Sustainable Models in the Fine and Speciality Chemicals Industry

Special Report

Sustainable models in the fine and speciality chemicals industry

Shifts in industry landscape goals is steadily gaining acceptance in R. RAJAGOPAL he global fine and the speciality this industry, and in the process have E-mail: [email protected] chemicals business is a multi- been driving innovations in feedstocks, Tproduct, multi-technology, multi- R&D, manufacturing, marketing and business functions. Sustainability prac- location enterprise spread across di- supply chains. New advances in chemi- tices are now being adopted in diverse verse economic zones. It is a high pre- cal sciences and engineering, operating segments of this industry with increas- mium, knowledge-intensive component models and resource management have ing use of sustainability methodologies, of the chemical value chain, catering to accelerated the development of sustain- tools and reporting practices. This has a multitude of societal and industrial able products and solutions. In this con- also brought about shifts in structures, needs. Regulatory, sustainability and text green chemistry and engineering procedures and systems to manage consumer forces have been constantly tools have been instrumental in several strategic sustainability goals within the shaping the business fundamentals of commercially successful sustainable industry. Perhaps, the most profound this industry in diverse ways. Climate innovations. change has been the proactive approach change, regulatory compliance and cus- adopted by the industry in meeting sus- tomer preferences remain the top moti- In the last decade, the concept of tainability challenges. vators for action for the global fine and sustainability and that it makes busi- speciality chemicals industry. ness sense has led to a new agenda in The fine and speciality chemicals the fine and speciality chemicals busi- industry has been grappling with a va- Integration of social and envi- ness. Companies invested in develop- riety of challenges since the mid-80s: ronmental concerns into the business ing sustainable models and tools across high raw material, R&D, energy and compliance costs. In the 90s, rapidly growing Asian economies spurred the demand for high value specialities and in the process offered new growth avenues for commodity players. The rapid growth of the fine and speciality chemicals through the next decade was driven by new technologies, sophistication in end-use segments, newer business models and, in particular, climate change mandates. Niche technology, customer-centric and emerging market centric models were adopted.

At present, the global fine and speciality chemicals industry structure can be broadly differentiated into hybrid players (with multi product-technology capability) and niche (focused product/ technology capability) players, each adopting different business approaches (see Fig. 1).

In the last decade the industry made significant progress in addressing

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has been the driving force behind radi- Hybrid companies Niche companies cal changes within the industry. From a reactive control approach to a pro- Global presence Regional presence active approach the shifts have been Multiple technologies Niche technologies profound. Many global initiatives have Margin driven growth Customer driven growth now brought together civil society, in- Competitive feedstocks Competitive delivery dustry and governments to collaborate Innovation (mega trends) Innovation (Customer) in developing new instruments for the Sustainability capability Customer sustainability future.

Figure 1: Differentiated structures Since the 1970s several national regulatory instruments have been adopted under broad categories such as: Insulation foams, reflector coatings, detergent Healthcare chemical pollution control, waste man- enzymes (energy reduction) Food agement & hazardous chemical control Light weighting polymers (fuel efficiency) Housing (1970s); pollution prevention & chemi- Fluorescent lights (GHG reduction) Transportation cal information (1980s); managing Metallocene catalysis (bio plastics) Infrastructure chemicals in products (1990s); and Energy devices (energy optimization) evolution of safer chemicals & resource Advanced materials (fuel efficiency) efficiency (2000+). Crop-protection chemicals (Optimal dose) Novel Bio-materials (GHG reduction) Many of these regulations will con- tinue to drive sustainable innovations in Figure 2: Commercial innovations future. the critical needs in sectors where a is also adopting newer approaches in high level of chemical intensity and pushing the sustainability agenda and Sustainability models negative impacts are present. Lever- developing real time predictive capa- Identifying the right sustainable aging enabling technologies has led to bilities to respond to emerging regula- model is complex task, as this industry novel developments that are needed for tory regimes. has different sub-segments, each with healthcare, diagnostics, food produc- its unique chemistries, technologies & tion, housing, transportation etc. Novel Several companies are now busy application platforms, and regulatory energy storage devices, advanced with assessment of their base line sus- directives. materials, designer crop protection tainability performance in each of their chemicals, novel packaging materials verticals and redesigning them. Be- Assessment of sustainability prac- and a host of innovative & sustainable sides, emergence of sustainable report- tices within this industry indicates that products & processes were developed. ing, exchanges and indices have led to the fastest and most competitive way The industry also developed enhanced structural changes in the way invest- to meet sustainability goals is to tar- capabilities in meeting regulatory stan- ment decisions are being made. Since get those areas that provide for faster dards with REACH imposing new chal- 2010, there has been increasing call for implementation and enable revenue lenges. segment-specific sustainability stan- generation through improved process dards, considering the heterogeneity of economics and cost savings. Resource Sustainability practices: Evolving the specialty chemicals industry. management, obviously, is high in the trends agenda. Typically, four models have Capturing value through sustainable In the last decade, several sustain- been adopted by the industry based on practices is slowly becoming a reality. able innovation approaches have been energy efficiency, waste valorization, In recent years, there have been quite followed. Fuel efficiency, GHG reduc- innovative green chemistry and tech- a few instances of companies creating tions, bio-based materials and designer nology (GCT) platforms and bio-based revenue growth through investments in actives have been some of the key ones products. R&D, manufacturing, supply chains, (see Fig. 2). tools and guides that enable them to Energy efficiency meet sustainability goals. The industry Evolution of regulatory instruments Investing in energy efficiency is the

200 Chemical Weekly January 21, 2014 Special Report first choice for most companies seek- Adopt energy efficient systems A few examples of innovations in ing to lower their carbon footprint. Combined heat and steam systems energy efficiency include: This was driven by advances in process to enable heat recycling have been a Bayer’s Oxygen Depolarized Cath- intensification, novel feedstocks and major contributor to improving en- ode (ODC) technology, which is materials, all of which led to nume- ergy usage. At present, co-genera- a method of chlorine production rous innovations targeted at improving tion plants are the norm across the working on fuel cells principles, energy management in the industry. At industry. and offering high degree of energy present, climate protection driven pro- Management tools for quality efficiency. Bayer has operational duct development accounts for nearly (TQM), productivity (TPM), busi- plants in Shanghai (China) and 10-15% of sales of companies pursuing ness process (BPR), to name a few, Brunsbuttel (Germany), based on this agenda. have also enabled significant energy this technology. use rationalization and cost savings. Dow’s novel titanium dioxide pow- A recent report [Accenture/UN der grades require less dispersion Global Compact, Sustainable Energy Focus on energy saving product time, use less associated energy and for All], recommends diverse approach- development offer the possibility of major cost es to enhance energy efficiency. Some Investing in a product portfolio that savings. of the approaches compatible with the addresses energy optimization and Akzo Nobel’s Lumitec technology needs of the fine and speciality chemi- savings is emerging as a thrust area for developing reflector and low cals industry are discussed below. within the industry. In recent years friction coatings lowers energy us- advanced materials, coatings, light- age, and has been a significant in- Enhance energy efficiency of produc- weight polymers, Li-ion batteries novation in the coatings sector. tion processes etc., have all been developed to im- Development of Li-ion batteries is a Identify high-energy intensive pro- prove energy efficiency in applica- focus area for companies like BASF, ducts/processes in portfolio and work tions. Evonik and Mitsubishi Holdings. on developing alternatives for those that are sought by end-use custo- Besides, increased use of renewable Green chemistry and technology mers. energy (wind, solar, hydro) in opera- platforms Locating manufacturing in clusters tions is a practice that has found favour Investing in Green chemistry and and adopting co-productivity con- in the industry. Tapping waste streams technology (GCT) tools has been one cepts have led to immense savings for fuel generation has also offered in- of the widely adopted models within in utility costs and rationalized en- creased options for enhancing energy the fine & speciality chemicals indus- ergy usage. efficiency. try. These platforms have contributed

Chemicals Materials Medicine Food Fuels D-lactic acid Farnesene Sitagliptin Valencene/ Nooktatone Isobutanol (Myriant) (Amyris/Kuraray) (Merck/Codexis) (Isobionics/DSM, Allylix) (Gevo) Biofene PHA Cephalexin Vanillin/resveratrol Algal oils (Amyris) (Metabolix) (DSM) (Evolva) (Solazyme) Butanediol Isoprene Antitrypsin Vetivone Butanol (BioAmber, (Amyris, (Intrexon) (Allylix) (Butamax/DuPont) Genomatica) Genencor etc.) Artemisnin Corn-enzyme Algal biofuels Adipic acid PBS (Amyris) (Syngenta/Verenium) (Syn. Genom) (Verdezyne) (BioAmber) Ethanol Succinic acid (Mascoma/Qteros) (BioAmber, etc.)

Figure 3: Syn-bio products Source: www.synbioproject.org

Chemical Weekly January 21, 2014 201 Special Report to commercially sustainable products eous wastes being converted to high mills. This pioneering, gas fermenta- and process. Some noteworthy deve- value products using diverse tech- tion technology developed by LanzaTec lopments related to process for making niques. (New Zealand), has led to several tie-ups paracetamol, naproxen, (s)-metola- with steel majors in Asia wherein chemi- chlor, ibuprofen, citral, lazabemide, to Conversion of agricultural, food cal plants are co-located with steel plants. name a few. and fruit processing wastes to high value fine & speciality chemicals offer Bio-based products New advances in phase transfer ca- significant opportunity to generate re- Bio-based product development, talysis, asymmetric catalysis and bio- venues while pursuing a sustainability based on synergies between chemi- catalysis have led to elegant processes agenda. cal and synthetic biology, has been with significantly improved process a major landmark in the industry. economics and minimal environmental Several initiatives such as valoriz- Bio-based chemicals based on syn- impact. Biocatalysis has led to block- ing potato wastes to proteins, bio-sur- thetic biology, thermochemical con- busters drugs (such as Atorvastatin, factants, bio-pesticides etc. are being version and algae platforms have Simvastatin, Pregabalin etc.) being actively pursued. been a focus area for several com- made by eco-efficient methods at low panies. Some examples of products costs. Bio-surfactants from soybean hull, where synthetic biology has been sugar beet, fruit & oil processing wastes a key facilitator are given in Fig. 3. Process intensification, process have opened up new avenues for im- integration, resource optimization and proved consumer chemicals. For the markets for bio-based products green tools & guides have comple- to mature, several issues related to sustain- mented computational & combinatorial Valorization of carbon dioxide able feedstocks generation, bio-process tools to enable eco-efficient products to high value chemicals has gained technologies and risk management have and processes. momentum with innovative develop- to be resolved. It is imperative for the bio- ments on the polymer front, as also the based chemical industry to develop innova- New tools and metrics have led to recent options to ethanol-based value- tive strategies from feedstocks generation to accurate measurements of many pro- added products from flue gases of steel final market access to ensure sustainability ducts and processes, while advances in of the entire value chain. reaction media and process design have opened up immense scope for rationali- Managing sustainability initiatives zing and improving the economics of Developing a sustainable stra- various processes. tegy calls for a strategic approach both within the confines of a company and Waste valorization outside of it. Progress in sustainability Waste valorization is one of the initiatives in the industry have been most active areas within the fine & spe- driven by advances in tools, emergence ciality chemical sectors, and there are of exchanges and adoption of reporting numerous examples of solid and gas- practices.

New business models New feedstocks New growth models Leverage intangible assets

Sustainable models Ensure flexibility TBL IPR Focus on emerging markets Newer product slates Tapping adjacent value networks Brands Collaboratie innovations Newer biomass sources Exploring opportunities from unmet Functional skills customer needs New customer models DuPont sustainable Solutions Dow Intellectual Assets

Figure 4: strategic approaches

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designer prosthesis, customised thera- Investing in innovation Cost optimization pies). New chemistries Portfolio rationalization Bio-based products Resource management Emerging challenges The fine & speciality chemicals in- Sustainable products New operational models dustry faces key challenges and these EHS management Asset management relate to managing innovations, re- Supply chain operations Best practices maining competitive and choosing the Green tools and metrics Manufacturing economics appropriate business model.

Figure 5: Operational approaches Managing innovations While tools have enabled perfor- new growth models and leveraging Leveraging innovations at the mance measurements, exchanges have intangible assets (see Fig. 4), opera- market place has proved to be most brought in a new phase of investor tional approaches involved investing in challenging for many companies. involvement in sustainability issues. innovation and cost optimization (see Low and slow pace of return on inno- Development of sustainability ex- Fig. 5). vation investments has led to shift in changes has been mainly due to institu- approaches within organizations. Per- tional investors who have brought about Creating sustainable value also in- haps, the major challenge comes from profound changes in the way investors volves tapping new opportunities aris- prioritizing functional areas where in- now park their funds in companies. ing from climate change challenges. novation is needed. This often varies Across speciality sectors such as per- from sector to sector and also from Development of sustainability tools sonal & home care, colourants, lubri- company to company within the same is an evolving process and it is impera- cants, coatings, adhesives etc., several segment. tive that the industry, regulators, aca- sustainable innovations have now gone demia and civil society synergize capa- to markets. Companies have also learnt Traditionally innovation invest- bilities and resources. to leverage intellectual property in ments have been in product and process newer ways. An excellent example is innovations, but in the last decade there Sustainability reporting is now an the way Unilever Ventures leveraged has been a shift to supply chain inno- industry practice, though several limi- Unilever’s iron catalysis platform capa- vations. From a business angle, inno- tations remain in the way reporting is bility (used for non-hydrogen peroxide vations often prove to be risky and the done. Effective reporting calls for reli- bleaching products, in the 90s) to cre- industry has to be cautious in investing able metrics and third-party validation ate Rahu Catalytics. In 2006, Rahu be- resources in “alternatives” to banned to quantify a company’s sustainability came a leader in iron-ligand chemistry products and find that these end up as progress. Sustainability reporting has used for developing eco-friendly driers “regrettable” replacements, like in the come a long way, mostly driven by ini- for coatings. Unilever then sold Rahu case of phthalates and several other tiatives such as the Global Reporting Catalytics to OM Group (US), in 2011 products. Index and Carbon Disclosure Project. – a purchase that provided OM Group access to iron-ligand chemistry plat- Remaining competitive Sustainable value creation form that it plans to leverage in its new Eastward migration of manufactur- Traditionally, sustainable value cre- coating product lines. ing and markets has also led to frag- ation tools did not factor in environ- mentation of capacities and disruption ment and social factors in its evalua- Climate change forces also led to of supply chains in Asian markets. tion. This has now changed and new numerous opportunities arising from Increasing customer consolidation in tools are based on finance, natural and unmet needs: in transportation (light textiles, healthcare, construction, infra- social resource costs. weight polymers, biopolymers, Li-ion structure and automotive segments has batteries, green tyres); infrastructure led to pricing replacing performance as The fine & speciality chemi- (energy efficient coatings, cement ad- the key value determinant. This has of- cals industry followed strategic and ditives, asphalt binders etc.); Informa- ten led to many high value specialties operational approaches to create value. tion-Communication-Telecom (ICT) ending up as commodities. While strategic approaches involved (sensor networks, recyclable materials); new business models, new feedstocks, and healthcare (novel diagnostics, Adopting new operational models

Chemical Weekly January 21, 2014 203 Special Report do pose challenges for companies while operating in multiple geographies and FORTHCOMING BOOK this has often led to a negative impact Sustainable Value Creation in the Fine and on growth. Speciality Chemicals Industry Appropriate business model This industry faces, perhaps, the R. Rajagopal, KnowGenix, India biggest challenge in adopting the Foreword by Dr David Constable right business & delivery models in Director, ACS Green Chemistry Institute regions where it operates. Often the American Chemical Society mismatch between market realities Publisher: Wiley, UK, 2014 and product/technology portfolio has Contact: CBS Publishers & Distributors P. Ltd. been pronounced in many speciality Tel: +91-11-23289259, 23266861/67 segments. Besides, setting innovation E-mail: [email protected] priorities that are aligned with customer needs and more importantly, The global fine & speciality chemicals industry is a vital segment within the embedding sustainability components chemical value chain, catering to a multitude of societal and industrial needs. in business goals have proved chal- Regulatory, sustainability and consumer forces have been constantly shaping lenging. the business fundamentals of this industry. Developing value creation strategies, which embed economic, environmental and social sustainability compo- Future directions nents, will need a comprehensive assessment of business, scientific and techno- The fine & speciality chemicals in- logical challenges facing the industry. dustry faces complex challenges ema- nating from new regulations, shifting ‘Sustainable Value Creation in the Fine and Speciality Chemicals Industry’ customer preferences and slow pace of assesses sustainable value creation options against the backdrop of global mega innovation, to name a few. trends defining the course of the industry. It discusses innovative strategies in feedstocks, R&D, technology, manufacturing, resource management and sup- It will need to develop segment- ply chain, as well as the significance of the bio-based chemical economy in specific strategies to develop newer enabling sustainable value creation. business models, product portfolios and delivery platforms. In the future, Topics covered include: game changers like synthetic biology, Transformation in the fine and speciality chemicals business third generation bio-refining technolo- Sustainable management: evolution, transitions and tools gies, biologically derived molecules, Research and technology directions improved carbon dioxide conversion Resource optimization strategies processes and metathesis technology Bio-based chemicals, specialities and polymers will shape the industry. Sustainable practices in the fine and speciality chemicals industry Sustainable value creation strategies Fine & speciality chemicals companies will have to seek growth through: The book presents a comprehensive overview of strategic options for sus- Revamped portfolios: Customer- tainability management in the global fine & speciality chemicals industry. It driven portfolio synergizing with will be a valuable resource for chemists and chemical engineers involved in the technology and sustainability capa- design and development of economically, environmentally and socially sustain- bilities. able practices for the future. R&D: Product and application engineering, integrated synthetic bio- and Middle East) and transition Hexion/Teke for ‘green’ construc- logy & chemical platforms etc. (BRICS) market needs. tion chemicals. Innovation: Collaborative and faster- Sustainability alliances: Synergi- to-market models. zing complementary capabilities [A brief summary of the talk given at the Newer markets: Catering to emerg- [for e.g., MWV/Albemarle tie-up IGWC 2013 symposium held on Mumbai from ing (Africa, Central Europe, CIS for mercury emission control, and 6-8 Dec. 2013]

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