Europe Middle East Eastern Europe Latin America 6
Australia Egypt Saudi Arabia Taiwan Turkey Thailand France Canada UK Mexico Global & European Lubricants Market Ranking Top 20 Lubricant Countries 2014 KT 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 China USA India Russia Japan Brazil Germany Korea Iran Indonesia 7
Global & European Lubricants Market Development Country Lubricants Breakdown Demand (Million tons)* 8.4 Russia 20% (19%) Germany 15% (13%) 43% 57% 6.8 45% 55% Ukraine 5% (5%) Poland 4% (3%) 2014 (2007) UK 10% (10%) France 8% (9%) Other Eastern Europe 16% (16%) Other Western Europe 22% (25%) Western Europe Eastern Europe 8 *Without Marine Oils
Agenda Profit-Planet-People How Sustainability Reshapes the Lubricants Industry Global & European Lubricants Market Competitive Landscape Sustainability 9
Competitive Landscape Structure Global Lubricants Industry* 1,500 1,200 "Independents" 590 "Majors" 200 180 130 mid-90s 2000 2005 10 *Number of Players > 1,000 tons
Competitive Landscape M&A Deals Global Lubricants Sector 25 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 11
INDIAN OIL PETROBRAS PHILLIPS 66 HINDUSTAN PETROLEUM PERTAMINA GAZPROM NEFT VALVOLINE GULF OIL LUKOIL JX HOLDINGS PETRONAS Competitive Landscape Ranking Top 20 Lubricants Manufacturers* SHELL EXXON MOBIL BP TOTAL CHEVRON PETROCHINA SINOPEC IDEMITSU FUCHS 12 *By Volume
Competitive Landscape Driving Forces Vertical Diversification Private Equity Globalization of NOCs Competitive Landscape Retraction from Niches Restructuring of Majors New Market Participants 13
Agenda Profit-Planet-People How Sustainability Reshapes the Lubricants Industry Global & European Lubricants Market Competitive Landscape Sustainability 14
Sustainability FUCHS Drivers Internal Drivers Mission Statement Competitiveness Credibility Employee Loyalty Efficiency Enhancement Capital Access Employer Branding Quality Improvement External Drivers Code of Responsible Conduct Shareholders Customers Suppliers Society Government / NGOs Media Future Generations 15
Sustainability FUCHS Framework 16 Source: Graduate School Rhein-Neckar
Sustainability FUCHS Responsibility Sustainability Economic Ecological Social Shareholder Value Stakeholder Value Raw Materials: Suppliers / Supply Finished Lubricants: Production / Products Internal: Employees External: Society 17
Sustainability FUCHS Guidelines External Availability: Declaration of Corporate Governance Compliance Management System Code of Conduct Global Diversity Guideline Anti Corruption Guideline Antitrust Law Guideline Health & Safety Guideline Sustainability Guideline Reasons: Internal communication of sustainability topics in the FUCHS Group Simplified answering to external questionnaires of customers, etc. 18
Supply - Do you incorporate sustainable procurement into your supply chain? Wessex Water / December 2010 19
Sustainability FUCHS Suppliers In a first step our Key Suppliers across the globe were approached in writing to comply with the FUCHS Code of Conduct and the FUCHS Sustainability Guideline (2013) We received a 100% response rate from them, mostly referring to their own codes/guidelines, in some cases even signing to ours (2014) In a next step we started to get the same from our centrally managed and important local suppliers We also established a Guideline for evaluation of new suppliers 20
Production: Energy & Carbon - Did you reduce energy consumption in the last years? - Do you have energy reduction targets? - Do you calculate the carbon footprint associated with the production of goods? Wessex Water / December 2010
Sustainability FUCHS Ecological Sustainability KPIs 22
Sustainability FUCHS Carbon Footprint 23 Source: FutureCamp
Sustainability FUCHS Scope 3 Calculation 24 Source: EVONIK
Production: Water & Waste - Do you have water reduction features installed in your facilities and/or buildings? - Do you have any initiatives in place to reduce the amount of waste you produce? Wessex Water / December 2010
Sustainability FUCHS Water Reduction Stage I Cold tab water Grease reactor Hot tap water to the sewage Stage II Cold tab water Grease reactor Buffer tank for water Hot tap water to the sewage Stage III Cold tab water Grease reactor Buffer tank for water Hot tap water to the sewage Mixer for product with water 26
Sustainability FUCHS Waste Reduction Waste reduction Tank cleaning with compressed air Manufacturing and storage tanks characterized by: plain interior surface, external heating coils, cone bottom for better flow of oil Inlying loop, which descends automatically after drain and cleans the tank wall using compressed air 27
Employees - Was your staff turnover less than 10% in the past 12 months? - During the last months, were there any industrial accidents? Wessex Water / December 2010 Fiat / January 2014
Sustainability FUCHS Social Sustainability KPIs 29
Society - Are you committed in community initiatives? Fiat / January 2014
Sustainability FUCHS Corporate Citizenship Corporate Giving Sponsorship Corporate Volunteering Education Health Corporate Foundations Poverty Other Environment 15 Sports Culture Politics 31 Science
Sustainability FUCHS Commitment 32
Sustainability FUCHS Ambition Honey Spot Eco-Efficiency Sufficiency Socio-Efficiency 33
Sustainability Counterfeiting Ecological Impact Economic Impact Environmental damage Reduced turnover & margin Pressure to reduce prices Loss of market share Liability for damages Investigation costs Legal costs Social Impact Loss of employment Health & Safety 34
Sustainability The Final Frontier Malta 4 planets 35 Source: Happy Planet Index Ecological Footprint