Sustainability in Industry: Benchmarks and Road Maps

1
Sustainability in Industry Benchmarks and Road
Maps
Darlene Schuster Director, Institute for
Sustainability
November 2008
2
Acknowledgements

• Calvin Cobb, Chair Institute for Sustainability
  2006-7
• Subhas Sikdar, Chair Instiute for Sustainability
  2008
• Golder and Associates
• Beth Beloff,
• Dicksen Tanzil,
• Abigail Martin
• Industry Representatives to Center for
  Sustainable Technology Practices (CSTP)
  Sustainability Guide Task Group
• Carol English, Cytec Industries, Inc.
• Charlene Wall, BASF
• Dave Taschler, Air Products
• Lafayette College
• Professor Javad Tavakoli

3
The Institute for Sustainability

• A community of sustainability practitioners
• Companies (Center for Sustainable Technology
  Practices)
• Professionalsindustry and academic (Sustainable
  Engineering Forum)
• Youth (Youth Council for Sustainable Technology
  Practices)
• Organized under the American Institute of
  Chemical Engineers (AIChE)
• Professional membership organization
• Non-profit 501c(3)

4
Overview of the Institute
IfS Practitioners, students companies
Sustainability Engineering Forum 745 AIChE
members 950 additional non- AIChE members 25
dues
Center for Sustainable Technology
Practices Industry Group 10 companies,
growing Air Products, BASF, Cytec, Dow, FMC,
Honeywell Interface Inc. , Middough (WalMart)
Projects of IfS 1.Sustainability Index Purpose
of financial guidance, benchmarking
management Differential to other
indices Potential for high profitability 2.
ICOSSE Aug 09
Youth Council on Sustainable Sciences
Technologies Partnership w/ SustainUS 9750
students, growing Incorporates
sustainability into undergrad research, sponsors
awards student chapters
Mission 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. 
ifs_at_aiche.org
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 Sustainability
November 04-July 05 Grassroots Project, Earl
Beaver, Chair IFS
7
Credit Trading Design
Ecosystems Modeling
Watershed Protection
Industrial Ecology
8
How is your Companys Sustainability Performance
Viewed?

• By the community?
• By your shareholders?
• By your customers?
• Versus your peers?
• The AIChE Sustainability IndexTM

9
How is your Companys Sustainability Performance
Enhanced?

• Via the value chain?
• by corporate decision making?
• by job function?
• The CSTP Sustainability Roadmap
• A Process for Sustainable Decision Making

10
Purpose of a Sustainability Index

• Investment guides
• Ethical investment/SRI
• Long-term return (stock picks)
• Stock market indices
• Stakeholder ratings
• Benchmarks for company management

11
Examples of Financial SIs
12
An Example The Dow Jones Sustainability Index
(DJSI)

• Investment guide
• Includes only companies that meet DJSI criteria
  governance, transparency, accountability
• Stock market index
• Track market performance of DJSI components
• Subset of corresponding broader indexes
• DJSI World, subset of Dow Jones World Index
• Benchmarking
• Inclusion, being sector leader
• Consulting services through SAM analysis and
  recommendations for companies who want to be
  included, improve ratings

13
Used for Market Tracking
Source SAM, Dec 2007
14
Reporting of Financial SIs

• Dow Jones Sustainability Indices
• Inclusion (in or out), Supersector Leaders
• Individual company scores analysis to
  licensees only
• FTSE4Good
• Inclusion (in or out)
• Individual company scores analysis to
  licensees only
• GS SUSTAIN
• Ratings leaders, average, and laggards
• Analysis for sector leaders
• energy, mining steel, food beverage,
  pharmaceutical, alternative energy, environmental
  technologies, biotechnology
• Innovest
• Top companies sector leaders Global 100 list
• Ratings (AAA to CCC) and analysis, for investor
  clients only

15
What a Company Can Get from Financial SIs

• Dow Jones Sustainability Indexes
• Benchmarking with peers, advisory
• FTSE4Good
• Guidance and support for companies to work
  towards inclusion in FTSE4Good through EIRIS
• GS SUSTAIN
• (none specific to sustainability and its ESG
  analysis)
• Innovest
• Confidential custom benchmarking studies for
  companies operational efficiency and business
  opportunities per peer analysis

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
  indicators
• Provides a heavier weighting applied to various
  indicators of safety and environmental
  performance and to technological innovation
  towards SD
• Available to range of sectors, company size
• The scoring robust methodology designed to
  account for subjectivity in a transparent manner.
  
• Designed to avoid the black box problem of
  other indices
• Intended for executives and directors to manage
  company business lines
• Global, initially focusing on major chemical
  companies
• Publication remains silent on individual company
  ratings
• Companies find it useful to benchmark themselves
  relative to a set of companies

Research funded by United Engineering Foundation
17
Status

• Needs analysis completed in the Fall of 2005
• Pilot study performed in 2006
• Launch
• Methodology Published June 07
• Index for Fortune 500 CPI November 07
• Additional pilots underway for Engineering
  Construction and Energy/ Power Sectors
• Requests to explore development of index from
  water resources, textile chemical manufacturers

Research funded by United Engineering Foundation
18
Advisory Panel

• Mission
• to  protect and promote the soundness,
  credibility and utility of the AICHE
  Sustainability Index
• Advisors
• International financial community
• Industrial sector experts
• Media
• Non-governmental Organizations (NGOs)

19
AIChE Sustainability IndexTM for the Chemical
Industry November 2007
Gray Shading Ranges of individual company
scores Blue Line Simple average of 11
representative companies
20
AIChE Sustainability IndexTM for the Chemical
IndustryNovember 2007
21
(No Transcript)
22
(No Transcript)
23
(No Transcript)
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
2007
Notes For Sustainability Index methodology and
data sources, see CEP, June 2007, pp. 38-42.
Companies included in the assessment are ____,
___, ____,
4.1
4.3
4.3
3.8
4.0
3.9
26
Elements of the Index

• Strategic Commitment
• Safety Performance
• Environmental Performance
• Resource Use
• Waste Emissions
• Environmental liabilities
• Product Stewardship
• Innovation
• Product and service innovation meeting social
  needs
• Process innovation
• Value Chain Management
• EHS Management
• Supply Chain Management
• Stakeholder Engagement

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Unique Elements

• Strategic Commitment
• Safety Performance
• Environmental Performance
• Resource Use
• Waste Emissions
• Environmental liabilities
• Product Stewardship
• Innovation
• Product and service innovation meeting social
  needs
• Process innovation
• Value Chain Management
• EHS Management
• Supply Chain Management
• Stakeholder Engagement

28
Calculations Use Existing Data Sources

• Company reports
• Annual Corporate Reports
• SEC 10-K Filings
• Sustainability/EHS Reports
• Government Agencies
• EPA
• CSB
• U.S. Patent Trademark Office
• Company websites
• Media reports
• Independent NGO reports

29
Value Chain Management Details

• Environmental Management System
• Corporate level environmental management system
  ISO14001, RC-14001, RCMS or EMAS certified
• Facility level environmental management system
  ISO14001, RC-14001, RCMS or EMAS certified
• certified
• Indication of presence/current effort
• Supply Chain Management
• Presence of a supply chain policies and
  procedures related to sustainability
• Sustainability evaluation required of suppliers
• Audits of supplier practices
• Policies extended to suppliers suppliers

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Value Chain ManagementIdeal Score of 7

• Value-Chain ManagementProject Orientation
• System in place to manage sustainability
  performance in operations and project delivery
• System in place to manage sustainability
  performance of sub-contractors and other
  suppliers
• Significant number of projects demonstrate
  excellence in long-term environmental and social
  performance
• Value-Chain ManagementProduct Orientation
• Externally recognized environmental management
  system in-place at the corporate level and at all
  major facilities
• Presence of company-wide supplier management
  policies and procedures related to
  sustainability, applied and enforced to all
  supply-chain entities with potentially
  significant impacts

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AIChE Sustainability IndexTM

• Drills down, but remains broad enough
• Based on public data
• Targeted for managers and corporate executives,
  not investors
• Focused on
• Environmental performance metrics
• Safety performance metrics (workplace, process)
• Product stewardship mgmt system, history
• Value chain management mgmt system
• Sustainability innovation initiatives, tools,
  results
• Social performance and strategic management also
  covered
• Less than other indexes
• Benchmarked to peers and best practices

32
How is your Companys Sustainability Performance
Viewed?

• By the community?
• By your shareholders?
• By your customers?
• Versus your peers?
• The AIChE Sustainability IndexTM

33
How is your Companys Sustainability Performance
Enhanced?

• Via the value chain?
• by corporate decision making?
• by job function?
• The CSTP Sustainability Roadmap
• A Process for Sustainable Decision Making

34

• CSTP formed in 2004 as part of the AIChEs
  Institute for Sustainability
• Supported by member companies
• Tailored collaborative projects and
  pre-competitive research
• Monthly sustainability education virtual
  sessions
• Utilize members to conduct project work
• Project Development of Case studies and
  evaluation of Decision Support Tools in
  industrial Use
• Project Focus Groups for Survey of
  Sustainability in the Chemical Industry
  (PriceWaterhouse Coopers)
• Project RD Checklist for Sustainability
• Project Sustainability Roadmap

35
Background

• Project EPA Grant 2005 Case Studies of Industry
  Decision Support tools for Sustainability
• Identified gaps challenges
• Great tools, not widely used
• Need for better integration of sustainability
  into business processes
• Understand context of management and technology
  decisions along value chain
• Understand key decision points, relevant SD
  considerations, and key functional areas/decision
  makers involved
• Need 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 stage

Main Page Overview Key corporate functions
resources
Summary Table Form to record answers, action
plans, responsible parties, status and
documentation
Scoring Framework Highlight issues and
opportunities, updated at each stage
37
Potential for ImprovementSD Roadmap Summary
Table

• 192 Key Sustainability Questions
• Where to ask them during process and product
  development
• Who should be included in the answers?

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SD Considerations
Resource Use
Energy use, material intensity, water use, land
use
Environmental
Environmental Impact
GHG emissions, air emissions, solid waste,
(pollutant effects)
Health Safety
Toxic reduction, hazards, process safety
Social
Societal Impact
Workers well-being, local community impacts/QOL,
global societal impacts/contributions
Economic Impact
Financials along value-chain (corporate,
customers, )
Econ.
Management
Internal process, value-chain partnership,
stakeholder engagement
Business Perspective
Business Strategy
Alignment with business strategy, core values
competencies, market regulatory drivers
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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 Use
• How 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
41
Engaging Key Corporate Functions

• Value Chain Axis
• Business Strategy Development
• Upstream Input
• RD
• Idea Generation
• Concept
• Scoping
• Definition
• Development
• Scale up
• Commercialization
• Production
• Distribution
• Industrial Consumer Use
• Customer Use
• End of life
• Facility
• Molecule

42
Engaging Key Corporate Functions

• Corporate Functions Axis
• (each box represents a different corporate
  function that is critical to driving
  sustainability in the organization)
• Executive Management
• Financial
• Business Management
• RD
• EHS
• Engineering
• Manufacturing / Operations
• Logistics / Supply Chain
• Sales
• Customer Technical Service/Support
• Marketing
• Communications
• Public Relations
• Human Resources
• Legal
• Information Technology Management

43
Sustainability Considerations
Checklist along the Value Chain
Value Chain Axis
Sustainability Considerations Specific
questions, applied and modified along the value
chain whenever appropriate
44
Elements of the Roadmap
Tools Resources Publicly available in-house
tools to support sustainability considerations
along value chain
45
Scoring Framework
46
Using the Roadmap

• Model developed by CSTP member companies
  associated consultants
• Next step validation of concept in use

47
Illustration of Roadmap

• Evaluation of Biofuels Processing PlantUpstate
  New York.
• Reuse of existing brownfields site
• Possible Feedstocks Corn Willow
• Stages of Roadmap to Illustrate
• Upstream Input Stage (show examples)
• Commercialization Stage (in progress)
• Provide feedback on criteria, questions
• Partner with Lafayette College cross functional
  team

48
Process of EvaluationOur Hypothetical Company

• Information
• Located in upstate New York
• Purchases corn primarily from mid-western states
• Has onsite corn ethanol refinery
• Grows willow biomass onsite
• Has onsite willow ethanol refinery
• Focus of study
• Not to consider the most sustainable industry
  possible
• Developing a plausible vantage point to make
  comparisons between corn and willow ethanol

49
Test Case Biofuels Plant

• Established process for biofuel from publicly
  available information
• Answered Roadmap questions based on internet
  sources personal/professional opinion/insights
• Used publicly available information on willow and
  corn-derived feedstocks
• Focused on issues with sustainability and energy
  efficiency

50
Process of Evaluation Example Industries

• Corn Ethanol
• Well developed industry
• Studies done by a variety of sources data
  readily available
• Production plants already in operation across the
  US
• 2 processes dry and wet milling

51
Process of Evaluation Corn Ethanol Process Flow
Diagram
52
Process of Evaluation Corn Ethanol Energy Balance
53
Process of Evaluation Corn Ethanol

• Facts about corn ethanol
• Cost
• Corn
• 4.00 per bushel
• Corn ethanol
• 1.20 - 1.50 per gallon
• Production
• US production goals
• 15 billion gallons by 2017
• Current production
• 4.8 billion gallons of ethanol in general
• Demand calculated to be 5.4 billion tons
• Estimated production capacity
• 6.183 billion gallons of ethanol in general from
  113
• refineries in 20 states

54
Process of Evaluation Corn Ethanol Production
Millions of gallons
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Process of EvaluationExample Industries

• Willow Ethanol
• In developmental stages
• Majority of studies done by SUNY ESF
• Only one plant in operation
• More energy/sf than corn

56
Process of Evaluation Willow Ethanol Process
Flow Diagram
57
Process of EvaluationWillow Ethanol (Energy
Balance)
58
Process of Evaluation Willow Ethanol

• Facts about willow ethanol
• Costs
• Willow biomass
• 50 per dry ton cellulosic biomass
• Willow ethanol
• 1.90 - 2.25 per gallon
• Production
• US production goals
• 1 billion gallons per year by 2015
• Current production
• 0.66 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 feedstock
• Are there current or expected future regulatory
  drivers that may affect steady supply of
  feedstock?

60

• 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
  2006
• Corn is in high demand as a food product as well.
  
• used livestock feed various livestock
• corn 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
  reached
• New 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 recently
• Current growth rate exceeds removal by 317.
  (Bower, 2007)
• Production potential of 188 million dry tons of
  willow in NYS by 2008
• Long term market should be stable (Bower, 2007)
• Willow feedstock shows very little fluctuation in
  price or availability.

62

• 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 sources
• Demand requires 35 billion gallons of fuel
  primarily from corn ethanol, already effecting
  the allocation of fields to corn and the price of
  dairy
• In 2007 27 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 12.46 billion bushel crop predicted for
  2007 (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 emitted
• Fewer N2O emissions will be released in willow
  farming than is released in corn farming because
  of the fewer amounts of fertilizers used
• Shipment by train and truck is needed and will
  require more energy usage than shipment by
  pipelines
• GHG emissions are increased because of
  long-distance shipment by diesel burning trucks
• While 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 gasoline
• Both cellulosic (willow) and corn ethanol are
  heavily tied to the government through subsidies
• If political opinion and support were to be
  turned away from ethanol, this fledgling industry
  would have major issues
• If the US government drops its tariffs against
  sugar cane import equaling 1.05 per gallon
  ethanol, it would make the marketplace more
  challenging
• Willow 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 feedstock
• Growth is currently exceeding the rate of harvest
• Little or no competition for the feedstock among
  other industries
• Great 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
Using the Checklist
Summary Table
?
? Completed
Legend
High priority
Medium priority
Low priority
69
Scoring Framework
70
What the Guide Does

• Provides list of considerations asked as
  questions by key decision makers at each stage
• Ability to score responses
• Track improvement to sustainability concepts
  through each stage
• Provides list of resources and tools

71
Summary

• Sustainability Roadmap identifies key
  sustainability questions and criteria in a gated
  process/product development scheme
• Use of Roadmap in biofuels case illustration
  appears to be increasing the level of discourse
  on sustainability issues in a short time period
• Roadmap offers a holistic framework for
  consideration of progress down the path towards
  sustainability
• Feedback 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 Deuteronomy
John Locke, Two Treatises of Government, 1689
Then I say the earth belongs to eachgeneration
during its courseno 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 (English20 min)
• CSTP SUSTAINABILTY GUIDE (Cytec lead)
• Release of Version 1 November 18, 2008
• Version 2 Tools/scoring additions 2009 .
• Raising Awareness (BASF lead)
• InternalNewsletter  review of 08 and 09 needs
• Select/approve Exchange topics for 09
• 3rd Party guidelines (FMC/Colgate/Packaging
  Institute)
• Survey plans
• Supply Chain Certification Issues Table
• Best Practices  (Dow 2008, 2009?)
• Tools (Air Products)
• Publication of Tools to CSTP members
• Incorporation into Sustainability Guide Version 2

74
2009 CSTP Proposed Projects

• Sustainability Guide (English20 min)
• Biofuels Metrics Roundtable (John Carberry, lead
  Federal Request)
• Total Cost Assessment/Full Cost Accounting Users
  Group  (Request by GE, Toyota, Formosa
• Water 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????