INTERNATIONAL
CSR IN THE DUTCH
CHEMICAL SECTOR
QUICKSCAN
INTERNATIONAL CSR
IN THE DUTCH CHEMICAL SECTOR
PUBLICATION DATE
November 2015
AUTHORS
CSR Netherlands
Elsbeth Roelofs Sector Manager Chemical Sector
Marjolein van Gendt Project Manager & Research
Rowena Achterkamp Project Manager & Communications
ANNEXES:
Annex
Annex
Annex
Annex
Annex
I:List of PSD and BIC countries
II: List of consulted parties
III: Definitions of Sustainable Chemistry
IV: Relevant policies and regulation
V: Future outlooks for a sustainable chemical sector
INTERNATIONAL
CSR IN THE DUTCH
CHEMICAL SECTOR
QUICKSCAN
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
READERS’ GUIDE
THIS QUICKSCAN PRESENTS AN EXTENSIVE OVERVIEW OF THE
CURRENT STATUS OF INTERNATIONAL CORPORATE SOCIAL
RESPONSIBILITY (CSR) IN THE DUTCH CHEMICAL SECTOR. THE
REPORT CONTAINS FINDINGS BASED ON DESK RESEARCH AND
INTERVIEWS CONDUCTED WITH OVER 60 ENTREPRENEURS
AND OTHER STAKEHOLDERS IN THE CHEMICAL SECTOR. THIS
RESEARCH IS PART OF AN INTERNATIONAL CSR PROGRAMME
FINANCED BY THE MINISTRY OF FOREIGN AFFAIRS, WHICH
AIMS TO FURTHER ENHANCE SUSTAINABILITY IN THE DUTCH
CHEMICAL SECTOR AND TO STRENGTHEN TRADE RELATIONS
WITH DEVELOPING COUNTRIES AND EMERGING ECONOMIES.
IN THIS QUICKSCAN SOME OF THE RESULTS HAVE BEEN
SUMMARIZED.
FOR MORE INFORMATION,
PLEASE CONTACT ELSBETH ROELOFS
([email protected])
4
TABLE OF CONTENTS
READERS’ GUIDE 4
ABSTRACT6
01
DEFINING THE CHEMICAL SECTOR
10
02
HISTORICAL OVERVIEW: DEVELOPMENT OF AN INTERNATIONAL INDUSTRY 14
03
CULTURE AND STRUCTURE OF THE CHEMICAL INDUSTRY: CONSERVATIVE AND COMPLEX
16
04
ADOPTING CORPORATE SOCIAL RESPONSIBILITY 22
05
CSR ISSUES IN THE CHEMICAL INDUSTRY 26
06
TOWARDS A SUSTAINABLE CHEMISTRY: TRENDS AND BARRIERS 40
07
OPPORTUNITIES FOR INTERNATIONAL CSR IN THE CHEMICAL INDUSTRY
48
08
CONSTRUCTING A SECTOR PROGRAMME: PRIMARY FOCUS
52
REFERENCES54
ANNEXES 57
5
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
ABSTRACT
DUTCH CHEMICALS CONTRIBUTE SUBSTANTIALLY TO WEALTH CREATION
ALONG NEARLY ALL VALUE CHAINS AND ACROSS INDUSTRIAL SECTORS
WORLDWIDE, RANGING FROM PHARMACEUTICALS AND CROP PROTECTION
TO THE AUTOMOTIVE SECTOR, TEXTILES AND CONSUMER GOODS. HOWEVER, LARGE SOCIETAL CHALLENGES SUCH AS THE GROWING EXPANSION
OF CHINA AND THE SHALE GAS REVOLUTION IN THE UNITED STATES HAVE
PUT SUBSTANTIAL PRESSURE ON THE SECTOR IN EUROPE. SOCIETAL
AWARENESS OF POTENTIAL RISKS THE SECTOR POSES INTERNATIONALLY,
IN TERMS OF POLLUTION AND WORKING CONDITIONS, HAS GROWN.
INNOVATIVE SOLUTIONS AND NEW WAYS OF WORKING BASED ON
SUSTAINABILITY OFFER A WIDE RANGE OF OPPORTUNITIES FOR THE
SECTOR TO REPOSITION ITSELF.
Value chain responsibility is required of companies through
the OECD Guidelines of Multinational Companies and also
demanded by clients and society at large. Chemical companies
are optimistic about, and sometimes even underestimate, the
risks that international CSR issues can pose in their supply
chains. When confronted with international CSR risks while
doing business, 58% of the sector feels powerless. These issues,
like biodiversity loss, forced and child labour, and extensive
pollution, are therefore the sector’s blind spot. This research
provides an overview of the complete array of CSR issues relevant to the chemical sector. See also figure A.1
The chemical sector as defined in this research covers the
chemical sector in its full diversity: producers of bulk chemicals and intermediates, producers and convertors of polymers,
industrial biotechnology companies, producers of fine chemicals and specialties, formulators of chemicals products. The
culture in the chemical sector tends to vary depending on the
segment, but in general the sector can be defined as rather conservative. Substantial investments in current technology cause
the sector to be hesitant to change. This is especially the case
for bulk companies. Other segments like industrial biotechnology, polymers, specialities and fine chemicals tend to be much
more innovative and flexible.
Looking at the trends that shape the landscape for the chemical sector, it is clear that a large number of trends directly and
indirectly influence the sustainable development of the chemical industry. Most of the trends are robust for the coming
years, such as the growth of the world population and major
environmental trends like climate change, the depletion of fossil resources, loss of biodiversity, scarcity of water of good quality. For Europe and the Netherlands the importance of multilateral, open trade will become increasingly important, because
of our dependence on raw materials and the search for new
markets to sell our products. Awareness in terms of resource
efficiency, recycling of waste streams, biobased and circular
economy will grow as well. Consumers are becoming more
environmentally conscious. The relevant legislation for the
chemical industry is increasingly determined by the EU and
generally tends to become stricter. It thus supports the sustainable development of the sector.
Sustainability is a major topic in the Dutch chemical sector.
Companies need to adhere to strict environmental, health and
safety regulations. Many of the Corporate Social Responsibility (CSR) activities in the sector are therefore compliance driven. In many companies CSR is strategically embedded: an inquiry in 2014 pointed out that half of the respondents from
the chemical sector have a CSR policy. In discussions on CSR
topics with chemical companies, cost savings or business continuity feature most prominently. Efforts to tackle other sustainability aspects are often considered to be beyond their means.
Although survival is essential to ensure a company can prolong
its positive impact, CSR does also entail being aware of the
potential negative or positive impact a company can have on
social or environmental aspects of society – locally as well as
throughout the international value chain.
6
ABSTRACT
FIGURE A.1 OVERVIEW OF CSR ISSUES IN THE VALUE CHAIN OF THE CHEMICAL SECTOR
However, setting up new sustainable business models in order
to cope with these trends can be a challenge, because they lack
initial economies of scale, require infrastructure investments
and there is a need to convince clients as well as regulators. The
following concepts and opportunities offer starting points for
the chemical sector to not only tackle CSR issues but also develop innovative solutions:
The chemical industry has the potential to develop solutions to
societal problems and as such has contributed and will contribute to sustainability. For the international CSR sector trajectory we have identified the following challenges and opportunities specifying how we, as a Dutch sector, can contribute to
sustainable chemistry. These are:
• Transparency in the value chain on CSR risks;
• Circular economy
• Sustainable production throughout the value chain;
• Biobased economy and chemistry
• Sustainable sourcing;
•
Small scale chemistry
•Development of sustainable products aimed at developing countries;
•
Smart, functional materials
•
CO2 economy
•A trust-based relationship between chemical companies and the government/society;
•
Sustainable products for developing countries
• Circular products and services;
•
Valorization of side streams and invasive species
• Diversity in scale.
•
Modernization of existing industries in developing
countries.
7
INTERNATIONAL
CSR
IN THE
DUTCH
CHEMICAL
SECTOR
8
DUTCH CHEMICALS CONTRIBUTE SUBSTANTIALLY
TO WEALTH CREATION ALONG NEARLY ALL VALUE
CHAINS AND ACROSS INDUSTRIAL SECTORS
WORLDWIDE, RANGING FROM PHARMACEUTICALS
AND CROP PROTECTION TO THE AUTOMOTIVE
SECTOR, TEXTILES AND CONSUMER GOODS.
HOWEVER, LARGE SOCIETAL CHALLENGES SUCH
AS THE GROWING EXPANSION OF CHINA AND
THE SHALE GAS REVOLUTION IN THE UNITED
STATES HAVE PUT SUBSTANTIAL PRESSURE ON
THE SECTOR IN EUROPE. SOCIETAL AWARENESS
OF POTENTIAL RISKS THE SECTOR POSES
INTERNATIONALLY, IN TERMS OF POLLUTION
AND WORKING CONDITIONS, HAS GROWN.
INNOVATIVE SOLUTIONS AND NEW WAYS OF
WORKING BASED ON SUSTAINABILITY OFFER A
WIDE RANGE OF OPPORTUNITIES FOR THE SECTOR
TO REPOSITION ITSELF.1
FOR A DEFINITION OF SUSTAINABLE CHEMISTRY WE REFER TO THE DEFINITIONS OF THE OECD AND SUSCHEM, SEE ANNEX III.
1
9
01. DEFINING
THE CHEMICAL
SECTOR
THE CHEMICAL SECTOR AS DEFINED IN THIS RESEARCH COVERS THE
CHEMICAL INDUSTRY IN ITS FULL DIVERSITY: PRODUCERS OF BULK
CHEMICALS AND INTERMEDIATES, PRODUCERS AND CONVERTORS OF
POLYMERS, INDUSTRIAL BIOTECHNOLOGY COMPANIES, PRODUCERS OF
FINE CHEMICALS AND SPECIALTIES, FORMULATORS OF CHEMICALS
PRODUCTS, THE COMPANIES THAT PRODUCE OR MIX CHEMICAL
PRODUCTS (I.E. DUTCH SBI CODES 20, 201-206).
FIGURE 1 (AT PAGE 11) PROVIDES AN OVERVIEW OF THE CHEMICAL SECTOR.
THE AREA WITHIN THE DOTTED LINE IS HOW WE DEFINE THE CHEMICAL SECTOR
IN THE SECTOR PROGRAMME.
10
DEFINING THE CHEMICAL SECTOR
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FIGURE 1: SCHEMATIC
OVERVIEW OF THE
VALUE CHAINS OF
BIOBASED AND FOSSIL
BASED CHEMICAL
INDUSTRY (BASED ON
WOLFS, TNO, 2014)

A MULTIMILLION INDUSTRY
SMALL COMPANIES, HIGHLY SPECIALIZED
The Netherlands is the third largest chemical producer in
Europe, after Germany and France. In 2012 the sectoral turnover was €60 billion. The chemical industry employs 64,000
people (including 14,000 in the pharmaceutical industry),
distributed among more than 400 companies. With the exception of food, beverages and the tobacco industry, the chemical
industry is the largest business sector in the Netherlands. The
Dutch chemical industry has a strong international character.
In areas such as basic chemistry, biotechnology, food ingredients, coatings and high performance materials, the Netherlands is among the world’s top players. This can also be seen in
the export figures. The chemical industry accounts for nearly
20% of all Dutch exports. This is a positive contribution of
€14 billion to the Dutch national trade balance. 75% of Dutch
produced chemicals are exported. Of this number 80% is exported within the EU and 20% to outside countries (Source:
www.vnci.nl, Vlaams Nederlandse Denkgroep Toekomstverkenning, 2013).
The Dutch chemical industry consists of both large multinational firms as well as specialized Small and Medium Enterprises (SMEs). Some of the multinationals have been at the
top of the Dow Jones Sustainability Index for years. Famous
examples include AkzoNobel and DSM. Both companies are
active in over 50 countries, with the largest number of foreign
locations being in China, India and Brazil. About 20% of the
total workforce in the chemical sector is employed by SMEs.
An overview for each segment (categorized by Dutch SBI
codes) is provided in Table 1. Zooming in on biotechnology
companies in the Netherlands, there are at least 600 companies providing almost 35,000 jobs (Van der Giessen et al,
2014).
“THE NETHERLANDS STANDS OUT IN INDUSTRIAL BIOTECHNOLOGY. WE SHOULD TAKE ADVANTAGE OF THIS. IN DELFT
ALONE AT LEAST 400 BIO-TECHNOLOGICAL ENGINEERS
CAN BE FOUND, IN ADDITION TO THE ENGINEERS SITUATED
IN LEIDEN, GRONINGEN AND WAGENINGEN.”
– CEO, BIOTECH COMPANY
11
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
TABLE 1: SHARE OF
SMES IN THE CHEMICAL INDUSTRY IN
TERMS NUMBER OF
ENTERPRISES, EMPLOYMENT AND EXPORT
& IMPORT TO BIC
AND PSD COUNTRIES
(CSR NETHERLANDS,
2015A)
12
DEFINING THE CHEMICAL SECTOR
TRADE RELATIONS WITH DEVELOPING AND
EMERGING MARKETS
Other observations regarding SMEs in the chemical industry
from the Thermometer International CSR (CSR Netherlands,
2015a) but not included in table 2 are: “On average chemical
companies have higher trade flows with developing countries.
31% of the respondents are directly involved in developing
countries. 18% have indirect trade relations. The main drivers
for doing business in developing countries are new opportunities and further continuation of current activities. Furthermore, 32% say they expect an increase in business activities
with developing countries in the years to come.”
The proportion of imports and exports of Dutch chemical
SMEs to developing countries2 and emerging markets3 is
relatively high as compared to the total amount of trade in
terms of EUR. SMEs account for 39% of export revenues and
38% of imports to PSD and BIC countries (OECD, 2012)4.
Table 2, derived from the International CSR Thermometer
2015 of CSR Netherlands, provides an overview of the import
and export breakdown. In terms of exports, China, India,
Brazil, South Africa and Egypt are in the Top 5 of export
destinations. Imported products mostly come from China,
Brazil, Indonesia, India and Thailand, which make up the
Top 5.
TABLE 2: RELATIVE BREAKDOWN OF EXPORTS AND IMPORTS OF
DUTCH SMES IN THE CHEMICAL INDUSTRY TO AND FROM PSD
AND BIC COUNTRIES (CSR NETHERLANDS, 2015A)
AS DEFINED AS PRIVATE SECTOR DEVELOPMENT COUNTRIES BY THE DUTCH MINISTRY OF FOREIGN AFFAIRS. SEE ALSO ANNEX I
BIC COUNTRIES BEING BRAZIL, INDIA AND CHINA
4
SOURCE: SUSTAINALIZE, 2014. THE PERCENTAGES ARE BASED ON THE STATISTICS OF THE OECD (2012). THE CATEGORIES OF CHEMICAL
COMPANIES TAKEN INTO ACCOUNT FOR THESE IMPORT AND EXPORT FIGURES ARE THE SAME AS IN TABLE 1 ABOVE, SBI CODES 201-206,
SBI CODE 20).
2
3
13
02. HISTORICAL
OVERVIEW:
DEVELOPMENT OF
AN INTERNATIONAL
INDUSTRY
DURING THE 20TH CENTURY THE CHEMICAL INDUSTRY AND CHEMICAL
TECHNOLOGY IN THE NETHERLANDS TRANSFORMED DRAMATICALLY.
THE MANUFACTURING OF END PRODUCTS EVOLVED FROM SMALL SCALE,
CRAFT LIKE PROCESSES TO ADVANCED BULK CHEMICAL PROCESSES.
MEANWHILE A LARGE NUMBER OF NEW PRODUCTS ENTERED THE MARKET,
MAINLY COMPRISING PLASTICS. THE CHEMICAL PROCESS TECHNOLOGY OF
THE TWENTIETH CENTURY ENABLED THE REALIZATION OF LARGE SCALE
PRODUCTION PROCESSES, AS WELL AS SPECIALIZED ROUTES FOR FINE
CHEMICALS AND SPECIALTIES. THROUGH THIS DEVELOPMENT NEWLY
DISCOVERED PRODUCTS CREATED IN LABORATORIES ENTERED SOCIETY
AT AFFORDABLE PRICES.
14
HISTORICAL OVERVIEW: DEVELOPMENT OF AN INTERNATIONAL INDUSTRY
At the same time it became clear that the large expansion of
the chemical industry led to overcapacity in Europe and America, severely impacting profits of bulk chemical companies.
This meant companies had to shift their focus towards other
production strategies. Due to societal discussions addressing
the limits of growth, such as in the Club of Rome, scaling up
and large production facilities were seriously questioned. This
led to extensive pressure on the Dutch chemical sector during
the seventies and eighties. In general, it was assumed the industry should make a shift towards knowledge intensive fine
chemicals and specialties. Even though this was not an easy
process, companies such as DSM and AKZO Nobel successfully broadened their product portfolio with fine chemicals
and specialties. Within bulk chemicals, methane and its derivatives grew in importance. However, propane and butadiene
became less significant.
products. This was the case particularly for chlorine, organic
solvents in coatings, plastics and pesticides. Currently the
chemical industry in the Netherlands and Europe is facing
major challenges. In 2013 profits of the Dutch sector fell by
50% (from €6 billion to €3 billion) due to the production of
cheap shale gas in the USA, leading to reduced profits in the
chemical industry and the Netherlands and the EU becoming
less attractive for investments in new commercial plants and in
the installed base of the chemical multinationals. In 2014,
however, a slight increase in profits was seen following a decrease in oil prices.
Even so, the European chemical sector still faces fierce competition from emerging economies in Asia and South America,
where production costs are relatively low. The same applies to
North America, where production of shale gas is reducing
energy costs. In response, one of the best strategies for Europe
seems to be to continue its transition from bulk chemicals towards products with higher added value, resulting in a reduced
dependence on feedstock and energy prices. The Dutch Chemistry Key Sector (Chemistry is one of nine sectors selected by
the Dutch government in its ‘Topsectorenbeleid’ industrial
policy) has developed an outlook for 2050 supporting this
strategy: In 2050 the Netherlands will be known worldwide for
its sustainable chemical industry using biobased resources and its
clean and sustainable production. For 2030 the vision is that the
chemical sector will have a turnover of €97 billion, will invest
about €3.5 million and employ 76,000 people. The sector will
use 75% virgin fossils, 10% recycled fossils and 15% biobased
raw materials (source: Topsector Chemie, 2015). See also
Annex V for the visions of the Chemistry Key Sector and
the Biobased Industries PPP.
Internationally, the chemical industry laid the foundation for
chemical technological developments, further strengthened by
research institutes and universities. Occasionally, the Netherlands took the lead, but most of the time remained in the
background observing developments in other countries. Meanwhile the structure of the chemical industry had changed profoundly: the chemical sector had now mostly become a fossil
based industry producing bulk chemicals. As most of these
companies are internationally oriented, this led to further
domination by multinationals. A similiar development took
place in Germany (source: Schot et al, 2000).
CHEMICAL ‘GREENIFICATION’
Aside from a changing structure, the Dutch chemical industry
also became more environmentally aware. This was further
enhanced by societal debates between the industry and environmental NGOs in the seventies and eighties. As a consequence, chemical companies invested more in developing environmentally benign (or environmental friendly) processes and
15
03. CULTURE AND
STRUCTURE OF THE
CHEMICAL INDUSTRY:
CONSERVATIVE
AND COMPLEX
THE CULTURE IN THE CHEMICAL INDUSTRY TENDS TO VARY DEPENDING ON
THE SEGMENT, BUT IN GENERAL THE CHEMICAL INDUSTRY CAN BE DEFINED
AS RATHER CONSERVATIVE. NEW PRODUCTS AND NEW PROCESSES HAVE
TO BE THOROUGHLY RESEARCHED AND TESTED BEFORE BEING WIDELY
ADOPTED. CHEMICAL PLANTS REQUIRE LARGE INVESTMENTS, MAKING IT
DIFFICULT TO IMPLEMENT MODIFICATIONS. THIS IS ESPECIALLY THE CASE
FOR BULK COMPANIES. OTHER SEGMENTS LIKE INDUSTRIAL BIOTECHNOLOGY,
POLYMERS, SPECIALITIES AND FINE CHEMICALS TEND TO BE MUCH MORE
INNOVATIVE AND FLEXIBLE.
16
CULTURE AND STRUCTURE OF THE CHEMICAL INDUSTRY: CONSERVATIVE AND COMPLEX
TABLE 3: IMVO THERMOMETER 2015 (CSR NETHERLANDS, 2015A)
SHAREHOLDER VALUE AND STRATEGIC
INDEPENDENCE
TRADE ASSOCIATIONS
The Dutch chemical industry is well organized (Table 3).
There is a great variety of trade associations representing different subsectors and, as a sign of unity, many even share an office
location in The Hague. Within the trade associations, political
trends and developments are often discussed with their members one or two years prior to implementation. Membership
can therefore be of advantage. However, membership fees tend
to be high and especially small companies struggle to meet
their payments.
Most Dutch chemical companies strongly value their independence and place great importance on constructing a solid
business case. By doing so they are no longer in need of subsidies or preferential rules and regulations, as subsidies and the
policy framework can easily be retracted, possibly undermining the foundation a company is built on. Strategic decisions
for Dutch chemical companies also rely heavily on their ownership structure. Family companies are very much future-oriented – and often value-oriented – and therefore have a stronger tendency to incorporate CSR. Shareholders or venture
capitalists can steer companies in certain directions as well.
Avantium, for example, started developing its own technology
due to a push by venture capitalists. This has led Avantium to
focus on developing biobased products and molecules with
high added value. CEOs who are also majority shareholders
have the power to single-handedly determine a company’s
strategy. Some choose innovation, some local opportunities
and some focus on sustainability.
EFFICIENCY
The chemical industry is operating as efficiently as possible,
fully maximizing revenues gained from feedstock and other
resources. The fossil polymer market is moving towards recycling and more efficient resource use.
“LARGE SUPPLIERS SOMETIMES DISPLAY A CERTAIN ARROGANCE
REGARDING QUESTIONS FROM CLIENT SMES. SOMETIMES THEY
HAVE A MONOPOLY ON CERTAIN PRODUCTS.”
– CEO, USER OF CONSTRUCTION CHEMICALS
17
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
BEST PRACTICE:
AKZO NOBEL EXAMPLE
SUPPLY CHAINS
Chemicals can be found in all types of end-products. Some
are produced for direct consumer use, others serve B2Bs.
Chemical companies are often first-tier suppliers within longer
supply chains. Most chemical supply chains incorporate one
or more multinational companies supplying all or part of a
product. SMEs, or wholesalers, often experience difficulty
when approaching these multinationals with questions about
the origins of their products. A strong example can be found in
cleaning products. These contain at most derivatives of palm
oil. Suppliers of chemicals cannot provide accurate information as to how much palm oil is used in which ingredients.
As long as this lack of transparency exists, it is very hard for
SMEs to obtain more sustainably sourced products. Multinationals usually create their CSR policy from an international
perspective. The Dutch market is only a small part in this
equation.
“I AM SURPRISED FROM WHAT CORNERS OF THE
WORLD OUR RAW MATERIALS COME. WE ARE
OFTEN BRUSHED OFF BY MULTINATIONALS WHEN
WE TRY TO RETRACE OUR RESOURCES OR ASK
QUESTIONS ABOUT THE ORIGINS. AS AN SME IT IS
HARD TO EXERT INFLUENCE OVER MY SUPPLIER.”
– MEO/OWNER, CLEANING AGENT MANUFACTURER
Wholesale and agents or resellers make up a large portion of
the Dutch chemical industry and its (international) buyers and
suppliers. For these parties low pricing has priority over sustainability. When a cleaning products company decided to
move forward with more concentrated products, they received
no support from resellers as they feared it would diminish their
business. To provide a positive incentive, the company offered
higher margins and training of cleaning personnel in order to
successfully push through their new product. This worked for
some resellers and established closer relationships.
Instead of auditing its suppliers, in
2005 Akzo Nobel shifted to ‘supportive supplier visits’. By conducting these visits, Akzo Nobel put forward the message that they wanted
to assist with making their suppliers’
business conduct more sustainable.
Access to the international market is
the ‘carrot’, withdrawal as a client
the ‘stick’. 350 suppliers in emerging
economies and developing countries
were identified. Of these 350 suppliers roughly 200 were performing
well, 130 companies needed to make
serious changes and Akzo Nobel had
to sever ties with the remaining 20
due to excessively poor circumstances. Improvements were quite swift,
sometimes aided by the government.
‘Supportive supplier visits’ always
involve two Akzo Nobel employees:
one from the Sustainability office,
the other from the Sales department.
This combination works well. A
mentality shift was also needed at
Akzo Nobel: if you require your suppliers to invest and change, you will
also sometimes have to accept higher
prices. The result? Long term sustainable business relations.
In general, resellers are less prone to respond to a client’s wish
regarding product improvement. Even though such feedback
would eventually help chemical producers, such as the cleaning
products company mentioned previously, to improve their
products. Even so, the reason why many producers still want to
work with resellers is because they are able to offer products in
a wider array with other products, providing distribution efficiency as well as an easier purchasing experience for clients.
“RESELLERS WOULD PREFER TO JUST SUPPLY THE
GOODS, SEND AN INVOICE, AND BE DONE WITH IT.”
– MEO/OWNER, CLEANING AGENT MANUFACTURER
18
CULTURE AND STRUCTURE OF THE CHEMICAL INDUSTRY: CONSERVATIVE AND COMPLEX
INNOVATION
OERLEMANS PLASTICS
Innovation is essential for the Dutch chemical sector. Annually
the chemical companies spend over €1 billion on R&D (2013).
This is 25% of the entire R&D budget of Dutch industry
(www.vnci.nl). In total, the public and private funding for
R&D in the Netherlands amounted to €12.9 billion in 2012
(TNO/HCSS, 2014). Although the large companies have considerable R&D budgets and foster and implement innovation
continuously, this mostly concerns incremental change – partly
because of the vested interests they have and the focus on
shareholder value and thus on the short term profit. Radical
innovation is more the domain of the innovative SMEs within
the Dutch chemical sector. In some rare cases, innovations and
research coming from SMEs even trump credible research
institutes, because the latter lack the required knowledge. It
often takes decades for chemical innovations to develop and
impact the industry. Research itself takes time, as does constructing a pilot and demonstration plant. These last phases
also require large investments, which are not always easy to
secure in the Netherlands and Europe. Business cases must be
solid, whereas companies often struggle to define them. The
Netherlands has a high cost of labour and international competition has caused many non-innovative companies to slowly
disappear over the past twenty years. Some argue that most
innovation is incremental and should be more disruptive.
has state-of-the-art technology and
often receives requests to perform
tests for companies, sometimes even
for research institutes. The company’s experience is that the R&D
manager at Oerlemans Plastics seems
to know more about plastics than
some of the research institutes. Oerlemans Plastics likes to innovate and
develop products in collaboration
with the client.
“YOU CAN’T
JUST PRODUCE
COMMODITIES,
THAT WOULD LEAVE
YOU BANKRUPT.”
Innovations are often kept in exclusive property. Collaboration
between companies is often pre-competitive. Innovation Labs
(iLABs) and Centres for Open Chemical Innovation (COCI)
aim to offer a space where young companies are provided with
utilities, infrastructure and collaboration opportunities to
enhance their chances of success.
– CEO, PLASTICS AND
PACKAGING
MANUFACTURER -
POLITICS, POLICY AND INSTITUTIONS
The legislative framework for the chemical industry is very
much determined by the European Commission and to a lesser
extent by the Dutch government. The Dutch government is
heavily criticized in the chemical sector for the amount of rules
and regulations and more specifically their enforcement. Companies are often visited by government officers who try to adhere
strictly to the regulatory framework, but lose sight of the ‘idea’
behind such legislation and are unnecessarily strict according to
the companies. Governments can play a positive role by acting
as a launching customer through sustainable procurement, by
creating a level playing field (reducing and eventually eliminating fossil subsidies) and by enabling international partnerships
through consulates and embassies. Annex IV provides an overview of the relevant legislation at European and national level.
“THE DUTCH AND EUROPEAN GOVERNMENTS SHOULD LESSEN THE
REGULATORY BURDEN. IRONICALLY, TOGETHER WITH OUR EUROPEAN
TRADE ASSOCIATION, THE EUROPEAN COMMISSION ISSUED A
QUESTIONNAIRE CONCERNING RED TAPE, WHICH WAS ELABORATE
TO THE EXTENT THAT FILLING IT OUT WOULD TAKE A WEEK...”
– MEO/OWNER, CLEANING AGENTS COMPANY
19
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
RESEARCH
NGOS
The Netherlands features a large number of research institutes
and universities which perform research that is relevant to
CSR in the chemical industry. Companies in the chemistry
sector often also hold extensive knowledge and expertise.
Changing financial structures of the knowledge institutions
and universities have caused a shift from fundamental research
to more demand driven, applied research. Subsidies often
require them to partner with companies. Differentiation
between these institutions and consultancies has become
slightly blurred and companies do not always have a clear understanding of the current position of these organizations.
NGOs usually do not target the chemical industry as such, but
focus on specific CSR issues like mitigating climate change
(energy efficiency, renewable energy, protests against oil extraction), substitution of hazardous and toxic substances, GMO
crops, resource efficiency, recycling, biodiversity or working
conditions on farms or in mines. Action Aid, for example,
focuses on less use of chemicals for farming. Oxfam Novib is
active in the food versus fuel debate, whereas WWF focuses
more on the impact of indirect land use change on biodiversity. NGOs all address societal issues, some in a more activist
manner, but increasingly acknowledge the importance of
business models and collaborate with businesses to solve issues.
INDUSTRY STRUCTURE
INTERNATIONAL BUSINESS CONDUCT
All trade associations in the sector (VNCI, NRK, VVVF,
HollandBio, NCV, NVZ) have sustainability topics on their
agenda, mostly oriented towards environmental impact reduction, safety and resource efficiency. People aspects of international CSR do not feature as prominently. VNCI, for example,
carries out the Responsible Care programme, the chemical
industry’s global initiative that drives continuous improvement
in health, safety and environmental performance together with
an open and transparent communication with stakeholders.
NRK, the Dutch Federation of Rubber and Plastics Industry,
encourages its members to conduct the ISO 26000 self assessment. In Europe nine chemical multinationals have joined
forces in the Together For Sustainability initiative to stimulate
sustainable supply chains. The companies voluntary jointly
audit their suppliers and share the costs. Regarding sustainability issues, numerous networks are active in the Netherlands,
especially linked to the development of a biobased economy,
like the Biorenewables Business Platform, Biobased Delta,
Dutch Biorefinery Cluster5.
Cultural differences and physical distance have impacted the
ability of entrepreneurs in the Dutch chemical industry to
build trustworthy business relations outside of Europe. Some
products, in order to be able to penetrate local markets, need
to be adapted. This most certainly applies to cosmetics with
regard to differences in skin and in scent preferences.
ROB ROELOFS OF PLEXALGROUP has worked internationally
for many years and indicates that
hierarchy is a major topic, as are
work ethics and corruption. Being in
charge, he will occasionally deliberately tell his people he does not know
how to address a certain issue. This is
perceived by the local staff as very
odd, but after a while they will come
back with potential solutions. Dutch
entrepreneurs working abroad also
need to understand things might
happen differently and at a slower
pace than expected. There can be
cultural differences as to how solid a
deal or agreement is perceived. In
the case of Rob Roelofs, he begins
every presentation to clients by discussing ethics and honest business
conduct. This is to prevent corruptive practices. Furthermore, he states
that it is essential to be physically
present in a country.
Globally, the newly defined 17 UN Sustainable Development
Goals are another framework that could support the sustainable development of the chemical sector. According to the European sector association Cefic, the European chemical industry
is committed to help meet the UN Sustainable Development
Goals target and will play an essential role as one of the largest
and most diversified industries shaping economic activities, in
both traditional and technologically advanced industries, and
acting as an important engine for innovation in other sectors.
See also Annex IV for more information on the UN SD goals
and the role of the European Chemical Industry.
FOR MORE INFORMATION ON VARIOUS NATIONAL BIOBASED NETWORKS,
SEE ALSO: HTTP://WWW.BIOBASEDECONOMY.NL/NETWERK/BBE-OP-DE-KAART/
5
20
CULTURE AND STRUCTURE OF THE CHEMICAL INDUSTRY: CONSERVATIVE AND COMPLEX
ORIENTATION FOR THE FUTURE
As stated previously, chemical companies place particular
emphasis on developing solid business cases. This requires
predictable markets with stable prices for raw materials and
energy. Policies, rules and regulations also need to remain
onsistent for a substantial amount of time. However, especially
in the last few decades, technology and market developments
have increased rapidly. The long-term plans multinationals
work with usually look too far ahead, on average 15 years,
while SMEs constantly struggle to even define five-year plans.
21
04. ADOPTING
CORPORATE SOCIAL
RESPONSIBILITY
22
ADOPTING CORPORATE SOCIAL RESPONSIBILITY
“IT IS CLEAR THAT THE INNOVATION
PRIORITIES FOR THE CHEMICAL INDUSTRY
ARE: 1.SUSTAINABILITY; 2.SUSTAINABILITY;
3.SUSTAINABILITY. IN COMBINATION WITH
GLOBAL COMPETITIVENESS”
– CHAIRMAN, DUTCH BIOBASED NETWORK
Sustainability is a major topic in the Dutch chemical industry.6
Table 4 below (CSR Netherlands, 2015a) indicates that out of
six focus sectors only those working in the chemical industry
had all heard of or encountered the concept of CSR. A relatively large percentage of these companies also took concrete action to implement CSR. This increasing awareness, however,
does not solve everything. The industry also has the largest
share of companies that show no CSR activity: 25% (CSR
Netherlands, 2015a), compared to 3% in the horticulture sector
and 15% in the maritime industry (second highest percentage).
Chemical companies which do work on CSR often do so more
thoroughly and strategically. 51% have a CSR policy vs an average of 26% in 12 other sectors. Chemical companies view
CSR as an investment: 68% see CSR as a business case and
40% consider CSR to be interesting from a cost savings perspective (all data CSR Netherlands, 2015b).
Chemical companies directly doing business in developing
countries or BIC countries can be divided into two categories
when applying CSR: 58% feel powerless because of a perceived
lack of influence or a lack of ideas on how to act; 42% are CSR
frontrunners also in relation to their international trade partners (Table 5, CSR Netherlands, 2015a).
Powerless 58% (no influence 44% or don’t know what
action can be taken 14%)
INTERNATIONAL CSR ATTITUDE (WHEN DOING BUSINESS
DIRECTLY IN DEVELOPING/BIC COUNTRIES)
Refuse 0%
Sustainability frontrunners 42%
Social entrepreneurs 0%
TABLE 5: IMVO THERMOMETER 2015 (CSR NETHERLANDS)
TABLE 4: IMVO THERMOMETER (CSR NETHERLANDS 2015A)
SUSTAINABILITY OR CORPORATE SOCIAL RESPONSIBILITY (CSR) ARE USED INTERCHANGEABLY THROUGHOUT THIS REPORT. CORPORATE SOCIAL
RESPONSIBILITY REFERS TO COMPANIES TAKING RESPONSIBILITY FOR THEIR IMPACT ON SOCIETY. THEY CONSIDER THE SOCIAL, ENVIRONMENTAL
AND ECONOMIC (PEOPLE, PLANET AND PROFIT) IMPACT OF ALL THEIR DECISIONS, WHILE TAKING INTO ACCOUNT THE INTERESTS OF STAKEHOLDERS.
6
23
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
“DOING WELL BY DOING GOOD.”
WHEN YOU HAVE PRODUCTS THAT ARE
TECHNICALLY ACCEPTED AND YOU TREAT
YOUR EMPLOYEES AND STAKEHOLDERS
WELL, PROFIT WILL COME. HOWEVER,
THIS DOES REQUIRE BEING IN IT FOR
THE LONG HAUL.”
– CEO, COATINGS MANUFACTURER
Our in-depth interviews have shown that all interviewees
associate planet issues with CSR, whereas only two-thirds
mentioned people issues, and out of these 60% limit their
interpretation to health, safety and labour conditions.
According to CSR Netherlands’ CSR monitor (CSR
Netherlands, 2015b), the following CSR topics were the
first that came to mind: energy savings, safe working
conditions, climate and environment.
Chemical companies are optimistic about, and sometimes even
underestimate, the risks that international CSR issues can pose
to their supply chains. Only 41% think scarcity of resources
is an issue, 39% are aware of human rights issues and 27%
consider poverty to be of relevance to the sector, even though
extraction of chemical resources often happens in mines where
wages are extremely low and labour conditions unsafe (CSR
Netherlands, 2015b). In addition to potential reputational risk,
these are human rights issues for which companies can be held
accountable under the OECD Guidelines for Multinational
Enterprises. In interviews with KPMG, stakeholders indicated
social impact should receive more attention from the sector
(KPMG, Sector Risico Analyse, 2014).
24
ADOPTING CORPORATE SOCIAL RESPONSIBILITY
“BIOBASED SMES OFTEN DO NOT HAVE A
CLUE ABOUT THE SOCIETAL DEBATES
SURROUNDING THE BIOBASED ECONOMY
LIKE GMO, ILUC AND FOOD VERSUS FUEL.”
– SENIOR RESEARCHER, RESEARCH INSTITUTE
Supply chain issues like those mentioned earlier above are the
industry’s blind spot. Once aware, companies think they cannot exert influence to improve the situation. Table 6 shows all
CSR topics that came up in our in-depth interviews. Considering the strict environmental and health and safety regulations
chemical companies need to adhere to, their perception is that
additional efforts to tackle other sustainability aspects are
beyond their means. Many of the CSR activities in the sector
are therefore compliance driven (The Rock Group, 2014).
1.Improve phase - risk oriented, the aim being to maintain
and secure a licence to operate. In this phase it is all about
process & product safety and vendor policies.
2.Manage phase - focus on cost reduction and optimization
of processes. In this phase Akzo Nobel has started its
‘Supportive supplier visits’.
3.The Invent phase - this phase incorporates key supplier
agreements and product development, with the aim of
creating sustainability throughout the value chain. This
includes development of sustainable products and evaluating the complete portfolio of products. CSR is integrated
throughout the company (also in strategy and reporting).
As a multinational company, Akzo Nobel identifies three phases in CSR development, applicable to all chemical companies:
Most Dutch companies in the Chemical industry still operate
in phase 1 or 2. BASF for instance, is currently looking into its
complete product portfolio and has therefore reached phase 3.
the
TABLE 6: CSR TOPICS MENTIONED IN IN-DEPTH INTERVIEWS (CSR NETHERLANDS, 2015)
25
05. CSR ISSUES
IN THE CHEMICAL
INDUSTRY
IT IS IMPORTANT TO NOTE THAT THE CHEMICAL INDUSTRY HAS THE
POTENTIAL TO DEVELOP SOLUTIONS TO SOCIETAL PROBLEMS AND AS
SUCH HAS CONTRIBUTED AND WILL CONTRIBUTE TO SUSTAINABILITY.
IN DISCUSSIONS ON CSR TOPICS WITH CHEMICAL COMPANIES, PROFIT
OR BUSINESS CONTINUITY FEATURES MOST PROMINENTLY. ALTHOUGH
SURVIVAL IS ESSENTIAL TO ENSURE A COMPANY CAN PROLONG ITS
POSITIVE IMPACT, CSR DOES, HOWEVER, ALSO ENTAIL BEING AWARE OF
THE POTENTIAL NEGATIVE OR POSITIVE IMPACT A COMPANY CAN HAVE
ON SOCIAL OR ENVIRONMENTAL ASPECTS OF SOCIETY. THIS CAN BE SEEN
BOTH FROM A NATIONAL PERSPECTIVE, FOR EXAMPLE BY LOOKING AT
THE IMPACT ON THE COMMUNITY AND ITS SURROUNDING ENVIRONMENT,
AND FROM AN INTERNATIONAL ASPECT, BY TAKING INTO ACCOUNT A
COMPANY’S VALUE CHAIN, WHICH IS OFTEN CROSS-BORDER. THIS CHAPTER
PROVIDES FURTHER DETAILS ON CSR RISKS THAT ARE SPECIFICALLY
APPLICABLE TO THE CHEMICAL INDUSTRY.
FIGURE 2 PROVIDES AN OVERVIEW OF THE CSR ISSUES ALONG THE VALUE CHAIN THAT HAVE BEEN
IDENTIFIED DURING THIS RESEARCH. IN THIS CHAPTER WE WILL FIRST DISCUSS THE PEOPLE ASPECTS
AND THEN THE PLANET ASPECTS OF CSR ALONG THE VALUE CHAIN.
26
CSR ISSUES IN THE CHEMICAL INDUSTRY
FIGURE 2: GENERAL OVERVIEW OF CSR ISSUES
IN THE VALUE CHAIN OF THE CHEMICAL INDUSTRY
27
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
PEOPLE
IMPROVEMENTS
Inspection Social Affairs and
Employment has developed a
self inspection tool concerning
hazardous substances.
HEALTH & SAFETY OF WORKERS
Health & Safety is an integral part of the sector: most companies are aware of the applicable rules and regulations and act
with care. Some measure days without injury, are very strict
about the use of PPE (Personal Protection Equipment) or start
each meeting by indicating where the emergency exits are. Still
the health and safety of workers in the chemical industry remains a concern, even more so in countries with less than ideal
rules and regulations or lax enforcement.
‘Veiligheid voorop’ (Safety first) aims
to improve the culture concerning
safety at (chemical) companies and
their value chain. ‘Veiligheid Voorop’
is an initiative by VNO-NCW, the
chemical industry (VNCI), the petrol industry (VNPI), tank storage
companies (VOTOB) and traders in
chemical products (VHCP). Since its
initiation other organizations have
joined, such as trade associations of
maintenance companies (VOMI,
NVDO and Profion) and paint and
printing ink (VVVF).
Hazardous substances
Around 95% of Dutch chemical companies work with hazardous substances. The main occupational risks in the oil and
chemical industries are exposure to such substances. They involve both acute risks (fire, explosion, irritation / burns, poisoning and suffocation) and chronic risks. The accident in
Tianjin, China, on 12 August 2015, where more than 100 people died and hundreds were injured, was caused by an explosion at a warehouse storing chemicals (CNN, 2015).
New safety deals applicable to
BRZO companies (companies working with hazardous substances) were
concluded on 1 June 2015, one being
the Safety Self Assessment Questionnaire, another dealing with knowledge exchange concerning Best Practices and another concerning the way
Safety as a topic is integrated in
schooling (Petrochem, 2015).
According to inspections conducted by SZW, 40% of Dutch
chemical companies working with hazardous substances did
not fully comply with the law and at more than 50% of these
companies deficiencies were identified relating to exposure to
hazardous substances (Inspectie SZW, 2012). Research by Marieke Kluin of TU Delft indicates that about one-third of the
chemical companies in the Rotterdam area act in a reckless
manner concerning safety: very compliance driven and some
even act only when inspectors show up on the doorstep (Petrochem, 2014). Larger companies are usually able to prove that
they control the risks for most of their substances. SMEs, on
the other hand, have usually put in place measures to protect
their employees, but do not have an inventory of substances,
exposure limits or assessments of exposure (KPMG, 2014).
Clients who use chemicals or
chemical products do not always
fully understand the product’s
accompanying Safety Data Sheets or
Material Safety Data Sheets. Partly
due to REACH, these sheets might
comprise 150 pages. The NVZ
(Dutch association for soap manufactures) has started a project to
create Generic Exposure Information
Sheets, which can be used by
clients to create simple workplace
instructions.
Physical strain
Physical strain can occur in the rubber and plastics industry
when labourers lift, push or pull, for instance when cleaning
the machines, when changing machine components and in the
supply and delivery of materials. Other risks are poor posture
and repetitive activities, such as placing raw materials into machines, auditing tasks and packing products (Arbeidsinspectie,
2008).
“WE NEVER EXPERIENCE PROBLEMS WITH PUBLIC OFFICIALS: WE MAKE SURE EVERYTHING IS IN GOOD
ORDER AND WE ARE VERY OPEN IN COMMUNICATING WHAT IS HAPPENING AT OUR COMPANY. LIFE IS
JUST SO MUCH EASIER IF YOU HAVE YOUR ACT TOGETHER. ALSO IT IS VERY HELPFUL TO ARRANGE
THINGS WELL RIGHT FROM THE START: IT IS EASIER TO MAINTAIN A HIGH STANDARD THAN TO
STRUGGLE AT A LOW LEVEL. 12 OR 13 YEARS AGO A LABOUR INSPECTOR CAME TO SEE ME. THIS
PERSON HAD NO CLUE ABOUT THE INDUSTRY. I THEN ARRANGED A GUIDED TOUR OF THE PREMISES
AND SOME EDUCATION. I ALSO ASKED THE INSPECTOR: ‘DON’T YOU UNDERSTAND THAT MY INTEREST
IN MAKING SURE MY WORKERS ARE HEALTHY IS STRONGER THAN YOUR INTEREST IN THIS MATTER?’”
– CEO, PLASTIC PACKAGING MANUFACTURER -
28
CSR ISSUES IN THE CHEMICAL INDUSTRY
Noise
In some subsectors of the chemical industry, such as the plastics and rubber industry, high noise levels can occur. The noise
level is determined by the way the machines were constructed,
the number of machines in the workspace, the layout of the
space and the nature of the products manufactured. Prolonged
exposure to noise above 80 decibels may cause hearing damage. This hearing loss is permanent. Additional effects may be:
elevated blood pressure, fatigue and loss of concentration
(Arbeidsinspectie, 2008).
PRODUCT HEALTH AND SAFETY, INCLUDING SAFE USE OF
CHEMICALS BY CLIENTS
Stakeholders of the Dutch chemical industry mainly worry
about potential negative effects of chemical products on people
and planet (KPMG, Sector 2014). Chemicals are all around us
and chemical alteration of processes or products scares people,
but effects remain elusive and it is therefore hard to draw solid
conclusions as to how serious the effects can be. Examples of
such worries concern endocrine disrupting chemicals such as
Bisphenol A (BPA) that are found in food, furniture, clothing,
etc. These chemicals are proven to impact development in children (WHO, 2013). In cosmetics nano-particles are used. The
effect of these on the body is currently unknown (RIVM,
2014). In the US the Center for Environmental Health is of
the opinion that cocamide DEA is a known carcinogenic (cancer-causing) chemical and the organization is surprised that it
is still used in shampoos and soaps (Center for Environmental
Health, 2014). The FDA, on the other hand, believes there is
currently no reason for consumers to be alarmed and that the
cosmetics can be safely used (FDA, 2006). People also worry
about all additives put in food (for instance Joanna Blythman’s
book ‘Swallow this’), the consequences of which are unclear.
One should note, though, that natural products also contain
a multitude of completely natural chemicals, see figure 3
(Kennedy, 2014). Greenpeace has been running a Detox campaign since 2011. They focus on textiles and water. In the
textile sector, companies like Nike, Adidas, Puma, H&M,
M&S, C&A, Li-Ning, Zara, Mango and Esprit have committed to eliminating all releases of hazardous chemicals from
their supply chains and products.
FIGURE 3: CHEMICAL
INGREDIENTS OF AN
ALL-NATURAL BANANA.
(KENNEDY , 2014)
29
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
SMALL SCALE CHEMISTRY
HEALTH AND SAFETY COMMUNITIES
When risks at chemical plants are not properly managed,
local communities might suffer the consequences. The risk of
environmentally damaging incidents is largest with chemical
installations (including firework factories). Storage and transport of hazardous materials may also pose risks for local communities if inadequate standards are applied. See figure 4 for a
comparison between transport modalities and the number of
incidents each caused in transporting chemicals in the Netherlands (VNCI, 2014). Intentional or unintentional releases of
hazardous materials can lead to contamination of natural
resources from waste disposal and pollution, and to contamination of the food chain or of water supplies. The risks associated with transportation of hazardous substances include
major fire (gasoline), large clouds of gas burning (LPG),
toxic clouds of gas (chlorine) and evaporating toxic liquid
(ammonia). The consequences can be very serious for both
humans and the environment (UNEP Finance Initiative,
2011).
“CURRENTLY ONLY
ECONOMIC FACTORS
DETERMINE THE AMOUNT
OF TRANSPORT KILOncidents per transport modality at VNCI member companies
METRES. FUEL PRICES
ARE OF MAJOR CONCERN.”
Flowid focuses on continuous
processes rather than batch processes
through a specially developed reactor
(Spinning Disk Reactor) and a specially developed dosing system. In
the development of specialty and fine
chemicals, batch processing is still
the norm. There is much to be
gained in terms of the size of the
installation, start-up and stop speed
of the reactions, energy use and, last
but not least, control over the process
and therefore safety. Jeoffrey van den
Berg gives the example of a process
that was carried out under high
pressure and in which a toxic gas was
needed. By using the spinning disc
reactor, there is no need for high
pressure, and the toxic gas is no
longer required. “The process has
become as dangerous as making
lemonade.” Simplifying the process
is one element; another element that
enhances safety is the fact that the
reactor can be turned off at any
given time.
– BUSINESS DEVELOPER, FEED COMPANY -
20
FIGURE 4: NUMBER OF
INCIDENTS PER TRANSPORT MODALITY (VNCI,
2013)
number of occurrences
15
10
5
0
Air
Rail
Road
2010
2011
2012
Sea
30
Inland
waterways
Pipelines
Source: VNCI RC questionnaire (for an explanation of this indicator, see appendix C)
CSR ISSUES IN THE CHEMICAL INDUSTRY
LAND GRABBING
Land grabbing in relation to the chemical industry can occur
in mining, shale gas fracking and the production of biomass
(e.g. cane sugar and palm oil) (KPMG, 2014). Moving people
away from their land for product or site development for
chemical production may lead to loss of livelihood, resources
or assets, resulting in local tensions if inadequate compensation arrangements are made (UNEP Finance Initiative, 2011).
Oil palm tree plantations can mainly be found in Malaysia
and Indonesia, but can also be found in countries like Guatemala, Colombia, Ecuador, Brazil, Ghana, Liberia, Cameroon
and Nigeria (The Guardian, 2015b).
CHILD LABOUR
In relation to the chemical industry, it is important to note
that child labour has been extensively reported for agriculture
(biomass source), mining (extracting chemicals) and in the
production of fireworks.
Child labour is frequently reported to occur in agriculture,
including on farms where biomass is grown that can be used
in the chemical industry. In addition to depriving children of
their opportunities to obtain an education, children working
in the agriculture sector are often exposed to harmful pesticides, use dangerous tools, carry heavy loads and work long
hours (US Department of Labor, 2013; DIHR, 2014). Oil
palm tree plantations are an example. Sugarcane is another
problematic crop.
DEFINITION OF LAND
GRABBING
Child labour also occurs in mines. Take Mica, a mineral
used as glitter in a wide array of cosmetics, pigments and food
colouring, as insulator in electronics and as filler in cement,
rubber and plastics (WIRED, 2015). There are strong signals
that a significant quantity of mica is extracted in illegal mines
in the Indian provinces of Jharkhand and Bihar. According to
DanWatch, child labour is widespread here and about 5,000
children as young as five years old are working in mines to
collect the mica. They are exposed to dangerous and unhealthy
situations (DanWatch, 2014). Child labour also occurs in
mines in Tanzania (DIHR, 2014; Human Rights Watch,
2013d; LHRC & ZLSC, 2012).
In ILC’s Tirana declaration, the
following, commonly accepted,
definition of land grabbing was
drawn up: Land grabbing is acquisitions or concessions that are one or
more of the following:
(i)in violation of human rights,
particularly the equal rights of
women;
(ii)not based on free, prior and
informed consent of the affected
land-users;
(iii)not based on a thorough
assessment, or are in disregard
of social, economic and environmental impacts, including the
way they are gendered;
(iv)not based on transparent
contracts that specify clear
and binding commitments
about activities, employment
and benefits sharing, and;
(v)not based on effective democratic planning, independent
oversight and meaningful
participation. (ILC, 2011)
As for the production of fireworks, matches and pyrotechnics,
child labour has been reported for Argentina, El Salvador,
India, the Philippines and China. This work exposes the
children to the physical risks linked to working with heavy
machinery and hazardous substances (US Department of
Labor, 2012; US Department of Labor, 2014).
FORCED LABOUR
Like child labour, forced labour is known to occur relatively
frequently in agriculture, for example on palm oil plantations
in Guatemala and sugar cane plantations in Brazil (Oxfam
America, 2013; Verité, 2013; US Department of Labor, 2014;
DIHR, 2014). According to a 2012 UN study, the sugarcane
agribusiness in Brazil has been implicated in using seasonal
migrant workers who were forced to work under harsh and
insecure conditions (UN RISD, 2012).
The extractive industries are also known for making use of
forced labour. For example, there are strong indications of
forced labour taking place in the oil sector of Equatorial
Guinea and in the mining sector of Eritrea and Congo,
especially in unlicensed artisanal mines (Human Rights
Watch, 2013a; US Department of State, 2015).
The International Commission of Jurists noted in 2011 that in
the ethanol industry in Brazil over a thousand workers had
been found working in conditions analogous to slavery. These
distilleries have continued to use forced labour despite having
several orders to pay the damages and penalties issued against
them. Additionally, distilleries have refused to comply with a
31
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
NAGOYA PROTOCOL
variety of judicial mechanisms, demonstrating the lack of
efficacy in judicial enforcement (International Commission
of Jurists, 2011; DIHR, 2014).
The ‘Nagoya Protocol on Access to
Genetic Resources and the Fair and
Equitable Sharing of Benefits Arising
from their Utilization’ (ABS) is
aimed at the preservation and sustainable use of biological diversity
and the fair and equitable distribution of the benefits flowing from the
use of genetic resources. The protocol
was adopted on 29 October 2010 in
Nagoya, Japan, and came into force
on 12 October 2014.
UNFAIR COMPENSATION FOR INDIGENOUS KNOWLEDGE
It is important to have clearly defined procedures and payment
for the use of indigenous peoples’ knowledge and resources.
The access to essential natural ingredients to produce pharmaceutical or cosmetic products may create tensions with
indigenous peoples (UNEP Finance Initiative, 2011).
CORRUPTION
Encountering corruption is common when doing business
abroad. Involvement in corruption is usually considered an
offence, even if the activities occurred abroad (for instance
under Dutch law). Corruption is widespread in securing the
raw materials used in the chemical industry: extractive
industries (mining, oil, gas), tree-logging and distribution of
land deeds to erect plantations. Sometimes the enforcement of
rules and regulations, for instance concerning environmental
or labour hazards, is affected by corrupt officials. Corruptive
practices are also found in waste processing.
RECOMMENDATIONS FOR ADDRESSING
CORRUPTION
(OECD, 2012; World Economic Forum, 2014; Rijksoverheid, 2012; Transparency International, 2013a; ICCWBO,
2014; Business Anti-Corruption Portal, 2012; OECD, 2014):
Corruption in obtaining land is a widespread risk. International surveys conducted by Transparency International show
that 10-20% of respondents paid bribes to the government
in connection with the acquisition of land (Transparency
International, 2013b; FAO, 2011).
•Do not offer, promise, give, request, agree to or accept
undue pecuniary or other advantages to or from public
officials or the employees of business partners.
•Arrange for appropriate and regular oversight of third
parties such as agents and other intermediaries, and
ensure that remuneration is appropriate and for
legitimate services only.
•Keep a list of agents engaged in connection with transactions with public bodies and State-owned enterprises and
if relevant make this available to competent authorities,
in accordance with applicable public disclosure requirements. Any small payments needed should be registered
as well.
•Publicly commit to fighting bribery, create an anticorruption policy, and inform your employees of such.
Also arrange for schooling.
•Using disciplinary measures like suspension or even
firing, you can enforce policy adherence.
•Controls on accounting can prevent bribery.
•Furthermore, you can adopt the Whisteblowing
Guidelines outlined by the ICC to create a new policy
for reporting fraud. Under an established whistleblowing
policy, employees will feel comfortable reporting
concerns without fear of repercussions.
•You can add the ICC Anti-Corruption Clause to
contracts and agreements.
•You might like to join the Partnering Against Corruption
Initiative (PACI).
•The Business Anti Corruption Portal provides several
guidelines, country profiles and tools such as compliance
systems.
Organized illegal logging and systematic corruption in forestry
happens mainly in Indonesia, China, Brazil, Congo, the Baltic
States, the Balkans, Gabon, Cameroon, Namibia, Belarus and
Ukraine. Common abuses include: the falsification of permits,
bribery to obtain permits, allowing more logging than regulations should permit and hacking of government websites to
obtain permits for larger transport volumes (UNEP, 2012;
U4 Anti-Corruption Resource Centre, 2013; Business anticorruption portal, 2012; Human Rights Watch, 2013c;
The Guardian, 2015a).
Examples of affected countries concerning the extractive
industries (Business anti-corruption portal, 2012; Business
anti-corruption portal, 2014; DIHR, 2014; Revenue Watch,
2014; Amnesty International, 2013; World Bank, 2013;
Human Rights Watch, 2013c):
• Burkina Faso - mining;
• Myanmar - extractive industries;
• Uganda - extractive industries;
• Nigeria - oil;
• Angola - oil.
The chemical, pharmaceutical, biotech and energy
sectors all are prominent in the extent to which they set
up anti-corruption policies (Cools, 2012).
32
CSR ISSUES IN THE CHEMICAL INDUSTRY
FREEDOM OF ASSOCIATION
Freedom of association and the right to organize and bargain
collectively are fundamental human rights, the exercise of
which has a major impact on work and living conditions (ILO,
2012). In the oil and gas sector employees often lack the opportunity to join a legitimate trade union. Also, the management refuses to engage with trade union representatives who
are justly elected by workers (Shift & IHRB, 2013). An example of the way in which freedom of association is limited in
this sector:
Ghana, oil - The members of the General Transport, Petroleum and Chemical Workers Union (GTPCWU) in the Western Region of Ghana have been harassed and mistreated by
foreign oil service companies. These companies do not want
their workers to unionize and are trying to prevent them from
joining a trade union using intimidation and even dismissal.
Some companies have refused to sign a verification form to
enable the workers in that company to join a trade union
(ITUC-CSI, 2015).
FREEDOM OF ASSOCIATION
TAXATION
Tax is often regarded as an obligatory burden for a company’s
profits. Developing countries lose around $160 billion annually through tax avoidance by multinational companies, revenues which could have been used for, e.g., infrastructure, education and health care. Research by the International Bar
Association establishes a direct link between tax avoidance and
poverty (International Bar Association, 2013). Tax evasion in
the Democratic Republic of Congo has been explicitly reported for the logging and mining industries (Reuters, 2014; Global Witness, 2013).
THE FAIR TAX
In countries where unions are
banned, or (as in China) where the
government only allows an official
state union, FNV recommends companies to inform employees of their
rights (potentially by inviting NGOs
to speak on the topic), allow alternative forms of employee organization
and make explicit that participants
will not be disadvantaged in any
way. (FNV Mondiaal, 2010)
The Fair Tax Mark is a label for
companies that want to show that
they are open and transparent about
their tax affairs and pay the right
amount of taxes at the right time in
the right place. (Fair Tax Mark,
2015)
“SCARCITY IS OFTEN
ARTIFICIALLY CAUSED
BY MULTINATIONALS. AND
SWITCHING TO BIOBASED
ALTERNATIVES ALSO STILL
CARRIES THE RISK OF
SCARCITY: WHAT IF THE
HARVEST IS POOR?”
PLANET
RESOURCE SCARCITY
Resource scarcity is not always caused by physical resource
depletion; other potential causes are that extraction is no
longer geographically or economically feasible. Geopolitical
factors can contribute to such scarcity. Uncertainties concerning resource availability has led governments to secure resources, which leads to a distortion of the previous market dynamics. Proactive acquisition of resources by (semi) state-owned
enterprises, creation of commodity stocks, the introduction of
trade restrictions and ‘land-grabbing’ are examples of actions
taken by governments (The Hague Centre for Strategic Studies, 2011).
In addition, changes in legislation potentially affect the use of
resources. Examples are environmental legislation that aims to
reduce CO2 emissions or stricter safety requirements for the
extraction of shale gas (CSR Netherlands, 2015). Figure 5 below shows the rate of depletion for all elements in the periodic
table. Figure 6 shows to what extent these elements are currently being recycled (Renewable Matter, 2015). For multiple
pigments, such as titanium oxide, prices have risen sharply
over recent years. Because of this coatings have become more
expensive to produce. 80% of Dutch chemical production is
still fossil based. This large dependency on oil, its forecast scarcity, inherent finite availability, unsustainable sourcing of the
remaining reserves and consequent price fluctuation make biobased alternatives attractive.
– MEO/OWNER, CLEANING AGENTS
MANUFACTURER
BIOBASED WRAPPER
Rodenburg Biopolymers from
Oosterhout supplies the bioplastic
for a new biobased wrapper Mars is
testing in Germany. If this pilot
turns out a success, the wrapper will
be introduced in more Western
European countries. (BOM, 2015)
33
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
FIGURE 5: ELEMENTAL UNSUSTAINABILITY – HOW WE ARE RUNNING OUT OF TRADITIONAL MINERAL RESOURCES AS SEEN
BY DIMINISHING RESERVES THROUGH INCREASED AND DIFFERENT USE PATTERNS
FIGURE 6: RECYCLING RATES OF ELEMENTS
34
CSR ISSUES IN THE CHEMICAL INDUSTRY
USE OF RENEWABLE ENERGY
CONSUMPTION OF RESOURCES AND UTILITIES
The chemical industry makes intensive use of raw materials
and energy. A lot of fossil fuels (oil, gas, coal) are used, as well
as water, air, metals, palm oil and minerals (including phosphorus) (Compendium voor de leefomgeving, 2013). Figure 7
shows the EU chemical industry consumed 56.6 million
tonnes of oil equivalent in 2012. In all OECD countries the
chemical manufacturing industry is the largest single consumer of water by sector. These large amounts of water provide
many opportunities for contamination through effluent water
(Blacksmith Institute & Green Cross Switzerland, 2012).
At a FrieslandCampina (dairy manufacturer) plant in Borculo the chemical industry is showing it can also
be part of the solution and provide
renewable energy to other industries.
FrieslandCampina fuels its production site in Borculo using certified
renewable pyrolysis oil. The oil is
extracted from biomass (wood chips)
by Hengelo-based firm Empyro,
which uses pyrolysis. Pyrolysis is a
thermochemical decomposition of
organic material at elevated temperatures in the absence of oxygen. This
technology was developed at the
University of Twente in the Netherlands and refined by BTG-BTL,
Empyro’s parent company.
AIR POLLUTION
According to KPMG, greenhouse gas emissions resulting from
the production of chemicals and the use of energy by the
chemical sector are high in absolute and relative terms (approximately 12% of national emissions per year). This is one of the
most eye-catching environmental themes in the sector. Over
the period 1990-2011, the chemical industry in the Netherlands succeeded in reducing greenhouse gas emissions by
roughly 40%. In the period 2005-2012 the sector achieved an
approximately 11% reduction in greenhouse gases per tonne of
product. This makes the Dutch chemical industry one of Europe’s leaders in terms of energy efficiency (KPMG, 2014).
FIGURE 7: EU CHEMICAL INDUSTRY FUEL AND POWER CONSUMPTION (CEFIC, 2014)
35
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
CO2 UTILISATION FOR
CHEMICALS
Specific applications of chemicals can also cause air pollution.
Excessive use of nitrogen fertilizers, for example, causes reactive nitrogen to be released in the air. This leads to higher levels of ozone in the lower atmosphere, causing respiratory ailments and damaging vegetation. Acidic precipitation (acid
rain) is another consequence, and leads to corrosion of buildings, bridges and other human-made structures, acidification
of soils and inadvertent fertilization of trees and grasslands,
creating unnatural growth rates, nutrient imbalances, and ultimately decreasing ecosystem health and biodiversity (UNEP,
2007). Volatile organic compounds are used in gasoline, paint,
detergents, cleaning products and cosmetics. These substances
contribute to the creation of smog and may lead to health
problems, such as respiratory problems, headaches and irritation of the eyes and nose. In addition, there is a risk of problems with the organs and the nervous system (Milieucentraal,
Kernenergie, 2014; Kenniscentrum InfoMil, 2015).
Biotechnology company Photanol
made a business case of greenhouse
gas emissions: the company developed a breakthrough technology to
convert CO2 into valuable organic
compounds. The company intends to
apply this technology in a number of
markets, ranging from food ingredients to chemical bio-blocks and
bio-fuels.
cro plastics’ – are being observed in ocean gyres, sediments,
and on beaches, as well as being found in marine organisms.
In marine protection, plastic particles with a diameter of less
than 5mm are referred to as micro plastics. These can be fragments created by the breaking up of larger pieces of plastic
such as packaging, or as fibres are washed out of textiles. They
can also be primary plastic particles, produced in microscopic
sizes. These include granulates used in cosmetics (scrub, toothpaste and shampoo), washing powders, cleaning agents and in
other applications. These are very small, especially designed
pieces of plastic that contain toxins. It can take centuries for
plastic to be broken down in the oceans by physical, chemical,
and biological decomposition processes. It is impossible to remove the micro-plastics once they enter the oceans. Fish consider these micro-plastics food. Research has shown that micro-plastics cause harm to water resources, marine life and
ecosystems (Bio-based News, 2014; The Guardian, 2014b;
Frankfurter Allgemeine, 2015; P+, 2014). According to the
NCV (Dutch trade association for cosmetics) cosmetics companies are working to eliminate the micro-plastics from their
products (NCV, 2015).
WATER POLLUTION
Industrial water pollution in the global chemicals sector is considered to be very serious. Wastewater treatment often does not
remove all pollutants. Chemicals may be toxic to human beings, animal and plant species. The origin of these chemical
wastes varies greatly and depends on the local situation, but
typically discarded chemicals, manufacturing by-products and
waste solvents contribute to the waste stream (WWF, 2014).
Examples where water pollution has links to the chemical industry are the chemicals-filled effluent from leather tanneries,
the use of fertilizers, extraction of minerals and metals and
plastics polluting the oceans.
Plastics
Scientific studies have shown that plastics make a huge contribution to the ‘littering’ of the seas. Along with larger waste
items such as plastic bottles or bags, steadily increasing
amounts of plastic micro particles – commonly known as ‘mi-
“IN ITALY PLASTIC BAGS ARE NOW BANNED.
LCA RESEARCH HAS SHOWN THAT PLASTIC BAGS ARE
A VERY SUSTAINABLE OPTION. OF COURSE ONE SHOULD
NOT THROW THE BAG ON THE STREET AFTER USE.
THE PLASTIC SOUP IS MAINLY CAUSED BY CONSUMER
BEHAVIOUR. ALSO IT RECEIVES A LOT OF ATTENTION
BECAUSE PLASTIC WASTE IS PERSISTENT AND IT FLOATS.
IF YOU DREDGE THE OCEANS, YOU WILL PROBABLY
ALSO FIND A LOT OF METAL.”
– CEO, PLASTIC MANUFACTURER AND CONVERTER
36
CSR ISSUES IN THE CHEMICAL INDUSTRY
Fertilizer
If improperly managed, elements of fertilizer can move into
surface water through field runoff or leach into ground water.
The two main components of fertilizer that are of greatest concern to source water quality (ground water and surface water
used as public drinking water supplies) are nitrogen (N) and
phosphorus (P). As a rule of thumb (reactive) nitrogen pollution leads to eutrophication of salt/brackish water and phosphorus pollution to eutrophication of fresh water. Eutrophic
water contains an excess of mineral and organic nutrients,
which causes a proliferation of plant life, especially algae,
which reduces oxygen levels and causes toxicity and the death/
extinction of other organisms. This pollution also often renders
the water unfit for human consumption. In babies nitrate
based pollution has caused the Blue Baby Syndrome (can result
in death) and it has been linked to a several types of cancer,
like colon cancer (US-EPA, 2010; UNEP, 2007).
BIODIVERSITY
Insecticides
Species such as honey bees, bumble bees, solitary bees, hoverflies, butterflies and moths are affected by neonicotinoids (insecticides that affect the central nervous system of insects).
These species provide the ecosystem services of pollination,
natural pest control and soil productivity and are the underpinning of biodiversity. Most pollinators have declined across
Europe; honey bee colony numbers have fluctuated. Some intensive agriculture has become reliant on neonicotinoids, with
proponents arguing that their withdrawal would have serious
economic and food security implications. However, EASAC
notes that some recent research has questioned the benefits of
routine use as seed dressing against occasional or secondary
pests. In some cases, neonicotinoid use has even made pest
problems worse by eliminating insects which provided natural
pest control. All pesticides involve a balancing act between the
desired effect on food production and the inevitable risk of
collateral damage to non-target species and the environment.
In the case of the neonicotinoids, the increase in scientific
knowledge over the last two years suggests that the current
balance requires reassessment (EASAC, 2015).
Mining
The process to extract minerals and metals from ores requires a
varying amount of chemicals, creating large amounts of waste
contaminated with chemicals. In less technologically advanced
or older plants, some of the minerals mined, tailings and the
toxic chemicals used are released into the environment causing
severe pollution and negatively impacting human health. At
abandoned or poorly closed mining sites, mine tailings and
improperly stored waste can pollute groundwater, surface water
and agricultural activities. According to the Blacksmith Institute the most dangerous pollutants at mining and ore processing sites are lead, chromium, asbestos, arsenic, cadmium and
mercury (Blacksmith Institute & Green Cross Switzerland,
2012).
Biomass plantations
Deforestation due to plantations being erected for biomass production has an impact on local biodiversity. This might happen
through ILUC (Indirect Land Use Change). ILUC applies to
the situation where agricultural land is converted into biomass
plantations, and non-crop land such as grasslands or forests is
used for agricultural production. In this case the plantations
are very likely to indirectly cause deforestation (European
Commission, 2015). There are strong signals that the deforestation caused by palm oil production in Indonesia threatens to
render extinct endangered species such as the Bornean orangutan and the Sumatran tiger (Rainforest Action Network,
2014).
SOIL CONTAMINATION
The production and processing of chemicals contributes to soil
contamination (European Commission, 2013). Mining also
contributes to soil pollution. Hunan province in China, for
instance, is rich in non-ferrous metals, which makes it a leading polluter of cadmium, chromium, lead and non-metal arsenic. This has caused pollution of agricultural grounds and
questions have arisen as to whether the area can still be used
for agricultural practices (The New York Times, 2013).
CHEMICAL WASTE
Internationally, discarded products increasingly contain toxic
chemicals such as mercury or PBDEs (flame retardant chemicals). This waste and direct waste of the chemical industry constitutes potentially hazardous waste. Neither landfills nor incineration eliminate toxic chemicals in waste. Landfills might
eventually leak and affect groundwater and also give off potentially harmful gasses. Incinerating waste releases toxic chemicals, such as lead and mercury, and might even produce additional by-products (dioxins and furans). The process produces
toxic ash when the toxic chemicals and heavy metals in the
waste concentrate in the left over waste. This waste then has to
be disposed of in a landfill. The areas where waste is collected
prior to processing leaves room for waste to decompose and
release toxic chemicals into the open air, threatening worker
health and safety and impacting nearby neighbourhoods
(Toxics Action Center, 2015; National Geographic; 2015).
37
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
CHEMICAL LEASING OR TAKE
BACK CHEMICALS
UNSUSTAINABLE ASPECTS OF BIOMASS PLANTATIONS
In earlier paragraphs loss of biodiversity was mentioned in relation to biomass plantations, as well as land-grabbing, child and
forced labour. These issues mainly concern palm oil and raw
materials used for the production of bioplastics (like sugarcane
and corn). Other unsustainable aspects of these plantations are
the food versus fuel debate, decreased soil fertility, flood risks
and energy use for crop growth.
Traditionally, suppliers sell large
quantities of chemicals to end-users;
it is therefore in their interest to sell
as much as possible. De facto, the
inefficient use of chemicals is being
“rewarded”. The sustainable solution
is Chemical Leasing (ChL), whereby
users only pay for the services rendered by the chemicals (e.g. volume
of water treated, number of parts
painted, lengths of pipes cleaned,
etc.) and not for the volume of
chemicals consumed. By de-coupling
the payment from the consumption
of chemicals, ChL encourages better
chemicals management. This results
in clear environmental advantages as
well as consequent economic benefits
for both suppliers and users of chemicals.
UNIDO strongly supports the establishment of Chemical Leasing business models. In 2005 a working
group on chemical leasing was set
up, and bi-annually since 2010 a
Global Chemical Leasing Award has
been awarded to the best initiatives
in this field. The Dutch Ministry of
Infrastructure and the Environment
supports chemical leasing in its
Green Deal Take Back Chemicals,
which was signed in November 2014
(Chemie Magazine, 2015; Chemical
Leasing, 2014).
In food versus fuel, the discussion is whether biomass production is in competition with food production. Definitions of
several ‘generations’ of biomass have been introduced to be
able to distinguish different types of biomass. The European
Biofuels Technology Platform defines the generations based on
the carbon source:
•1st Generation - the source of carbon for the
biofuel (or biochemical) is sugar, lipid or starch
directly extracted from a plant. The crop is
actually or potentially considered to be in
competition with food.
•2nd Generation - the biofuel (or biochemical)
carbon is derived from cellulose, hemicellulose,
lignin or pectin. For example this may include
agricultural, forestry wastes or residues, or
purpose-grown non-food feedstocks (e.g.
Short Rotation Coppice, Energy Grasses).
•3rd Generation - the biofuel (or biochemical) carbon is derived from aquatic autotrophic organisms
(e.g. algae). Light, carbon dioxide and nutrients are
used to produce the feedstock “extending” the carbon resource available for biofuel production. This
means, however, that a heterotrophic organism
(using sugar or cellulose to produce biofuels) would
not be considered as 3G.
“CIRCULARITY OF
PRODUCT AND
PROCESS IS A WAY
TO GUARANTEE
QUALITY OF RESOURCES
AND TO BE CERTAIN
OF THE AVAILABILITY
OF SUPPLY.”
The technology platform emphasizes that this does not necessarily imply that 2G is always more sustainable than 1G and 3G is
always more sustainable than 2G or 1G. Factors relating to land
use, the efficiency of the production process and other factors
need to be taken into account for each specific value chain.
When biomass is used for further processing, less crop residues
are left on the land. This means less residues return directly to
the soil and less biomass is available for composting, leaving
soil fertility at risk (Zwart, 2015).
In some instances a change of land use might leave the land
more vulnerable, for instance to floods. There are strong
indications that the conversion of peatlands in Indonesia and
Malaysia for palm oil and pulp wood plantations causes severe
flood risks in extensive areas of low lying peatlands. Deforestation and draining peatlands in order to plant these valuable
crops leads to peat oxidation and soil subsidence. These are low
lying areas where the soil surface can subside below river or sea
levels, leading to frequent and prolonged flooding (One World,
2015).
– SENIOR POLICY ADVISOR,
MINISTRY OF INFRASTRUCTURE
AND THE ENVIRONMENT
38
CSR ISSUES IN THE CHEMICAL INDUSTRY
“THE BIOECONOMY IS A NEW SYSTEM THAT BRINGS
ALONG NEW CHALLENGES LIKE INDIRECT LAND USE,
FOOD VERSUS FUEL QUESTIONS, GMOS. YOU HAVE
TO DEAL WITH THESE ISSUES. SOME PEOPLE SHY
AWAY IF THEY GET AWARE OF SIDE EFFECTS AND
DISADVANTAGES OF THE BIOECONOMY. BUT THAT
DOES NOT MEAN THE BIOECONOMY IS A NOT A
GOOD DEVELOPMENT.”
– SENIOR RESEARCHERS, RESEARCH INSTITUTE
In the Corbey Commission (Commission on Sustainability
Issues regarding Biomass, commissie Duurzaamheidsvraagstukken Biomassa), science, companies and NGOs join forces to
advise the Dutch government on the sustainability of biomass.
A number of certifications exist to ensure sustainable biomass
is used: NTA8080, RED and ISCC. RVO has developed a
tool, Biograce II, which can be used to calculate emissions due
to biomass production.
ANIMAL WELFARE
NGOs and the major Dutch chemical companies agree that
these three Rs form the basis of how animal testing should be
dealt with: replace, reduce and refine (KPMG, 2014). REACH
only requires animal testing if no other options exist. PETA
(People for the Ethical Treatment of Animals), however, does
claim animals are unnecessarily used for testing because companies are insufficiently aware of REACH. According to
PETA, REACH’s rules are misinterpreted and applied too
strictly: this causes unnecessary pain (PETA, 2015).
UNCERTAINTY EFFECTS OF GMOS
GMOs are also used to grow biomass which is then used for
the biobased industry. Biotech companies are held responsible
for the promotion of GM crops as an answer to world hunger.
There is a tension between NGOs and the industry. EuropaBio
(2013), for instance, states: “For 17 years GM crops have been
increasingly cultivated and consumed worldwide. Concerns
about possible negative effects on health and the environment
have proved to be unfounded. The commercialization of biotech crops started in 1996. In 2012, 17.3 million farmers planted GM crops on 170.3 million hectares around the world. Scientists, political leaders and farmers have become increasingly
vocal in calling for a rational debate based on scientific data
and years of practice in the field.” NGOs like ActionAid argue
that GMOs make farmers dependent on the biotech companies, creating a market for their seeds and chemicals, and others have concerns about their effects on health.
Harmful effects on wildlife are mostly due to chemicals being
released into the environment, for example in terms of the effects of pesticides, micro-plastics that are swallowed and animals living in water becoming entangled in plastic (KPMG,
2014).
In the Netherlands there is an information platform on Green
Biotechnology (IGB Platform), focussed on the facilitation of a
structural dialogue for sustainable agriculture, healthy food
and the role of new technology in these developments.
39
06. TOWARDS
A SUSTAINABLE
CHEMISTRY: TRENDS
AND BARRIERS
A LARGE NUMBER OF TRENDS SHAPE THE LANDSCAPE OF THE DUTCH
CHEMICAL INDUSTRY. THEY CAN EITHER ENABLE OR HINDER A TRANSITION
TOWARDS A SUSTAINABLE CHEMISTRY. THE FOLLOWING CHAPTER
IDENTIFIES TRENDS CONCERNING ECONOMY, SOCIETY, DEMOGRAPHY,
TECHNOLOGICAL DEVELOPMENT, ENVIRONMENT AND POLITICS. BASED
ON THESE DEVELOPMENTS, CHEMICAL COMPANIES MAY HAVE TO
ADAPT THEIR BUSINESS STRATEGIES. WHAT ARE THE MAIN BARRIERS
FOR CHEMICAL COMPANIES TO FOREGO SUSTAINABLE CHOICES?7
7
COMPLETE OVERVIEW OF ALL TRENDS, BARRIERS AND DRIVERS IS PROVIDED IN THE SYSTEM ANALYSIS:
A
INTERNATIONAL CSR IN THE CHEMICAL SECTOR (CSR NETHERLANDS, 2015)
40
TOWARDS A SUSTAINABLE CHEMISTRY: TRENDS AND BARRIERS
TRENDS
CO2 economy: this concept can also be considered to be a part
of the circular economy. Some argue the CO2 economy will
eventually even replace the biobased economy, given that
renewable energy is abundant and cheap. In a circular CO2
economy the sustainable supply of raw materials is the key
element. A combination of sunlight/renewable energy and
CO2 could be the basis of this future economy. There are
several research institutes and companies worldwide currently
developing chemicals with CO2 as feedstock. This can be seen
as a positive development, because it uses a raw material that
would otherwise enhance climate change (carbon capture and
usage), and is widely available. Furthermore, it will decrease
dependency on fossil resources and hence on the providing
countries.
MOVING TOWARDS A NEW ECONOMY AND NEW INDUSTRY
Socio-technological trends such as the circular economy or the
bioeconomy are interesting for a number of reasons: they offer
solutions to one or more societal challenges, strengthen the
Dutch economy and take advantage of its knowledge position.
Such trends can eventually transform the current economy and
chemical industry. Each socio technological trend is described
briefly below.
Circular economy: a circular economy is an economic and industrial system that takes the reuse of products, raw materials
and the recovery of natural resources as a starting point, minimizing value reduction throughout the system and striving for
value creation in every part of the system (‘Towards a Circular
Economy’, EMF, 2012). Further arguments in favour of this
development are the decrease of environmental impact, dependency on other countries for raw materials and the growing
awareness among consumers of resource efficiency and climate
change. As for most sectors, the concept of a circular economy
is still being explored.
“A LOT IS HAPPENING IN THE
SEARCH FOR RENEWABLE RAW
MATERIALS, BUT ONLY ON A
SMALL SCALE. I EXPECT THIS TO
BE DIFFERENT IN THE FUTURE,
AS THE AWARENESS OF CHEMICAL
COMPANIES IS STARTING TO GROW.
HOW LONG THIS EVENTUALLY
MIGHT TAKE, I DON’T KNOW.”
A bioeconomy can be defined as an economy in which biobased
raw materials and waste streams are used on a large scale for
food and non-food applications in a broad range of sectors. For
the Netherlands a further uptake of sugar beets as feedstock is
expected since the EU has abolished its sugar quotas (Deloitte,
2014). Alternatively, algae will be modified to contain more
valuable components. They will be produced in greenhouses
and used to produce food supplements. Because of the development of pre-treatment of biomass, separation technologies
in continuous processes, scaling up of bioconversion processes
and better valorization of side streams, more bio refineries
will be developed and established. This will affect mostly those
industries (feed industry) which currently use side streams as
raw materials.
– BUSINESS DEVELOPER,
ENGINEERING COMPANY
“A LARGE BARRIER IN THE SIDE STREAM SECTOR OF
THE DUTCH FEED INDUSTRY IS THAT SUPPLIERS ARE
STARTING TO VALORIZE THEIR SIDE STREAMS MUCH
MORE. IN THE FUTURE THIS COULD LEAVE US WITH SIDE
STREAMS THAT ARE DIFFICULT TO USE OR TRANSPORT
FOR FURTHER APPLICATION. THE BUSINESS CASE WILL
NO LONGER BE APPROPRIATE.”
– BUSINESS DEVELOPER, FEED INDUSTRY -
41
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
Furthermore, increasing awareness regarding the scarcity of raw
materials and the need for recycling, reuse and design for circularity is noticeable amongst consumers and companies. Even though
chemical companies hardly feel directly pressured to adjust,
several stakeholders are witnessing a pseudo-scientific, emotional debate in the media for certain issues that are not or
only partly based on scientific facts. These issues concern
GMOs, E-number ingredients in food and the production of
biofuels. A debate like this can hinder sustainable developments, while present unsustainable practices are continued.
Because innovative companies would like to be rewarded for
progressive activities at environmental and safety level. This
reward does not, however, occur at societal level.
Small scale chemistry: decentralized, modular, local, continuous
chemicals production. This development is interesting for a
number of reasons. It will make investments and thus the
threshold for establishing innovative commercial plants lower
and better accessible to SMEs. Furthermore, resource efficiency will increase and the environmental impact of the plant and
logistics will become smaller. The external safety profile of the
plant will be lower. Taking small scale chemistry as one of the
possibilities when innovating will enlarge the possibilities for
innovation.
Smart Industry is about the rise of the ‘internet of things’, big
data and new sensor and production technologies. The Smart
Industry agenda in the Netherlands intends to fully use the
latest ICT developments in order to make the industry more
efficient, flexible, qualitatively better and tailor made (www.
smartindustry.nl). 3D printing is one of the main examples
which highlights how products can be designed, or how
components no longer need to be delivered from elsewhere
but can be printed on location.
INCREASING DEMAND FOR CSR WITHIN SUPPLY CHAINS
With regard to business-to-business activities, companies in
the Dutch chemical industry are faced more often with questions
about CSR and sustainability from their clients. These questions
mostly relate to closed loops, circularity, energy efficiency, regionally produced products and the use of biobased resources.
The growing interest in sustainability is also apparent in the fact
that sustainable development is part of the long term visions of
Dutch sector associations, the Dutch Chemistry Key Sector and
EU policies. This offers a good starting point for initiatives
aimed at encouraging sustainable development within the sector. The number of companies considering CSR to be a business
case, instead of a marketing tool (greenwashing) is also increasing.
INCREASING PUBLIC PRESSURE AND DISTRUST
Aside from socio-technological trends, society itself is changing. There is an increasing public interest in safety, and transparency. Citizens are less accepting of industrial incidents, despite
efforts being made by a lot of companies to comply with legislation or even go beyond it. The demand for transparency on
the part of companies and authorities is increasing.
More openness in the chemical industry in the Netherlands. In
the last four years transparency and openness in the chemical
industry has increased. This can be witnessed in a growing
amount of companies reporting on sustainability according
to GRI guidelines and third parties being allowed to develop
activities on site (Green Chemistry Campus at SABIC).
Inspection authorities have also become more transparent in
reporting incidents through the BRZO legislation on safety.
Summarized safety reports are now available through an
online database.
“CITIZENS AND NGOS ARE
BECOMING MORE VOCAL
WHEN IT COMES TO CLIMATE
CHANGE AND SUSTAINABLE
DEVELOPMENT. THE CLIMATE
CASE STARTED BY URGENDA
PERFECTLY ILLUSTRATES THIS.”
CREATING A SENSE OF URGENCY: A SMALLER PORTION
FOR EUROPE
New innovations and technologies aside, recent developments
have also created a sense of urgency for the chemical sector to
redefine itself. Although EU chemical sales have doubled since
1993, the global market share of the EU chemical industry has
declined since 2013. This is mainly due to the enormous expansion of the Chinese market (Suschem, 2015). Due to changing
geopolitical relations, the growth in Dutch and EU chemical
sales is slowing further; the European market is becoming
saturated. Traditional refineries are closing and there are plenty
of mergers and acquisitions. The port of Rotterdam appears
to become a last resort for the refineries in Europe for future
existence. At the same time the chemical industry is very
much focussed on resource and energy efficiency: using
every last ounce of fossil raw materials.
– SENIOR POLICY MAKER, MINISTRY OF
ECONOMIC AFFAIRS
42
TOWARDS A SUSTAINABLE CHEMISTRY: TRENDS AND BARRIERS
Fast growth of bio-based polymer production is expected, mainly in
Asia. Production capacity of biopolymers is expected to triple
from 5.1 million tonnes in 2013 to 17 million tonnes in 2020,
representing a 2% share of polymer production in 2013 and 4%
in 2020. In light of these developments, the world market shares
are expected to shift dramatically. Asia is predicted to experience the highest development in the field of bio-based building
blocks and polymer production, while Europe and North America are slated to lose more than half and three-quarters of their
shares respectively (Aeschelmann et al, 2015).
TESTING THE LIMITS OF THE ENVIRONMENT
Obviously, climate change is one of the most prominent environmental trends currently under scrunity. The rapid decline
of biodiversity worldwide is also a matter of concern. The
increase in the world population to 9 billion in 2050 will
increase environmental pollution and depletion of resources.
Also, scarcity of non-renewable raw materials in the long run
(oil, gas, metals, other elements) will become tangible if nothing is done. With the growth of the population and urbanization, the scarcity of fresh water reserves for growing crops,
industrial activities and human consumption will increase.
Decrease in multilateral trade due to protectionist measures and
bilateral trade agreements.
A number of important raw material producing and consuming
countries have a mercantile and protectionist raw material policy
(HCSS, 2011). Both Indonesia and Malaysia charge an export
tariff for palm oil and wood in order to support the local valorization of raw materials. Besides that, the increase in bilateral
trade agreements and regional trade communities is another example of a long term strategy to guarantee the supply of raw materials for the domestic market and industry. These developments
are worrisome, as for a sustainable chemical industry multilateral
trade and likewise institutions (WTO) are a necessity.
EUROPE IS MOVING FORWARD: POSSIBILITIES STEMMING
FROM LEGISLATION
In general the European Commission is much more ambitious
in terms of innovation policy for a biobased economy and
sustainable chemical industry than the Dutch government.
The Dutch government tends to take a facilitating role instead
of a leading role.
The termination of sugar quotas by the EU as of 30 September
2017 will stimulate the production of sugar beets for the
biobased chemical industry. EU sugar policy today concerns
three main areas: quota management, a reference price and a
minimum guaranteed price to growers, and trade measures.
It is expected that the chemical industry will invest €1 billion
in plants that refine sugar beets into biobased chemicals in the
three to five years to come (Deloitte, 2014). This means that
feedstock for biobased plants in Europe will become more
accessible at a lower price.
The Netherlands and the EU have a less attractive investment climate
for (biobased) chemical plants compared to the USA, parts of Asia
and South America. Consequently, the profits of the chemical industry will decline and the Netherlands and the EU will become
less attractive for investments in new commercial plants and the
installed base of the chemical multinationals. Although the
Netherlands and Europe have invested hugely in R&D, the benefits of this knowledge position are being implemented elsewhere.
Active EU energy policy to stimulate reduction of greenhouse gases,
energy consumption and increase in renewable energy. This is
supported by the Emission Trade System for CO2, Renewable
Energy Directive Targets, Framework Support Carbon
Capture and Storage. Companies have indicated that the ETS
system will only provide fair business conditions if it is implemented globally. This will be a topic on the agenda of the
climate summit in Paris this year. The European Renewable
Energy Directive (RED) gives negative impulses (adding biomass in waste incinerators) to the development of biobased
products (in supply of biomass and in investing direction).
“I HAVE SEEN THIS HAPPEN A
COUPLE OF TIMES. FOR INSTANCE
IN FRANCE, WHERE THE PLANTS
WERE EVENTUALLY REALISED IN
CANADA AND KOREA.”
– CEO, BIOTECH COMPANY
More transparency and requirements for the impact of chemicals
on people and the environment. This trend is visible in the implementation of REACH (Registration, Evaluation, Authorization and restriction of Chemicals), which has been in force
since 2007. The REACH Regulation requires companies to
provide information on the hazards, risks and safe use of
chemical substances that they manufacture or import.[1]
Companies register this information with the ECHA agency
and it is then freely available on their website. This also gives
European consumers the right to ask retailers whether the
goods they buy contain dangerous substances.
A GROWING AND AGEING POPULATION
Demographic trends will also put pressure on the chemical
industry. In 2050 the world population is expected to grow to
9 billion people. Furthermore, 80% of the global population
will be living in cities. This will have huge consequences for the
chemical industry in terms of market demand. Aside from these
developments, the world population also continues to age.
Particularly in Western-Europe, China and Japan, leading to an
increase in demand for medicine. Worldwide a growing wealthy
middle class is arising both in developed countries and in developing countries, increasing the need for a larger diversity of produce. Another trend related to ageing is the shortage of qualified
technical personnel in the Netherlands. This is also addressed in
the Human Capital agenda of the Chemistry Key Sector.
The standards for fuels (Fuel Quality Directive) will become
stricter, especially for biofuels to ensure a fuel quality that can
be handled by ICE. Biofuels will probably become less interesting for road transport in the future, apart from HDV
43
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
(Heavy Duty Vehicles), although the development of the
production of biofuels in Europe is heavily influenced by the
Renewable Energy Directive. Major application is expected in
marine fuels, since biofuels contain little or no sulphur and
legislation for sulphur reduction in marine fuels is being implemented. In the USA a lot of investments have been made in
biofuels originating from algae. But this does not seem to be
a very efficient conversion.
Feedstock prices are high and fluctuate, because of the limited
amount of feedstock (biomass) available in Europe and the
legislation stimulating biomass for bioenergy (through the
RED) for use in biochemicals and biomaterials. Energy
companies can afford to buy feedstock as they are supported
by subsidies.
When building a business case the hidden costs of environmental
impact are generally neglected. The costs of environmental
impact are not taken into account when making investments.
Stricter legislation regarding corruption worldwide. Legislation
regarding corruption has become stricter in recent decades.
Since the last century the USA has had the Foreign Corrupt
Practices Act, which entails that the USA can prosecute American and foreign companies for corruption. Besides fines and
exclusion from the US market, CEOs of companies can be
held personally responsible and taken into custody. Other
OECD countries including the Netherlands have followed,
resulting in a convention in 1999 on fighting and preventing
corruption. For international companies it resulted in more
attention for signalling and prevention of corruption (FD,
27 August 2015).
“IT WILL COST €4,000 PER TON TO
COLLECT PLASTIC SOUP FROM THE
OCEAN AND BRING IT TO SHORE,
WHILE CLEAN, VIRGIN PLASTIC IS
WORTH €1,000 PER TON. THAT IS
WAY TOO EXPENSIVE.”
There is a trend towards the use of certification to ban unsustainable practices instead of legislation. For this you need a stable and
reliable political system. However, this is still no guarantee of
success, since implementation is crucial.
The investment climate for biobased companies in the Netherlands
concerning biobased demonstration and commercial plants is fairly unattractive compared to the USA and Asia. For biobased
R&D it is fairly good. Compared to other countries within the
EU there does not seem to be much difference (Suurs, Roelofs,
2014, nova Institut, 2014).
BARRIERS FOR INTERNATIONAL CSR IN THE
CHEMICAL INDUSTRY
In light of these trends, it will be inevitable for companies to
rethink their current strategies and change course. One of the
options would be to move towards a more sustainable business
strategy. However, there are certain barriers that can obstruct
sustainable development. From the in-depth interviews we
derived the following:
TOO BIG A COMPANY, TOO SMALL AN INNOVATION
Existing production facilities of the bulk chemical industry have
had overcapacity for years. This is a threat to sustainable development, as the existence of overcapacity provides no incentive
to invest in innovation. Furthermore, the dominant innovation
paradigm in the chemical industry is ‘to innovate on a large
scale’, making the threshold to innovate even larger. Another
factor is the focus on short term ROI and shareholder value by
multinationals.
DEFINING A SUSTAINABLE BUSINESS CASE
The market for biobased products is undeveloped. Logistics
and sourcing have yet to be streamlined. The market value
of biobased products is not price competitive. Initially, it was
assumed the consumer would be willing to pay a biopremium
as in the case of biobased polyethylene. However, this is not
the case. Biobased products simply have to compete with fossil
products on price and functionality. A higher price is only
accepted with better functionality.
“WHEN WE DEVELOP A BIOBASED
PRODUCT, OUR CLIENTS EXPECT A
HIGHER PERFORMANCE. IF PERFORMANCE IS EQUAL TO OUR FOSSIL
BASED PRODUCTS, THERE IS NO
INCENTIVE TO CHANGE.”
– OWNER, BIOENERGY TECHNOLOGY PROVIDER
– R&D MANAGER, SPECIALITY
CHEMICALS COMPANY
44
TOWARDS A SUSTAINABLE CHEMISTRY: TRENDS AND BARRIERS
“PURCHASES OUTSIDE EUROPE ARE
COMPLICATED BECAUSE OF REACH.
BUT REACH HAS MADE A LOT OF
COMPANIES MORE AWARE OF THEIR
VALUE CHAIN.”
Large chemical companies dominate the speed of innovation and
direction of the chemical industry. Most large chemical companies seem to be rather reactive in response to a transition to a
biobased economy. One of the common strategies is to look for
innovative SMEs to incorporate. This is, however, also a barrier
for innovation, as it can easily slow down the speed of innovation of the incorporated SME and thus slow down the innovation in the value chain. At the same time, innovative SMEs
feel they do not have much influence over larger companies
and the semi-finished products being supplied to them. This is
because they possess less market power and because of the lack
of transparency and information being distributed to them.
- SENIOR ADVISOR, SECTOR ASSOCIATION -
Another issue related to transparency concerns the sustainability risks in producing renewable raw materials, such as bad
labour conditions, child labour, ILUC or the decrease in biodiversity. To mitigate risks, certification is a means of banning
unsustainable practices. But certification requires auditing.
In BIC and developing countries reliable audits are difficult.
Legislation is another possibility, but this requires a politically
stable and reliable system.
LACK OF COOPERATION FOR VALUE CHAIN INNOVATION
Another barrier to innovation is that companies in the chemical industry usually do not (or only partially) design and develop the end product, and are therefore dependent on the B2B
client sector (leather, food, etc.) for implementing changes.
Furthermore, innovation possibilities are limited when they
are not collaborating with the rest of the value chain.
SOCIAL RESISTANCE
Sustainable development is seen as neo-imperialistic politics. In
developing countries the sustainability drive of the Western
world is sometimes seen as neo-imperialism, since the Western
countries are again trying to influence the behaviour of developing countries, despite having had unsustainable industries
for more than a century themselves. This is often explicitly or
implicitly heard in global negotiations on mitigating climate
change.
“THE CSR AWARENESS OF PEOPLE WHO WORK WITH MATERIALS
IS STILL UNDERDEVELOPED. THEY
COULD EXERT MORE INFLUENCE
ON THE SUSTAINABILITY OF THE
VALUE CHAIN BY DETERMINING
HOW A CERTAIN MATERIAL SHOULD
BE OBTAINED AND WHERE IT
SHOULD COME FROM.”
“IN DEVELOPING COUNTRIES THEY
OFTEN USE SIDE STREAMS MUCH
MORE EFFICIENTLY THAN WE DO.
TAKE FOR INSTANCE FOOD; THEY
USE EVERYTHING! WE HAVE A LOT
TO LEARN FROM THIS APPROACH,
STARTING BY GETTING RID OF OUR
MISGUIDED ARROGANCE.”
– CORPORATE COMMUNICATION OFFICER,
SPECIALTY CHEMICALS COMPANY -
Companies are reluctant to try something new, even when product
functionality is similar to the current standard. Working more
sustainably might require switching to alternative chemicals
and/or new processes and installations, which can be very expensive or difficult to implement. Companies also experience
resistance to change, to new processes as well as to new
chemical products. It took the metal industry 20 years to
accept water based coatings.
Transparency about CSR issues throughout the value chain
is lacking. Foreign labels are not always transparent about
environmental impact. Even though REACH requirements
have helped companies gather more information about their
value chain, the origin of the raw materials and the impact
on people and the environment remain unknown.
45
–R
&D MANAGER, SPECIALTY
CHEMICALS COMPANY
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
In Europe societal resistance against green biotechnology (genetic
modification of plants) and synthetic biology still exists. At the
same time the EU is the world’s biggest importer of agricultural commodities like soy. And a substantial and increasing part
of these imports is based on GM crops. Societal resistance
against genetic modification of micro-organisms in industrial
biotechnology is much less present.
Lack of support for companies in the Valley of Death (transition
from pilot- to demonstration phase): currently we are losing
the battle for the bioeconomy in Europe. Other countries
invest much more in biobased consortia. This is because of
limited government budgets, and because investors in Europe
are more risk-adverse and have less financial means.
“EMOTIONS PLAY A LARGE ROLE
IN THE POLITICAL DEBATE ON
GMOS AND SYNTHETIC BIOLOGY. CONSEQUENTLY LEADING TO
A PSEUDO SCIENTIFIC DEBATE,
WITHOUT ANY SCIENTIFIC EVIDENCE. THE NEGATIVE IMAGE
THAT IS BEING CREATED IN SOCIETY CAN HARM THE BIOTECH
SECTOR.”
“EUROPE LACKS A LEVEL PLAYING
FIELD FOR PLASTIC PRODUCERS.
THE NORMS FOR PLASTIC PRODUCTS IN MEDICAL APPLICATIONS
OR PACKAGING DIFFER EVEN
AMONG EU COUNTRIES.”
UNDERMINING LEGISLATION AND POLICIES
Lack of Level of Playing Field: there is no level playing field
between biobased and fossil resources and biobased and fossil
raw materials. This is caused by trade barriers, and the strong
and almost invisible support for fossil resources8 and little support for biobased fuels and chemicals. Biobased alternatives
still need research. Regulations refer to BAT (Best Available
Technologies) or LCAs (Life Cycle Analyses) which might
be outdated. Usually there is a special provision allowing for
innovation, but in practice this might be hard to apply. Apart
from that, there is a lack of a level playing field between the
use of biomass for chemicals and materials and for energy. The
use of biomass for energy is strongly stimulated by the RED.
Another example concerns the large differences in requirements for waste management and energy efficiency between
China and Europe. Building a new plant in China can be
more cost-efficient than maintaining an existing plant in
Europe.
– ADVISOR, SECTOR ASSOCIATION
Finding skilled and qualified technical personnel is a problem in
the Netherlands, but also when establishing a business abroad.
Human capital is therefore one of the topics on the agenda of
the Chemistry Key Sector.
BUREAUCRACY AND LACK OF GOVERNMENT SUPPORT
Requiring environmental permits for (pilot) plants costs time and
money: chemical plants are often assigned to the highest environmental category for environmental permits. For SMEs this
may cause a barrier when it comes to getting their (pilot)
plants financed, since they often do not take into account that
getting a permit requires time and thus money as well. Besides
that they have only little capacity and cannot afford to spend
too much time and money on the application process. Permit
processes are also not very streamlined, and civil servants are
not always well informed about the characteristics of individual companies, in spite of incentive measures taken by the regional and local governments. In spite of this, interviewed
companies still consider rules and regulations to be the driving
force towards a more sustainable chemical industry.
8
– CEO, PLASTICS MANUFACTURER AND
CONVERTOR
Legislation regarding waste streams hinders valorization and reuse. The use and valorization of (biobased) waste streams can
be complicated as a result of labelling these streams as ‘waste’.
For instance, waste water rich in nitrates and phosphate could
be used as feed for algae. But this is not allowed. Besides that,
waste and waste processing make AVI laws and regulations
applicable. This makes treatment and valorization of waste
complicated because of the legislative burden. Transporting
waste across borders is also difficult due to strict rules and
regulations. Governments decide what is waste and when
and where it can be used as a resource.
S OURCE: IEA WORLD ENERGY OUTLOOK, 2011. THE CURRENT EU SUBSIDY SYSTEM IS STILL MORE ORIENTED TOWARDS FOSSIL FUELS THAN
RENEWABLE ENERGY. SUBSIDIES THAT ARTIFICIALLY REDUCE END-USER PRICES FOR FOSSIL FUELS AMOUNTED TO $409 BILLION IN 2010, WHILE
SUBSIDIES GIVEN TO RENEWABLE ENERGY AMOUNTED TO $66 BILLION (NOMINAL). INVISIBLE SUPPORT OF FOSSILS ENTAILS, FOR INSTANCE,
THE LACK OF ENERGY AND IMPORT TAX FOR FOSSIL BASED CHEMICALS AND UNDERPRICING OF FOSSIL BASED ELECTRICITY.
46
TOWARDS A SUSTAINABLE CHEMISTRY: TRENDS AND BARRIERS
PAS legislation hinders expansion of chemical companies. The
Programmatic Approach for Nitrogen (in Dutch, PAS) is
meant to reduce the amount of nitrogen in the environment in
order to preserve Dutch nature and at the same time economic
activities. However, the PAS legislation is interfering with
the expansion of chemical companies in North Brabant and
Zeeland because the norms restrict industrial activity.
Barriers for the circular economy. The infrastructure for collecting
used products, products to be refurbished and side streams to
feed into a developing circular economy is poorly developed in
the chemical sector and changes occur at a slow pace. Similarly,
most financial institutions are not ready to finance business
models based on lease concepts. End of life solutions for many
products, like composite materials, are simply not available.
REACH hinders innovation by making the market introduction
of new (biobased) products more costly and time consuming. New
products in Europe have to be registered, evaluated in terms
of their risks to man and the environment and authorized. In
every business plan a REACH paragraph is obligatory. This
causes an administrative burden, which is very demanding
especially for SMEs.
“AWARENESS OF SUSTAINABILITY IN
CHEMICAL COMPANIES IS COMPLICATED, SINCE ROI AND SHORT
TERM PREVAIL. THE SHALE GAS
REVOLUTION AND THE LOW OIL
PRICE ARE NOT HELPING EITHER.
THE PRICE OF CO2 SHOULD
INCREASE AND THE ENVIRONMENTAL IMPACT SHOULD BE CHARGED.”
GMO legislation is rather strict in the Netherlands compared to
neighbouring countries. This hinders innovation in the industrial biotechnology sector. It is, however, important to take potential adverse effects on people and planet into consideration
when advocating looser regulation. There is a serious scientific
as well as societal discussion ongoing on this issue.
“WE PERFORM PART OF OUR
RESEARCH IN BELGIUM,
SINCE THEY ARE LESS STRICT
ON GMO RULES”
The Dutch government is unreliable and inconsistent when it
comes to sustainability. Businesses think government policies
change too swiftly with each establishment of a new Cabinet.
This increases risk when making long term investments with
subsidies. Several representatives of companies stated during
the interviews that they therefore try to construct an independent business case.
– CSR OFFICER,
BIOPLASTICS MANUFACTURER
WHAT IS SUSTAINABILITY?
It can be unclear how to define sustainability. There is no
uniform method for measuring the sustainability of (biobased)
products in spite of several existing measurement methods. Also
the numerous existing certificates for sustainable products
are causing confusion about what the certification entails and
what it does not. A biobased origin, for instance, is no guarantee of a sustainable product. An LCA is often required to
determine whether one solution is really sustainable.
“AT THE MOMENT, THERE SEEMS
TO BE SOME SORT OF ‘TITANIC
POLITICS’: EVERY FOUR YEARS
POLITICIANS HAVE TO SCORE.”
“YOUR INTUITION CAN BE DECEIVING. YOU TEND TO THINK ‘NATURAL
IS MORE SUSTAINABLE’. BUT PAPER
COFFEE CUPS OFTEN REQUIRE
MORE MATERIAL THAN PLASTIC
ONES, WHICH MAKES PAPER CUPS
EVENTUALLY LESS SUSTAINABLE
– VP PARTNERING & COMMERCIALISATION,
BIOPLASTICS MANUFACTURER
– SENIOR RESEARCHER, RESEARCH INSTITUTE
47
– CEO, PLASTIC PACKAGING MANUFACTURER
07. OPPORTUNITIES
FOR INTERNATIONAL
CSR IN THE CHEMICAL
INDUSTRY
“WHILE TALKING TO (LARGE) CHEMICAL COMPANIES,
I NOTICE THEY ARE IN TRANSITION. THESE COMPANIES
ARE INCREASINGLY AWARE OF SOCIETAL DEMANDS
REGARDING SUSTAINABLE PROCESSES AND PRODUCTS.
BIOTECHNOLOGY CAN BE AN OPTION, BUT COMPANIES
ARE NOT ALWAYS FAMILIAR WITH THE APPLICATION OF
THIS TECHNOLOGY. COMPANIES TOO OFTEN STILL THINK
IN TERMS OF PRODUCING SUBSTITUTES FOR CHEMICAL
PRODUCTS (DROP-INS) INSTEAD OF USING NEW
TECHNOLOGY. COMPANIES ARE HESITANT TO INTRODUCE
NEW PROCESS ROUTES OR PRODUCE NEW PRODUCTS.”
– CEO, BIOTECH COMPANY
48
OPPORTUNITIES FOR INTERNATIONAL CSR IN THE CHEMICAL INDUSTRY
FIGURE 8: OVERVIEW OF CIRCULAR ECONOMY, ELLEN MACARTHUR FOUNDATION, 2015
leads to a lot of waste streams that are not collected or treated
afterwards. Plastic producers, amongst others, could help and
find solutions for this problem.
EIGHT STARTING POINTS FOR SYSTEM INNOVATION.
The following eight starting points for (system) innovation
offer companies in the chemical sector opportunities to tackle
CSR issues and for further sustainable development in the
sector:
Development of a bioeconomy and a biobased chemistry. Opportunities for this concept lie in the strong position of the Dutch
agrifood sector, including the sugar beet quota abolition in
2017, the strong position of transport and logistics, and Dutch
expertise in biochemistry, life sciences and biotechnology. The
Dutch government itself is quite active in stimulating and
coordinating the bioeconomy. The valorization of agricultural
residues and invasive plants and trees in developing countries
also offers opportunities. Attractive biobased policies and regulations can be found in Malaysia (attractive incentive policies),
Singapore (active acquisition of foreign investments, especially
for biobased industries), Thailand / Indonesia (attractive fiscal
arrangements). The USA also has an attractive investment
climate (low energy price, many investors and government
support, infrastructure, market access), as do Brazil and South
America (TNO, 2014, Nova, 2014).
•Circular economy;
• Biobased economy and chemistry;
• Small scale chemistry;
• Smart, functional materials;
• CO2 economy;
• Valorization of side streams and invasive species;
•Sustainable product development for developing
countries;
•Modernization of existing industries in developing
countries.
Circularity as a starting point for a system innovation offers resource efficiency, sustainable sourcing and production, altering the
production, use and end of life phase. The Chemistry Key Sector
has implemented circularity as a concept into its vision for
2030 by setting an ambition of 15% biobased chemicals, 10%
recycled fossil based and 75% traditional fossil based.
Small scale chemistry as an alternative innovation paradigm. The
chemical industry generally tends to think in terms of innovation on a large scale. Small scale chemistry can literally bring
producers closer to their resources and the (regional) market,
which might specifically be relevant to developing countries
that grow feedstock. The concept can be seen as enabling for
the circular and biobased economy. Small scale chemistry
makes new products and continuous processes possible due to
a higher degree of control of process variables and selectivity,
which can also contribute to safer production conditions.
Companies are actively developing circular fossil and mineral
products. Mechanical and chemical PE recycling is becoming
more mainstream and phosphate and (mechanical) PET recycling are already well established, as is recycling of biodegrabales via composting. Leasing chemicals is a concept still to be
further explored. Interesting opportunities lie in the development of circular humanitarian aid goods. Humanitarian aid
49
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
Small scale solutions potentially help solve investment barriers
experienced by SMEs and larger companies. Of course, small
scale chemistry is not the ‘holy grail’, the solution for every
process development. Nevertheless, it might offer new innovation possibilities for traditional products, and thus modernization of industrial complexes.
Another valorization possibility for fossil based waste streams
is developing incorporating circularity for plastics in developing
countries: plastic litter, plastic humanitarian aid products and
other waste in general are causing huge environmental problems in most developing countries. Most of the time in most
countries there is little or no infrastructure for collecting
waste, nor a proper recycling facility. New business opportunities may arise in collecting, sorting and recycling plastics, since
the costs of collecting and sorting are lower than in the Netherlands, and proper recycling increases the resource efficiency
and reduces litter.
Opportunities for smart, functional materials. Smart materials
compete on added value in terms of product performance instead of resource price. The development is supported by the
trend of a smart industry development and the strong position
of the Dutch high-tech industry. Furthermore, these smart
new materials encourage a new way of collaborative innovation. If designed well, these new materials can be more
resource efficient and circular than conventional materials.
Sustainable product development specifically for developing
countries in the downstream value chain. The chemical industry
has the capacity to produce societally beneficial products.
Starting from the demand side (in developing countries) and
looking from a client’s perspective, the products will be better
attuned to the local situation and to local knowledge.
Opportunities for a CO2 economy. The Netherlands has a
unique position and opportunities for the development of a
CO2 economy, because of a strong position in the chemical
industry, process technology, 3D-printing technology, CO2
capture and storage and transport. Mediagenic examples are
Roosegaarde studio’s projects involving carbon capture: a
smog-free tower that filters CO2 from the air and smog-free
rings made with the captured CO2 (Studio Roosegaarde,
2015). CO2 as a resource is abundantly available around the
world (emitted by industry, part of the atmosphere) and integrating its capture in products or services solves an environmental issue as well. Abundance of renewable energy at a low
price is a success factor for this development. In developing
countries this could be easily provided by solar energy.
Modernization of existing industries in developing countries.
Developing countries and emerging economies often have
industries that are ill maintained and old fashioned in terms
of processes. This could offer a market for Dutch companies
in terms of exports of knowledge and technology and offers
developing countries the opportunity to ‘leapfrog’ to the current state-of-the-art technology. Success factors are reliable
local contacts, government support in terms of HSE legislation/policy and multinational clients seeking a reduction in
the social and environmental impact of the industry.
PROVIDING A NEW LEVEL
OF CHEMICAL PRODUCTION IN EUROPE BY IMPLEMENTING CSR: TRACEABLE
PRODUCTS, HIGH QUALITY,
AND SAFE PRODUCTION
WITHOUT PROBLEMS.
Further valorization of agricultural residues and invasive species
(plants, trees) in developing countries. Agricultural residues in
developing countries are often not used to their full extent.
To gain insight into the potential valorization of agricultural
waste streams, we need to look at the consumption trends in
emerging and developing countries. Residues and biomass
waste streams can potentially be used for biorefining. The same
goes for invasive plants and trees. Valorizing these is creating
value while solving a problem.
– CEO, PLASTICS AND PACKAGING
MANUFACTURER
50
OPPORTUNITIES FOR INTERNATIONAL CSR IN THE CHEMICAL INDUSTRY
SUPPORTIVE LEGISLATIVE FRAMEWORKS FOR NEW
WAYS OF BUSINESS
Allow frontrunners to innovate. For early innovators and
frontrunners, the government could install a legislative area
with more flexible regulations. This will create more room for
frontrunners to experiment. Current regulations function as
a ‘barrier to entry’ for more sustainable alternatives.
Simplify legislation including REACH. Simplification of
REACH by registration of groups of substances instead of
single substances will lift a burden for companies, especially
for SMEs. Another form of simplification could be to use
requirements for products instead of import conditions, and
to search for raw materials and products that are already registered by the EFSA, FDA and do not need to be registered
within REACH.
Support or strengthen initiatives that support the ICSR agenda.
Together for Sustainability is an initiative by chemical
multinationals to ensure ecologically and socially sustainable
sourcing. Other initiatives include the call of the Minister of
Development Cooperation to develop mega or icon projects
for developing countries and to develop an ICSR sector based
approach (covenant) for Dutch sectors. Furthermore, UNEP
and ICCE have an MoU regarding knowledge transfer to
developing countries with respect to clean production centres.
Besides that, there is the Responsible Care Programme of
ICCE, which contains some basic aspects of CSR, and the
so-called ELAN programme, which is an EU initiative that
seeks to increase and diversify the EU economic presence in
Latin America. All these initiatives can help advance the
CSR ambitions of SMEs. Finally, the 17 UN Sustainable
Development Goals can help. 51
08. CONSTRUCTING A
SECTOR PROGRAMME:
PRIMARY FOCUS
THE CHEMICAL INDUSTRY IS HIGHLY DIVERSE AND PLAYS AN ESSENTIAL
ROLE IN THE DELIVERY OF ALL SORTS OF INGREDIENTS AND PRODUCTS IN
SOCIETY. BECAUSE OF THIS THE SECTOR CAN MAKE A LARGE SUSTAINABLE
IMPACT. AS A RESEARCHER STATED IN ONE OF THE INTERVIEWS: “THE
CHEMICAL INDUSTRY CAN DO A LOT OF GOOD, BUT CAN ALSO CAUSE A
LOT OF HARM.” GOOD IN MAKING SURE THAT SUSTAINABLE PRODUCTS ARE
AVAILABLE AROUND THE WORLD. HARM IN THAT IT CAN CAUSE DAMAGE
TO PEOPLE AND THE ENVIRONMENT. FOR THE INTERNATIONAL CSR SECTOR
TRAJECTORY WE HAVE IDENTIFIED THE FOLLOWING CHALLENGES AND
OPPORTUNITIES SPECIFYING HOW WE, AS A DUTCH SECTOR, CAN
CONTRIBUTE TO SUSTAINABLE CHEMISTRY INTERNATIONALLY.
52
CONSTRUCTING A SECTOR PROGRAMME: PRIMARY FOCUS
households and valorization of invasive plants and trees. Other
barriers impairing the growth of sustainable biobased chemistry,
like discussions concerning Indirect Land Use Change, can also
be addressed. For both cases, the role of SMEs could be to
export knowledge and technology or set up alternative business
models that include the use of such waste streams and residues
for further processing.
TOWARDS TRANSPARENCY IN THE VALUE CHAIN ON CSR
RISKS
If we look at the ICSR risks in the chemical industry, they concern both people and planet issues along the entire value chain.
For Dutch companies the most severe CSR risks do not occur in
the Netherlands itself, but within the international supply chain
and in the use and end of life phase of products. Addressing
these issues requires substantial insight into the supply chain
and occurrence of issues. Through REACH, companies are
forced to gain more knowledge of the risks chemicals pose to
human health and the environment, which requires information
on the source of the chemicals. However, REACH does not
require insight into the entire value chain. Furthermore, the
impact on people beyond health (human rights issues) is not
addressed. Gaining insight into where international CSR issues
might occur will help to prevent or remedy risks for which
companies feel or are held responsible. Chemical multinationals
are increasingly aware of their supply chain and often work with
first tier suppliers to produce more sustainably. Beyond the first
tier much remains to be gained. SMEs face additional challenges. Most of them do not know what their international value
chain looks like and are unaware of the CSR risks that occur
along the chain. Working points therefore are value chain
mapping and the identification of CSR risks.
TOWARDS DEVELOPMENT OF SUSTAINABLE PRODUCTS
AIMED AT DEVELOPING COUNTRIES
Instead of just exporting products, we could develop sustainable
products in cooperation with local entrepreneurs in developing
countries, while using indigenous knowledge where possible.
Along with technological innovation this can also lead to social
innovation. An example is the development of biodegradable
sanitary napkins in cooperation with local entrepreneurs.
During the entire production phase CSR risks concerning
production, usage and end of life should be incorporated.
Dutch SMEs can co-develop and co-produce these products
or export knowledge and technology.
TOWARDS MORE DIVERSITY IN SCALE
The chemical industry usually thinks in terms of large-scale
processes and bulk processing, but a shift in thinking is taking
place. This is done by moving away from fossil to biobased, by
developing small scale and modular process installations. Small
scale chemistry can offer the advantage of a continuous process
that is easier to manage and thus safer for workers and surrounding communities. It also requires less energy. Considering
Dutch added value that lies in specialties and fine chemicals, a
more conscious choice concerning scale when innovating might
prove very relevant. In order for this to gain further ground,
a cultural shift is required. Proof of robust technology, skilled
personnel, trustworthy relationships internationally, a supportive government, and multinational counterparts putting
pressure on existing industries to reduce their social and
environmental impact can all speed up change.
TOWARDS SUSTAINABLE PRODUCTION THROUGHOUT THE
VALUE CHAIN
A significant part of the Dutch chemical industry has subsidiaries or production locations in developing countries or emerging
economies or finds such parties in their supply chain. Even
when aware of CSR risks, tackling these issues often seems
daunting and SMEs in particular lack the knowledge and leverage to undertake effective and efficient action. Prioritizing between identified CSR risks must involve stakeholder consultation. More cooperation in value chains would help encourage
sustainable development, create leverage and address CSR risks.
This ICSR sector trajectory offers the opportunity to develop a
sector based approach to how to deal with these risks. In that
way, SMEs benefit from combining forces and sharing insights.
TOWARDS CIRCULAR PRODUCTS AND SERVICES
A circular chemical industry can entail circular fossil chemicals,
thinking and working in value circles instead of value chains,
chemical leasing (i.e. product-service systems), designing
chemical products that are easy to reuse, refurbish and recycle.
The ICSR sector trajectory could stimulate collaboration on
innovation in business models and product offering.
TOWARDS SUSTAINABLE SOURCING
A lot of CSR risks occur at the beginning of the value chain,
where biomass, minerals, oil and gas are sourced. In the sector
programme we would like to focus on value chains starting
from secondary fossil raw materials and renewable raw materials. Since all visions towards a sustainable chemical industry
indicate that the chemical sector will remain largely fossil based
for the next decade, enhancing the circularity of fossil based
chemicals offers an opportunity for sustainable development.
Considering the amount of plastics that is used and disposed off
in developing and BIC countries and the discussion on plastic
soup and microplastics currently taking place, this value chain
offers a lot of potential.
TOWARDS A TRUST BASED RELATIONSHIP BETWEEN
CHEMICAL COMPANIES AND THE GOVERNMENT/ SOCIETY
It is evident from several studies and interviews that the relationship between chemical companies and the government and society is characterized by distrust. Governments seek to control companies in terms of impact, while companies do not feel rewarded
for sustainability efforts and innovative activities are strained.
Businesses think government policies change too swiftly with
each establishment of a new Cabinet. Additionally, it would be
interesting to compare certification pressure on biobased chemicals versus fossil chemicals. A key element in the projects of the
sector trajectory could be to invest in an improved relationship
between industry and government and to attain a better (and
more realistic) perception of the chemical industry in society.
Furthermore, an opportunity lies in further encouraging the
sustainable sourcing of biobased resources, since the market
for biobased chemicals is still in development,. Of course one
should keep in mind the advice of Commision Corbey. However, looking at the source this could be done through valorization
models for agricultural residues, biotic waste streams of urban
53
INTERNATIONAL CSR IN THE DUTCH CHEMICAL SECTOR QUICKSCAN
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ANNEXES
ANNEXES
ANNEX
ANNEX
ANNEX
ANNEX
I: LIST OF PSD AND BIC COUNTRIES
II: LIST OF CONSULTED PARTIES
III:DEFINITIONS OF SUSTAINABLE CHEMISTRY
IV:RELEVANT POLICIES AND LEGISLATION AT
EUROPEAN AND NATIONAL LEVEL
ANNEX V: OUTLOOKS FOR A SUSTAINABLE CHEMICAL SECTOR
57