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DAY 1

REPORT OF THE EPCA 2014 48TH ANNUAL MEETING GLOBAL COMPETITIVENESS AND THE CHEMICAL : WHAT ABOUT EUROPE? 4 TO 8 OCTOBER 2014 IN VIENNA, AUSTRIA REPORT OF THE 48TH ANNUAL EPCA MEETING CONTENT

DAY 1 BUSINESS SESSION GLOBAL COMPETITIVENESS AND THE CHEMICAL INDUSTRY: WHAT ABOUT EUROPE?

KEYNOTE SPEAKERS

GRAHAM DANIELE PROFESSOR XAVIER VAN’T HOFF FERRARI SALA-I-MARTIN

EDUCATION WORKSHOP WHEN AND WHY DO CHILDREN MAKE STEM CAREER CHOICES?

DIVERSITY WORKSHOP DIVERSITY MATTERS

DAY 2 CLOSING LUNCH SESSION CREATING SHARED PROSPERITY

KEYNOTE SPEAKER

PROFESSOR JOSEPH E. STIGLITZ

SUPPLY CHAIN AND LOGISTICS LEADERS BREAKFAST

o to the g se to c t k i c o i

l n C REPORT OF THE 48TH ANNUAL EPCA MEETING

DAY 1: BUSINESS SESSION GLOBAL COMPETITIVENESS AND THE CHEMICAL INDUSTRY:

WHAT ABOUT EUROPE? MONDAY 6 OCTOBER 2014

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OFFICIAL OPENING

TOM CROTTY EPCA President from June 2014 INEOS GROUP

TOM CROTTY EPCA President from June 2014 INEOS GROUP

” have a record number of continued, the development of shale gas ” registrations this year. Almost has transformed the competitiveness of We 2800,”said EPCA president Tom the US chemical industry, and now Europe Crotty, welcoming delegates faces a potential wave of imports from two to Vienna. “But I’m not sure whether this regions benefiting from low-cost production. is a sign of a recovery in the industry, or whether in the face of adversity it’s better At this point, he put the meeting into to have strength in numbers!” Certainly, the the hands of moderator Nadine Dereza global chemical industry is seeing seismic to introduce the speakers to offer their change, with massive shifts in global demand perspectives on the competitive challenges and in energy supply, Crotty noted. For this facing their and the industry reason, the meeting’s presentations would and how best to respond. focus on how the European sector can remain competitive in the face of these changes and the new challenges they bring.

When EPCA met in Vienna back in 2005, the focus was on the impact of investment in low-cost Middle East production capacity. There were predictions that a tsunami wave of imports would herald the demise of European , the Ineos director recalled. “But it didn’t happen, because mopped up this production.” However, today’s picture is very different. China has invested heavily in base chemicals production NADINE DEREZA and its economic growth is slowing, which Moderator is impacting imports. Furthermore, Crotty

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KEYNOTE SPEAKERS

Did Europe get lucky, or take measures to the Shell executive said, “North America remain competitive? Probably a combination has re-established itself as a low-cost of both, said van’t Hoff. As Middle East petrochemical region due production grew rapidly, demand in Asia, to the so-called ‘shale revolution’. Since and particularly China, also grew well ahead 2009, absolute price differentials between of expectations. Europe also had some hydrocarbon streams have increased, and good fundamentals, including highly energy- recent crude-gas spreads of $14/mmbtu ( efficient plants, a productive labor force, vs. Henry Hub) have created a particular GRAHAM VAN’T HOFF and a vast, differentiated portfolio. downside for the European chemical industry. Executive Vice-President These crude-gas spreads are expected to SHELL CHEMICALS Today, Europe has to grapple with increased continue and favor US ethane crackers production costs, including feedstock, fixed against European crackers.” and variable costs. For example, IHS reckons VISION OF AN UPSTREAM that in 2008 an average European cracker Planned new crackers based on cheap ethane INTEGRATED GLOBAL CHEMICAL cost 20% more than its global equivalent, feeds plans could raise US capacity PRODUCER van’t Hoff noted. By 2014, this cost gap had 40% to around 40 million t/y, and make risen to 45%, and by 2018 is expected to be North America a major ethylene derivatives Does Europe’s chemical industry have the exporter, said van’t Hoff. right ingredients to stay competitive despite and Europe would likely each receive 40% the region’s difficult economic struggles? of these exports, with China being the This was the question posed by the annual “the chemicals sector destination of last resort, in part due to the meeting’s first keynote speaker, Graham Middle East’s freight advantage. With US van’t Hoff, Shell Chemicals’ executive vice- PE imports into Europe expected to double president. can play a key role to 4 million t/y in 5-7 years, Europe could be facing PE capacity cuts of up to 2 million He believes it does, but sees two major in re-industrializing t/y, and knock-on cracker rationalization. challenges – the cost of production, and the potential threat of North American shale gas. However, the outlook is not totally gloomy, To these, he identified six key responses: Europe and in securing said the Shell Chemicals EVP. North America leveraging clusters, investment, looks to be facing steep cost increases, refinery integration, advantaged feedstock, skilled labor shortages and productivity a better industry image, and gaining the a sustainable future challenges, which may check exports. support of policymakers. If the industry Many North American players have major gets it right, the Shell executive believes plants in Europe, which may be limiting the chemicals sector “can play a key role for the region.” US shale gas impacts in Europe, although in re-industrializing Europe and in securing US companies could cut European a sustainable future for the region.” at least 55%, due mainly to hydrocarbon and and import instead. energy costs. Europe also faces a widening When van’t Hoff joined the industry in energy cost gap: industrial electricity prices Having outlined these two key challenges, 1984, there were fears that new Middle are more than double US prices, and 20% van’t Hoff suggested how Europe’s chemical East production capacity based on cheap higher than China’s; prices industry should respond, by feedstocks would destroy the European are 3 to 4 times above US and Russian on strong fundamentals to enhance petrochemicals sector by 2000. However, prices, and 12% higher than in China. Given competitiveness. “We should continue “Today, the European chemicals industry the close relationship between chemicals to leverage our clusters…such as the appears to be alive and kicking. It is a €558 and manufacturing industries, rising energy Antwerp- and Rhein-Ruhr clusters, billion industry providing over 1 million direct costs will have impacts across Europe’s down to and Marl,” said the and nearly 5 million indirect jobs in Europe.” economy. Shell manager. Competitive clusters are But while Europe’s chemical have more robust, as they are well integrated in doubled since 1992, its market share fell “While the availability of ethane in the terms of logistics, and derivative from 30.5% in 2002 to just 17.8% in 2012. Middle East is now clearly less abundant,” units; and they have low cost to serve.

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KEYNOTE SPEAKERS

GRAHAM VAN’T HOFF Executive Vice-President SHELL CHEMICALS

However, smaller clusters with fragmented Producers should also seek more advantaged, global economy. It must also harder to ownership may struggle, and producers lighter feedstock, such as LPG, although tackle its image problem with stakeholders, with less derivatives integration would be structural changes are required for feedstock and make policymakers understand its more exposed to the merchant market and flexibility. From 2010 to 2013, key role in economic growth, and that need to secure enough contractual volume liquid (NGL) cracking rose 13% to 31%, competitiveness needs to be the touchstone to ensure full asset utilization. with coastal plants accounting for about for all EU policies. 41%, and non-coastal for only 13%. Van’t Hoff also pointed to significant value The first wave of Europe’s ‘going lighter’ “Europe needs coherent, non-conflicting in integrating refineries and petrochemical strategy was mainly through LPG; the second energy and climate policies, aligned across plants. Shell, for example, draws strength wave is through cracking imported ethane. the EU, that deliver secure and competitively- from mega sites in the priced energy, without creating , the US Gulf an overly burdensome regulatory Coast, and Singapore, environment,” said van’t Hoff. and continues to invest “We should continue to leverage He also said Europe needs in enhanced integration a consistent and predictable between Moerdijk plants legislative framework that does not and the Pernis refinery, our clusters…such as the Antwerp- drive away investment, and urged and in Rheinland. He a focus on regulatory efficiency. continued: “Globally, “The cost of compliance with chemicals has and is Rotterdam and Rhein-Ruhr clusters, REACH should be addressed and expected to continue to be other national and EU legislative a high-growth hydrocarbon down to Ludwigshafen and Marl.” initiatives should be consistent outlet, with growth forecast with this objective. These should at 50% over the next 10 be streamlined, so as to deliver years, compared to oil products at 10%. However, not everyone can import ethane, the same level of protection to workers and In , chemical demand is as investments in onshore logistics, vessels, consumers, but at the lowest possible cost. stagnating, but fuels demand is worse, and import facilities are required, making it And the conditions and needs of small and declining at 3% per year.” Europe – like a viable option only for a few -based medium-sized enterprise have to be taken many other regions – has surplus , locations with easily adaptable cracker into account in such a process.” with no obvious ‘new home’ for that extra infrastructure. volume. An efficient refiner would switch its The Shell executive also urged the EU to attention to aromatics and discover growth Beyond feedstocks, the industry must step up its support and encouragement and margins from petrochemicals. continue to invest in developing chemicals for young people to choose a scientific technology – for more efficient and flexible , and fully implement the single production, new products and a greener market for jobs.

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were three times higher than in the US Europe needs is predictable, achievable, and European power costs were double sustainable and integrated energy and US levels. climate policy, he said.

In addition, the European industry has to cope Right now, energy issues are putting with a strong institutional and bureaucratic European supply chains at risk, Ferrari burden, Ferrari said. “We have about 3 continued. In , for example, that DANIELE FERRARI or 4 European Commission directorates means half a million jobs, and about €300 Chief Executive Officer overlapping on energy matters. We have 74 billion in turnover. Uncompetitive production VERSALIS SpA EU directives and regulations, and dozens of factors in Europe will mean increased imports and Chairman different national legislative initiatives. This and relocation of players further down the MATRICA SpA situation is not sustainable. The EU’s 2020 value chain, he warned. energy policy was supposed to support VISION OF A REGIONAL competitiveness and sustainability. But it So what should the industry do in response? PETROCHEMICAL PRODUCER UNDER was based on some erroneous forecasting, Ferrari suggested three key options. First, TRANSFORMATION and we’re not getting there.” in the short-term, pursue right - and integration, which requires rationalization Opening his presentation, Daniele Ferrari Versalis’s CEO said EU energy policy should and consolidation, and – further downstream noted that the European chemical industry is be addressing a major issue: the lack of – by increasing or realizing the value of by- struggling, and is threatened by a number of integration in the energy market. Today, products. Second, over the medium-term, “game changing” developments impacting there are 28 separate gas markets in the look to improve flexibility, by using cheaper competitiveness. EU, when what is needed is a United cracker feedstocks such as ethane, and by North American producers have seen States of Europe for gas. Europe already streamlining the supply chain. Third, over the their energy costs reduced by shale gas, imports over 60% of its gas requirements long-term, focus on the transformation of the which could account for 35% of US energy and between 2020 and 2025 this is likely production base, by making “Brownfield” production in 2035, and will increase US investment in new industrial platforms, exports of gas and polyolefins. The Middle and by increasing differentiation and/or East has access to low-cost feedstocks switching to “Green” production. and is increasing integrated downstream “what is needed is a capacity, while China continues to invest in Ferrari then turned to some of the chemicals production. But he said it is also consequences for Versalis of pursuing these important to recognize the impact of Latin of Europe options. He noted that the has America’s focus on renewable feedstocks. some particular challenges because it is The region is already producing about 33% only partially integrated and is not a global of the world’s bioplastics, and renewable for gas.” petrochemical player. However, he believes feeds offer big opportunities for the Brazilian Versalis is increasing its competitiveness petrochemical industry. by making changes. “The most obvious to rise to 80%. What’s needed is a well- choice for us was to optimise the asset Despite being energy-efficient producers, functioning and interconnected energy base and have the right scale, and look European manufacturers are losing market to improve the competitiveness for downstream integration and portfolio competitiveness in the face of a “deadly of the EU’s energy-intensive industry and specialization.” spiral” of related energy factors, Ferrari the economy as a whole, Ferrari stated. continued. The spiral started with the boom At Priolo, Versalis has improved integration, in US shale gas production which had cut Energy is a really big deal for the chemical reducing ethylene cracking and closing the US gas prices, lowered US prices and industry, which has already played its role in assets, and focusing on some seen a drop in CO2 prices caused by the achieving efficiency, and reduced its energy higher value products in the C9 and C5 chains, economic crisis, leading to more imports intensity by 50% in the last 20 years despite embarking on a technology joint venture. of US coal into Europe. This change in the increasing production by 60%. Now the EU At Brindisi, which is already integrated with European powergen mix has seen coal is discussing a 40% reduction in greenhouse captive use of C2 and C4 cuts, the effort increase and gas decline, which is increasing gas emissions by 2030, which would mean has been limited to feedstock flexibility and

CO2 emissions despite over €60 billion in the industry achieving reductions of 70% downstream further specialization of the subsidies for the sector. from 1990 levels. “This is not sustainable, product portfolio. Although it was unfortunate, The end result is a dramatic energy cost and an unrealistic target that risks further Ferrari said that cracking and polyethylene gap, whereby in 2013 European gas prices penalizing our industry,” Ferrari insisted. What facilities at Gela in , which were old and

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polyolefins far beyond earlier expectations, enabling them to penetrate into high performance applications in the energy, electronics, automotive, IT and sectors. Working with customers and other partners, the industry is transforming itself into a solution provider.

Bio-based offers the opportunity to create a circular business model, starting with agricultural materials that can be converted into valuable products, the Versalis chief executive said. He said it is possible to develop an efficient value chain – using DANIELE FERRARI non-food crops produced on marginal land Chief Executive Officer and processed in smaller plants depending VERSALIS SpA on regional, local or structural conditions – and Chairman to maximize the exploitation of . MATRICA SpA For its part, Versalis has partnered with Genomatica to develop a complete end-to- end process for biobutadiene production. uncompetitive, had been closed, and that applications in bioplastics, biolubricants and Versalis will build the first commercial plant the company’s Sarroch facilities in Sardinia , and as additives for rubbers and the technology will be available for will be transferred and re-integrated with and . At Porto Marghera, Venice, licensing, Ferrari said. the adjacent SARAS refinery, according to a Versalis and its partner, Elevance, are jointly preliminary agreement signed last October. investing in a metathesis green chemistry Before concluding, Ferrari mentioned the platform to make specialty products for joint venture project Versalis has with Yulex Ferrari said the medium-term option of applications ranging from personal care, to produce a range of products from guayule, maximizing flexibility of lighter feeds is detergents and cleaners and biolubricants a renewable and hardy non-food crop, from an interesting initiative. At Dunkerque, to high performance oilfield chemicals. which a wide range of products can be , there is the potential to use ethane manufactured, from rubbers and latex, to to produce up to 50% of ethylene from Ferrari said there are interesting opportunities energy, soil and construction additives, bio- ethane. This will require some major for European petrochemical companies, chemicals and pharmaceuticals, , logistics modifications – such as cryogenic which have strong used and and coatings. Although he storage and supply system – and changes in production worldwide, to work with doesn’t see bio-based chemicals replacing to specific cracking elements. technology developers in other sectors of petrochemicals, Ferrari believes they do offer the chemical industry, such as agrichemicals, additional sources of value and opportunities Long-term sustainability requires a market- to develop new technologies, such as to enhance competitiveness. driven approach, Ferrari continued. By biochemistry. He said Europe is at the Concluding, Ferrari outlined four key focusing on megatrends, it is possible center of a virtuous cycle of technology, routes to remaining competitive. Have a to identify opportunities for alternative and the industry should work to preserve fully integrated up/downstream platform, technology platforms related to energy, its global leadership in technology through with good geographical reach and an energy feedstock, environmental sustainability a focus on R&D, licensing, and protecting efficiency base in continuous evolution. and intelligent materials. For that reason, and developing intellectual property, while Focus on capacity right-sizing and re- Ferrari said, Versalis decided to develop improving existing technology and developing positioning, and take a fast and pragmatic integrated green platforms – via win-win new routes to production and products approach to rationalization. Foster a deep plant reconversions – for new bio-based with enhanced performance qualities. research and , and use products at two of its sites. The Versalis CEO said this is what his it to generate regional megatrend-driven company is doing through its products and feed international growth. And At Porto Torres in Sardinia, the Versalis- joint ventures with Lotte in finally, take an early adoptive and creative Novamont joint venture, Matrica, has invested and with Petronas in Malaysia. attitude towards renewable technologies, in an oxidation green chemistry platform, and target performance products based with a biorefinery-based integrated bio- Ferrari also noted that European companies on specific building blocks. chemical complex to produce biochemicals for have helped push the technical properties of

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focusing all talent through and towards the benefit of government, which was a massive disincentive for the generation of new ideas, he said.

For this reason, Sala-i-Martin expressed serious concerns about what he sees as today’s centralization of knowledge in Europe via the EU’s Bologna Process, PROFESSOR which is aimed at achieving comparability XAVIER SALA-I-MARTIN in the standards and quality of higher Chief Economist & Senior education, but is diminishing competition Director, between and contributing to WORLD ECONOMIC FORUM a decline in the reputation of European Editor of the WEF universities: “Fifty years ago, all the best Competitiveness Report, universities were in Europe. But today Professor of Economics at only the UK’s Oxford and Cambridge are Columbia among the world’s best, and none are from continental Europe.” He also berated an entertaining, thought European politicians and policymakers provoking presentation, for putting too much emphasis on R&D In Xavier Sala-i-Martin, urged the as a means to growing GDP, and also for PROFESSOR XAVIER SALA-I-MARTIN chemical industry to pursue focusing R&D spending on two areas – Chief Economist & Senior Director, competitiveness through innovation. But telecommunications and biomedicine. WORLD ECONOMIC FORUM he warned his audience not to confuse “Every city in Europe wants to be a new as a substitute silicon valley, or to focus on green energy.” for innovation, or to confine the search for creativity within R&D departments. on Amar Bhide’s work in On the R&D investor in all fields. “If you look at Origin and Evolution of Business, the Nokia’s patents, it shows they had enough economics professor noted that 72% of “72% of great business innovative ideas to have developed the great business ideas come from workers, iPhone, but failed to implement them,” 20% from regular citizens and just 8% from ideas come from workers, said Sala-i-Martin. This eventually led to formal R&D. And while R&D generates lots the sale of its mobile devices business of ideas, many are not implemented due to Microsoft, by which time 98% of the to an over-cautious approach to failure. 20% from regular company’s value had been lost. Looking back through history to 13th Success through innovation is not limited century China encountered by Marco citizens and just 8% to businesses at technology’s leading edge, Polo, Sala-i-Martin described a society the professor noted. The clothing giant, that had developed technologies well in Zara, the circus company, Cirque de Soleil, advance of those in Europe, with from formal R&D.” company, IKEA, and the global money, , water , and coffee shop operator, Starbucks, are great the press. Yet 800 years later, As an example of the failure of business examples of old, traditional businesses this once great empire had become a to innovate and to optimise ideas, the reinvigorated by people with innovative very poor nation, which seemed to have professor pointed to the IT and mobile ideas and new ways to attract customers, been bypassed by the renaissance, and phone company, Nokia. Ten years ago, a adding: “No scientists were involved in scientific and industrial revolutions. “So Nokia was the of choice, and generating these innovative ideas. They what happened?” asked the professor. China the company was a leading sector investor did not come from R&D. They came from centralized and monopolized knowledge, in R&D and also the world’s number 5 a shirt salesman, a clown, a student, and

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from teachers and poets.” Sala-i-Martin also Returning to education, within both national are coming from outside the discipline. highlighted Facebook, commenting that this education systems and companies, the There may also be an over-emphasis on success story was the result of students professor argued for a major overhaul in science and technology in education and taking an idea and running with it rather approach because there is a widespread not enough focus on art, which relies on than the output from a company’s R&D tendency to kill natural curiosity and to observation to see things as they really division. The key to staying competitive, suppress the asking of questions which are or how they work. the professor said, is having ideas and generates answers and solutions. implementing them. Some of the best ideas in business don’t “Schools haven’t really changed in over come from R&D, but from talking and A major challenge facing Europe is the lack 200 years. Go into a classroom, and you’ll exchanging ideas – the water cooler effect, of a single market and excessive regulation, see the same desks, the same chairs, or the Medici effect – where the meeting the professor suggested. The EU has a maybe even the same teachers!” But the of diversity generates innovation, said Sala- multiplicity of tax regimes, infrastructures, way digital-age children learn and interact i-Martin. For this reason, some companies markets, and labor rules, among other today is about connectivity, rather than are creating their own universities for diversities. “Go to the US, you need to buy the regimented systems of learning inter-disciplinary idea generation, or one phone. In Europe, you need 27 different familiar to their parents. Fostering learning having innovation days, sometimes with phones, or pay roaming fees, 27 lawyers, and curiosity requires the application of external input. Finally, innovation relies on 27 accountants, 27 companies. new technology. He also attacked the experimentation, which inevitably results Europe also relies too heavily on banking hyper-specialization that is encouraged in some failures. But trying and failing is to finance innovative projects, but the by education – at school, in universities, in a key to understanding and innovation, are risk-averse.” the work place. In his own field, economics, the professor argued. “We need to say: he suggested that today’s Learn from failure. Embrace innovation!”

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QUESTIONS & ANSWERS SESSION

NADINE DEREZA, PROFESSOR XAVIER SALA-I-MARTIN, DANIELE FERRARI, GRAHAM VAN’T HOFF

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eading the Q&A session, moderator seeing growing inequality between rich and poor, Nadine Dereza asked the speakers for so to fill the gap people need to be creative.” L their views on the role of education in innovation. NADINE DEREZA: “How are we going to switch more people onto STEM subjects and get them into the GRAHAM VAN’T HOFF sees diversity as a key to innovation. chemical sector?” “We need to attract people with new ideas. For Shell Chemicals, that means looking outside Shell, or outside GRAHAM VAN’T HOFF: “We need better science the industry, or from inside Shell but outside the education in primary schools and need people to chemicals business.” However, he accepted that understand that science is one of the foundations people within Shell Chemicals also had good ideas, of society. People understand the contribution of and suggested that the company also needs to bring pharmaceuticals but may not understand those of in people with core competencies, such as chemistry the chemical industry. We need to make science and , to protect its hydrocarbon assets. more interesting and we need to make the industry more interesting to attract the talent and innovators we need.”

“Industry needs less NADINE DEREZA: “What can government do to help boost competitiveness?” government interference and DANIELE FERRARI: “We spend a lot of time trying to get government and politicians to understand our industry. We need to move them beyond a focus more government support.” on plant-permitting and regulation and get them to understand the contribution we make to the economy. DANIELE FERRARI said that when he became head of Right now, the bureaucratic burden is too high.” Versalis the company lacked the drive for innovation. He agreed with Sala-i-Martin’s contention that ideas GRAHAM VAN’T HOFF: “We need to find new, better are not only found through R&D efforts. “The answer and faster ways to get our message across to is to go out and visit your plants, meet your people, governments to get their understanding and support.” or your partners and customers and create a culture open to ideas.” He explained that he had given people XAVIER SALA-I-MARTIN: “I think the EU government his email and address and asked for their input. “After does too much. It over-regulates, over-taxes, and 3 days, my email inbox was full. But there were lots of over-intervenes. Industry needs less government good ideas, many from people working in our plants interference and more government support. and in administration.” Government services are important, but they need to be more efficient.” XAVIER SALA-I-MARTIN: Referring back to Cirque de Soleil, he said: “My message is: don’t shut down NADINE DEREZA: “Finally, what would you all say R&D and hire clowns! Do R&D, but listen to others are the priorities for competitiveness?” outside R&D too, and implement ideas.” GRAHAM VAN’T HOFF: “I think every company has NADINE DEREZA: “Google has Innovation Days. Could to carve out its own basis for competitiveness, this industry do something similar?” because we are all different. For Shell, it’s about access to raw materials, finding options for value XAVIER SALA-I-MARTIN: “Parents should complement propositions, and focusing R&D in specific areas.” school education, for example, through using allowances as incentives. If my daughter can find problems and DANIELE FERRARI: “I agree with Graham. Look to solve them, then she gets an allowance. It’s a small-scale compete on your natural strengths, and apply version of what happens in life. We have to innovate. creativity.” Machines are eating up middle class jobs, and we’re

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EDUCATION WORKSHOP WHEN AND WHY DO CHILDREN MAKE STEM CAREER CHOICES?

an eye to the promotion of Sci- CLOSING THE STEM SKILLS GAP, age amounted to billions of euros in lost With ence, Technology, Engineering INCREASING STEM ATTRACTIVENESS revenues. Furthermore, with an ageing and Mathematics (STEM) in workforce – where 20% of engineers are schools and higher education, Workshop chair, Marc Durando, executive currently over 55 years old – the skills gap EPCA organized this workshop with repre- director of European Schoolnet, started is likely to worsen if it is not addressed. If sentatives from the Young EPCA Think Tank the session by pointing out that there are the situation is to change, Durando said, (YETT), the Belgian Foundation “Entreprise/ skill shortages in almost all science and STEM teachers need to be better motivated Institut”, academia, and Borealis, an EPCA technology jobs, including ICT (Information and get more recognition. They also need member company. The workshop looked and Communications Technology). There are new, improved teaching tools, more crea- at what needs to be done to encourage not enough mathematicians or physicists, tive lesson content, and other resources. more students to pursue STEM careers, and too few maths and physics teachers Industry must also play a more active role and at what is already underway. to ensure it is better engaged with edu- cation, to provide role models, to link For several years now, EPCA has with teachers, and to better explain the been promoting STEM to attract “there are skill shortages career prospects for STEM graduates. more talented girls and boys to join the chemicals industry, explained WINNING HEARTS AND MINDS FOR Wouter Bleukx, the EPCA YETT in almost all science and STEM AT AN EARLY AGE chair, and Business Unit Manager Vinyls, for Ineos Chlorvinyls. technology jobs, including ICT.” At the UK’s University of York, the Cen- Introducing the workshop, he said tre for Industry Education Collaboration EPCA had collaborated with Unesco (CIEC) has been studying when and why and the European Schoolnet to produce in many countries. The percentage of girls children and young adults choose STEM two videos to promote the industry and choosing STEM studies also remains far too careers. Director Joy Parvin told the work- careers in the sector, and to organize a low. To address these shortages, it will be shop about the results of research in the students’ workshop in 2011 and a teachers’ necessary to increase the attractiveness of UK, but suggested they reflected global workshop in Berlin in 2013. STEM studies in Europe, which will need issues relating to STEM recruitment. Al- In 2012 and 2013, EPCA also sponsored kids’ new teaching approaches and better career though there has been a slight increase in marathons respectively in Budapest and in prospects – compared to other sectors – 16-18 year olds choosing to study maths Berlin promoting STEM among children, and better communication about STEM and sciences at Advanced Level, with the their parents and teachers. EPCA has also careers. Making all these things happen exception of maths at 11%, uptake for invited XperiLAB.be® to its 2014 Annual will require significant and coordinated STEM subjects ranges from about 1% to Meeting in Vienna. This learning effort on the part of all stakeholders – from 8%. However, the figures also show that is designed to give children a chance to industry, from the education sector and apart from chemistry – where students explore science and scientific methods from governments. are split equally between boys and girls first hand. – boys dominate among maths, physics Durando said research suggested Europe and computing students. Sadly, few of currently needs an additional 850,000 the girls who choose chemistry go on to STEM graduates and that the skill short- work in the industry.

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JOY PARVIN WOUTER BLEUKX Director of CIEC Promoting Science, Chairman UNIVERSITY OF YORK (UK) EPCA YETT and Business Unit Manager Vinyls, INEOS CHLORVINYLS

MARC DURANDO Executive Director, EUROPEAN SCHOOLNET | JOY PARVIN Director of CIEC Promoting Science, UNIVERSITY OF YORK (UK) | GERARD COBUT Project Manager, XPERILAB.BE® | LINA NEUNER Chemistry Teacher, KLOSTERNEUBURG INTERNATIONAL SCHOOL | EVA PFANZELTER Senior Communications Specialist, BOREALIS POLYOLEFINE GMBH

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LINA NEUNER, EVA PFANZELTER

image of STEM industries in the minds of dren the chance to carry out hands-on Parvin said research into 9-14 year olds children, she explained. Meeting women experiments, arousing their curiosity and indicates that initial enthusiasm for STEM in science-based industry and jobs will giving them a sense of discovery and the subjects is largely dissipated by age 14 also influence the career choices of girls. potential of science. “We’re not teaching as students find lessons uninspiring and them with XperiLAB.be®. That’s the job of disconnected with everyday life, although XPERILAB.BE® – TAKING STEM TO teachers. But the students get a chance 45% still enjoyed the practical side of THE STUDENTS AND COMMUNITIES to feel what it’s like to be a scientist, to school science. The CIEC director said wear a lab coat, to use a , and that while 52% of 9 year olds have a firm For the past four years, a specially designed attempt to solve real problems by experi- idea of what career they’d like to pursue, truck – XperiLAB.be® – containing an ex- mentation,” Cobut explained. only 6% said becoming a scientist and perimental has been visiting of these 72% were boys. local communities across and Staffed by two “explainers” and a driver, beyond to encourage 10-14 year olds to XperiLAB.be® enables children to engage Changing these trends will require much choose STEM subjects at senior school with scientific methods – observing, fol- closer collaboration between schools level. With official approval from all three lowing instructions, experimenting by doing and industry, Parvin said. Science- ministries of education and support from or making [e.g. toothpaste, air vent rotors], based industries need schools – teachers Solvay (an EPCA member company) and testing hypotheses, and communicating and students – to gain a much better other partners, XperiLAB.be® hosts about results. “XperiLAB.be® is reliable, beautiful, understanding of what they do and the 450 groups and about 10,000 children a attractive, and has great on-board IT. We’re careers they offer. Better teacher training year. This October, it was parked up in getting great feedback from the children and resources and industry-focused and Vienna beside the where EPCA’s and on our , but it’s too early to problem-solving lessons, complemented annual meeting was held. say whether students are choosing STEM by site visits by students or school visits by careers as a result. But they are certainly industry ambassadors, create role models Gerard Cobut, the XperiLAB.be® project leaving XperiLAB.be® happy!” said Cobut. and a much more positive and attractive manager, says the science truck gives chil-

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“Science-based industries need schools – teachers and students – to gain a much better understanding of what they do and the careers they offer.”

try again – which is an important, positive Kindergarten and Linz International School, lesson for science. Neuner praised the promoting plastics engineering and catalyst opportunity for children to practice manual research at Johannes Kepler University in skills – such as transferring liquids using Linz, and donating materials and other re- pipettes, fine-tuning , or cutting, sources to primary and secondary schools shaping or mixing materials. She recalled for use in chemistry labs. On a wider stage, watching children experimenting with dif- Borealis awards scholarships for PhD and ferent shaped paper blades in an effort to master theses at several universities across get a solar-powered air vent rotor to spin Europe, and has a special student innovation at speed, noting how they tried different award – Borstar – for doctoral and master weights, delighting in coincidences, and degrees, which is worth €5,000 and attracts seeing one group use leaf-shaped rotor hundreds of applicants. blades to meet the challenge. The company is also partner of the Young The teacher did not see big differences in Scientist programme, a summer the way boys and girls interacted in the school for 17-year old students, including mobile lab. Rather, she suggested that 12 lectures at Linz university and 4 weeks a student’s relationship with science is summer traineeships at Borealis. personal, noting that XperiLAB.be® gives Another innovative Borealis initiative is Power children the opportunity to demonstrate Girls, which is a one-day workshop for 12- XPERILAB.BE® – HOW THE STUDENTS patience, concentration and logic, and to year old girls, giving them the opportunity INTERACT: A TEACHER’S PERSPECTIVE see connections. to visit the company and undertake differ- ent experiments. “Our hope is that Power Middle and high school chemistry teacher, BOREALIS – HOW ONE COMPANY IS Girls will help participants to develop an Lina Neuner, from Klosterneuburg Interna- PROMOTING STEM AND CHEMISTRY emotional and intellectual attraction for a tional School in Austria, stressed the impor- TO STUDENTS career in the STEM sector,” says Pfanzelter. tance of XperiLAB.be® in giving children a chance to become familiar with the actual Eva Pfanzelter, senior communications Borealis also participates in two other initia- business of doing science. She explained specialist with Borealis Polyolefine GmbH, tives promoting STEM careers and industry that different children and different groups offered some insights into how the Borea- understanding. Lange Nacht der Forschung of children took different approaches to the lis Group – which produces polyolefins, (Long Night of Research), is organized by experiences on offer. For example, some base chemicals and – is working two government ministries, and involves younger children in the 10-11 year age range in Austria and beyond to attract talented a number of institutions, museums and need more assistance or encouragement students into the industry and into the companies interacting with the public to from XperiLAB.be® support staff, while company. She explained how Borealis is encourage children and parents to learn older children tend to be more confident. doing this by promoting the chemical in- about the industry and apprenticeships and dustry, its products and opportunities in other job opportunities. Borealis is also one She said the children have no difficulty with associated institutions of the three main sponsors of the Zoom following step-by-step approaches to the – like EPCA – and by communicating the Kindermuseum in Vienna, which is a 2015 challenges they face, but sometimes do group’s own brand values as an employer exhibition focused on fostering interest in not read instructions carefully enough and and chemicals producer. chemistry and plastics by making them improvise. Some children were discouraged more accessible to children and raising by failure, but others were keen to learn In Austria, Borealis has a range of educa- awareness of responsible resource use. from mistakes or lack of success and to tional sponsorships – with the International

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DIVERSITY WORKSHOP “DIVERSITY MATTERS”

EPCA president Tom Crotty welcomed delegates to this first diversity workshop, reflecting on the fact that two years before the annual meeting had decided to focus on talent and technology in the industry.

DEBORAH GILLIS President and Chief Executive Officer, CATALYST

rejoice in our talented people. women, but reminded the workshop that first ever female US Secretary of State, ”We But are we making the most of diversity was a broader issue than gender. once said: “There’s a special place in hell that talent?” Crotty questioned. However, she suggested that time would for those women who don’t help other “Do we maximize the diversity restrict the opportunity to discuss some women.” Dereza then recounted how, of talent available?” He suggested the of the wider issues. in a recent project, ’s Heathrow issue was not about quotas, or political Airport had altered its shift rotations and correctness, but simply one of good business. Before introducing the three speakers, Dereza outreached to successfully recruit more A quick survey of EPCA member companies voiced the hope that the workshop would women for operations. showed that just 3% had a female chief encourage companies to embed diversity executive officer, with associate members into their corporate committees, policies INNOVATION AND COLLABORATION doing better with 35%. Registrations for and structures, and that the industry’s 3rd FOR SUSTAINABILITY THROUGH 3RD the annual meeting indicated that 86% generation leadership would foster diversity GENERATION : AN of delegates were male. However, Crotty as an avenue for innovation and to deliver URGENT CALL FOR DIVERSITY. noted that men were in the minority of on sustainability targets. In her experience, workshop attendees. companies embracing diversity were not Opening his presentation, Marc Buelens, only the best places to work but also the Emeritus Professor in Management, People Session moderator Nadine Dereza noted most profitable. She also reminded the & , Vlerick Business School, that the industry has struggled to attract workshop that Madeleine Albright, the reminded the workshop of Amar Bhide’s

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PROFESSOR MARC BUELENS Emeritus Professor in Management, People & Organization, VLERICK BUSINESS SCHOOL

research that shows 82% of innovative sustainability.” Companies need to be be working harder to advance, recruit business ideas come from sources outside open, listening and connected! and retain women in its workforce,” formal R&D. “That tells you a lot about the Deborah Gillis told the workshop. Gillis need for and value of diversity,” he said. Moving to his conclusion, Buelens said is President and Chief Executive Officer of inclusive strategies require inclusive leaders, Catalyst, the leading research and advisory While we all want new ideas, many chemical who can inspire questioning – asking organization working to change workplaces industry managers are “Triple A” – abstract, “Why?” These leaders also need to be role and improve lives by advancing women analytical and aloof – Buelens commented. models who act as mentors and coaches, into business leadership. But a look at the innovators mentioned especially for minorities. Leaders need to earlier in the day by Professor Xavier Sala-i- Better gender diversity starts at the top Martin indicates that they are not “Triple A” of companies, she said, with senior people, rather they are hands-on, engaged leadership commitment, and requires good and creative. He urged companies to seek “there is a clear business communication, making diversity part of the optimal workforce diversity, suggesting organizational culture, making a business those lacking internal diversity would strug- case for diversity, engaging employees gle to cope with external diversity in the case for developing and setting goals and accountabilities. world at large and in their customer bases. diverse leadership.” Why are so few women in STEM indus- Buelens also reminded attendees of the tries and why are they likely to leave? thoughts of Sumatra Ghosal, which suggest Gillis said there are few same-gender 3rd generation strategies cannot be managed think about and demonstrate the value of role models – female supervisors or fe- by 2nd generation , and 1st collaboration, and work to remove boundaries male senior executives – and women are generation managers. However, the professor while promoting of openness in often unaware of the attributes needed suggested too many companies still employ all aspects of business. “Remember: you to get a promotion, all of which impede 1st generation management techniques, cannot manage 3rd generation strategies advancement. “You can’t be what you which is ‘my way or the highway’, and with 2nd generation organizations and 1st can’t see!” ‘mushroom management,’ which means generation managers. Misalignment will keeping people in the dark, throwing crap be costlier than ever!” Gillis said there is a clear business case on them, then chopping them off at the for developing diverse leadership. Com- neck when they raise their heads. “3rd FIX THE WORKPLACE, panies with a commitment to diversity generation managers strategists – that’s NOT THE WOMEN are achieving enhanced financial per- what you should be after,” he said. “They formance, by leveraging talent to raise use collaborative networks to generate “Women are a critical part of global performance and innovation. They are also new ideas and innovations to achieve talent, and the chemical industry should companies that reflect the diversity of

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“Making changes in the chemicals industry to encourage diversity is a matter of importance and urgency”

ANDREW KRIS Founding Partner, BORDERLESS

their marketplaces, which in turn helps achievement, and opportunity. “Focus on the same sector, who know the business, to build and strengthen their corporate getting a strategy in place and remember who speak the same language, and who reputations. that there is competitive advantage in re- share a similar educational background or cruiting the very best talent.” culture: “People who look like me, sound One key route to greater gender diversity like me, and dress like me, etc.” is through sponsorship, which the Catalyst DIVERSITY MATTERS! IT’S President described as “A winning IMPORTANT AND URGENT! Companies need to forget comfort and Trifecta.” Sponsorship is important for embrace discomfort if they want to recruit women’s advancement, and benefits Making changes in the chemicals industry the talent to make them innovative and both those individuals who develop talent to encourage diversity is a matter of sustainable, Kris continued. This means and organizations, which will have more importance and urgency, Andrew Kris bringing in people who are different, who committed, satisfied leaders. Whereas told the workshop. A founding partner of come from other industries, with different a mentor will listen and speak to you, a Borderless, an HR specialist for the chemicals cultures, backgrounds, religions, ethnicity. It sponsor will speak about you, for you and and life science sectors, Kris said today also means looking to different generations, on your behalf, Gillis said. 50% of the workforce should be women, and finding people with different and wide- but they only represented 30% of staff. ranging experiences. By way of best practices, Gillis suggested companies wanting to promote gender di- Kris, who had a long previous career The ‘PLU syndrome’ is a big problem, and versity could look at initiatives developed by with Dow Chemical, said that develop- the industry has to change, the Borderless other businesses. She highlighted Kimberly ing demographics highlighted the need partner said. It is ironic, he noted, that a Clark’s Unleash Your Power: Strengthening for greater gender diversity, because there sector willing to take massive and long-term the Business With Women Leaders, Coca- aren’t enough men with the knowledge financial risks when investing in assets Cola’s Global Women’s Initiative: Women and experience to fill the industry’s future seems very risk-averse when it comes to as the Real Drivers of the 21st Century, skills and talent gap. diversity. “Be bold. Take risks!” he urged. Enbridge’s FEMINEM Employee Resource Take note of ‘good counsel’, which says Group, and IBM’s Women’s Diversity Network Senior managers in companies needed diversity is an investment strategy, make Group. Concluding, the Catalyst CEO said to stop trying to recruit PLUs – People sure it’s built into recruitment, invest the gender diversity has to be intentional, and Like Us – Kris insisted. The tendency is time of senior people, and look for and requires empowerment, encouragement, for top managers to look for people from develop role models.

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pening the session, Nadine DEBORAH GILLIS: “It’s like anything else. Dereza asked EPCA president, What gets measured gets done. Councils QUESTIONS O Tom Crotty, what he thought and processes need CEO engagement to were the biggest take-aways gain attention and for visibility. Diversity is a from the presentations. business strategy. We put structures, goals, & ANSWERS measures around every other business TOM CROTTY: “If we’re really serious about strategy, so we should do it with diversity.” SESSION diversity, then it has to be an active process. We can’t come back here in 10 years time NADINE DEREZA: “Now Andrew, you’ve and be asking: “Why has nothing changed?” said that businesses need to reflect the We have to do something positive. We have diversity of the people they sell to. But to have workplaces that are designed to how hard is it for you to sell diversity of ensure diversity occurs.” recruitment to your clients in the chemi- “our first cal industry, particularly when it comes to NADINE DEREZA: ”Given the moral case and senior grades?” the business case – the bottom line – and Diversity the statistics that support the argument ANDREW KRIS: “I must say in recent years for diversity, does this mean that EPCA there has been improvement. Recently, should perhaps put in place a Diversity I did some work with a petrochemical Workshop” Council to lead change?” company whose executive committee was composed largely of white British TOM CROTTY: “Yes. I’d like this – our first men. The plea was: Can we have some Diversity Workshop – to be the beginning non-Brits here, please?” of a process to see how EPCA can bring people together and start an active process.” NADINE DEREZA: “You mean less male, pale and stale?” NADINE DEREZA: “Deborah, what do formal- ized diversity processes and committees allow people to do in your experience?”

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“I really believe companies can influence societal values. It’s about how you look and how you act and what you do inside your companies.”

NADINE DEREZA, ANDREW KRIS, DEBORAH GILLIS, PROFESSOR MARC BUELENS, TOM CROTTY

MARC BUELENS: “Unfortunately, change is ANDREW KRIS: “For confidentiality reasons, very slow. If there are no clear policies to I can’t and won’t. But I can tell you there are QUESTIONS make diversity a reality, the situation is just some companies in the industry who are stagnating. Discrimination in the workplace doing really well and promoting diversity is much more entrenched than I thought panels and where leaders are engaged & ANSWERS and it will not be resolved without action and making diversity a visible goal.” and clear strategies, enlightened leaders, role models, structural changes.” NADINE DEREZA: “Deborah, while there SESSION are some companies in some countries NADINE DEREZA: “Tom Crotty, I know the making progress on diversity, there are industry talks a lot about best practices some countries, such as where across it operations, but where’s the best there are more women than men in higher ANDREW KRIS: “Yes, but I – being some- practice in diversity? Which companies are education, but where their prospects look what more diplomatic – wouldn’t exactly making the greatest strides?” limited. What’s the wider picture? Can com- say that. But the reality is that they wanted panies influence societal values?” some diversity, some more continental TOM CROTTY: “Well, I think it’s fair to point and international men! However, some of the finger at the chemical industry generally. DEBORAH GILLIS: “Yes, I really believe our clients demand that we present them Certainly from a gender point of view, we companies can influence societal values. with a diverse slate of candidates, and will can’t claim to have made great progress. I It’s about how you look and how you act not accept our work is done until we do. can think of one example where there is a and what you do inside your companies. Diversity has to be a deliberate strategy.” female CEO, and that’s DuPont, and Deborah A simple example is an ex-pat who went has already talked about how important into to run the company’s operation NADINE DEREZA: “Marc, from your point of sponsorship was in making that happen. and discovered a policy that if you arrived view, is this impacting students? Are they We’re doing better in diversity of people’s really early in the morning, breakfast was now thinking that regardless of where I fit backgrounds, but we haven’t cracked the provided, and if you stayed late, dinner was in terms of diversity, there’s a job out there gender challenge.” provided. If you stayed really late, then you for me? Or do women still think they’ve got a ride home. Although that policy was already lost the battle before venturing NADINE DEREZA: “Andrew, can you name well intentioned, what it did was reinforce into the job market?” some companies who are leading the way?” norms that said work long hours, which, of

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course, did not suit women. So the new CEO DEBORAH GILLIS: “Well, it doesn’t make ANDREW KRIS: “Some employers do get cancelled the policy. Initially it wasn’t well any sense. We need to focus on what gets it. And they can sometimes manage flex- received by some employees who thought done not where it gets done. It’s the same ible working. But they often tend to view a benefit was being withdrawn. But from as companies trying to prevent young em- it as an exception rather than endemic the CEO’s perspective it was the right thing ployees using social media. It’s pointless. to the organization. But it has to come to do to make the workplace more inclusive That’s how they communicate and that’s from the top.” and to promote and include more women. how we’ll be doing business, connecting That decision challenged societal norms. with one another.” NADINE DEREZA: “Is diversity a risk?”

MARC BUELENS: “Well, I know what hap- ANDREW KRIS: “Let’s go back to what I pens when we insist people come in at 8 said earlier about the industry being pre- “a sponsor will speak every Monday to Friday morning and leave pared to risk hundreds of millions of dollars at the same time every evening. More and or euros on a plant, but not on a female about you, for you and more time is spent in meetings, meetings, employee who could potentially bring in and nothing gets done. Nowadays, young hundreds of millions of dollars during her people want to communicate by Skype or career. Yes, there’s a risk. But the industry on your behalf.” other social media. The bigger question is always takes risks.” about business values. I really hate the It also said to the men: You don’t need to “work hard, play hard” mentality. I like DEBORAH GILLIS: “Andrew’s right. Diversity be in the office all hours – go home and the method for scaling Mount Everest: is viewed as a risk. But we know that be an equal parent.” “Climb high, sleep low.” women tend to be promoted on the basis of past performance while men TOM CROTTY: “That’s a good point. So many NADINE DEREZA: “Andrew, how flexible are more likely to be promoted on the of our working practices reinforce norms are employers becoming when it comes basis of their perceived potential. Women that we need to challenge.” to working hours and conditions? Are they have to prove they have done and can meeting the needs of employees or po- do a job, while men are promoted on NADINE DEREZA: “What about the move tential employees?” potential. That’s why sponsorship can away from home working, back into the be so important in giving women the workplace?” same opportunities as men.”

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“You can’t have a robust recovery if ordinary citizens don’t have DAY 2: money to spend.” CLOSING LUNCH SESSION

CREATING SHARED PROSPERITY TUESDAY 7 OCTOBER 2014

capita GDP lower than pre-crisis levels. Stiglitz argued that rising inequality is a And the worst performing countries are in serious impediment to achieving a robust depression, with youth unemployment at economic recovery and took aim at what 50% or above. What’s more, the performance he described as out-of-date, discredited of the best only looks good in comparison economic theories. “The old view was that with the worst.” there was a trade-off between economic PROFESSOR JOSEPH performance and equality – one could only E. STIGLITZ “But how can this be?” Stiglitz asked. get more equality by sacrificing economic Winner of the Nobel Memorial Prize Because Europe’s resources – its human, performance. But the new view is that we (2001 Nobel Prize in Economics) physical, and natural capita – are much pay a high price for inequality, and – when Professor, COLUMBIA UNIVERSITY the same as they were before the crisis.” it reaches current extremes – inequality and Co-Chair of COLUMBIA UNIVERSITY’S actually undermines economic performance.” COMMITTEE ON GLOBAL THOUGHT Stiglitz took little comfort in the fact that America is doing marginally better. He The old theory, which said everyone ben- noted that GDP is also some 15% below efits from the growth of income at the top, a hard-hitting speech, Joseph the trend line, and mid-range incomes are was known as ‘trickle down economics.’ Stiglitz highlighted the threat lower than a quarter of a century ago. Real But Stiglitz said there never was a proper In growing inequality of wealth wages are stagnating, despite continual theory or any evidence to support it. In and opportunity poses to the increases in productivity. The US labor fact, current evidence is overwhelmingly prospects of a robust recovery in Europe market remains weak, with high levels contradictory. The old theory said most and in North America. He also pinpointed of disguised unemployment, and rising inequality results from differences in societal European currency union – driven by politicians inequality has become a major concern, contributions, which Stiglitz paraphrased and poorly implemented, despite concerns he said. as “just deserts of the more able; they raised by many economists – as a source of make a greater contribution to society”. Europe’s current economic malaise. There are many dimensions to America’s rising inequality, the Nobel Laureate contin- The new theory is that much of our inequality “Something isn’t working the way it should,” ued. “In America, the top 1% gets almost arises from “wealth appropriation”, where Professor Stiglitz told EPCA. “It looks like 25% of income, and has also received some individuals and groups simply take Europe is entering a triple-dip recession. 95% of the gains since recession ‘officially’ a larger slice of the national income pie, Today, wages are lower than before the ended.” He said it was no surprise that rather than making the pie bigger, which economic crisis. The GDP of the eurozone America has less equality of opportunity is what economists call ‘rent seeking.’ is more than 15% below where it would than ‘old Europe’ and less than other de- Stiglitz offered several examples of how have been had the 2008 financial crisis not veloped countries, because countries with these market distortions contribute to in- occurred. Unemployment in the eurozone is high inequality of outcomes end up with equality, including “the natural resources 11.5%, and youth unemployment is almost limited equality of opportunity. curse”, the fight over who gets the ben- 24%. Most European countries have per efits of oil and gas and other resources,

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PROFESSOR JOSEPH E. STIGLITZ Winner of the Nobel Memorial Prize (2001 Nobel Prize in Economics) Professor, COLUMBIA UNIVERSITY and Co-Chair of COLUMBIA UNIVERSITY’S NADINE DEREZA COMMITTEE ON GLOBAL THOUGHT Moderator

and at the top of society, with The Columbia professor also took aim at could one say that is a savings surplus, exploitation/discrimination at the bottom. the use of inappropriate metrics to gauge when there is such a huge global need And in case anyone thinks this ‘new theory’ wealth, well-being and economic prosper- for investment? argument is the preserve of “liberal left- ity. GDP was a major target: “GDP can go ists”, Stiglitz suggested they might check up, even if most individuals in society are Another complicating factor has been what the International Monetary Fund is worse off. It’s also an inadequate measure the financial crisis: it made us lose focus, saying. “There is almost no pushback to because it doesn’t reflect other aspects of Stiglitz believes. “We became fixated on the new theory,” he said. He also noted quality of life, such as improved or poorer repairing the financial system and dealing that among Forbes Magazine’s listing of health, longevity, increased insecurity or with the immediate problem of the euro.” the 100 wealthiest individuals there are few environmental degradation. That’s why it’s But at the same time, long-term problems real innovators, and none of those whose important to use metrics that go beyond of inequality, global imbalances and the basic insights had led to the transformation GDP,” said Stiglitz. structural transformation needed to respond of our economy – those who discovered to the changing underlying fundaments of DNA, the transistor, the laser, etc. He ac- Wading into the failure of euro currency the global economy – including changing cused US banks of exploitation, market union, the professor said the EU was not global comparative advantage – were not manipulation, and other practices that did an optimal currency area. Those responsible addressed. In fact, some have become worse. not lead to faster economic growth, but for its implementation had misdiagnosed did enable the sector to extract outsized what was needed to make it work: and it And the financial system is still not fixed. returns. “Up to 40% of all corporate profits is not an easy matter to make a currency Meanwhile, the focus is on ensuring the were going to the financial sector before union with such diversity work. Significant financial system doesn’t do harm through the crisis,” he pointed out. problems arise, for instance, when countries excessive risk taking and market manipula- borrow in currencies they don’t control. tion, when the fundamental task should “So why do more equal societies perform He emphasized that the resulting crisis be ensuring that it performs the functions better?” said Stiglitz. It’s because there is led to widespread fiscal problems, not the vital to a well-functioning economy. less scope for rent-seeking, and greater other way around. The EU failed to create opportunity enables more individuals to realize institutions to enable the euro to work. Stiglitz offered a bleak prognosis. He sees their potential, he continued. “Less divided There are fundamental problems in the the global economy muddling along, and societies can pull together, and have more structure of the euro – not the structure of Europe stagnating while the US achieves trust. There is wider support for needed public the individual countries. Indeed, many of only weak growth, barely able to create investments, and better macroeconomic the structural reforms in individual countries enough jobs for the new entrants into performance.” Lastly, said Stiglitz: “You can’t are now making lack of demand – the real the labor force. He also expects a slight have a robust recovery if ordinary citizens problem – worse. slowdown in China, with knock-on effects don’t have money to spend.” in other emerging markets. And as global Stiglitz argued that there is currently a problems continue to fester, inequality will There are policies that can promote growth global shortage of demand, and that the increase along with global imbalances. and equality, the professor said. Some are pursuit of flawed policy – in particular, aus- While some structural transformations are obvious, such as more equal access to terity – had compounded the problem of in progress, they are happening slowly, quality education. But others are not so the euro. Global demand imbalances have and loose monetary policies continue to obvious. For example, current monetary/ also grown worse, and these contribute to feed asset price bubbles. Stiglitz urged macro policies are exacerbating inequality, weak demand, as countries with deficits the audience to learn the major lessons which helps explain why so much of the cut back faster than those with surpluses of the crisis: Sustained prosperity will be gains since recovery have gone to the are expanding. impossible without shared prosperity, but top, Stiglitz observed. He also suggested Furthermore, the global financial system is markets won’t create shared prosperity that better public transportation is a way not surpluses to where they are on their own. to improve access to jobs. needed. Though some have pointed to a And even seemingly benign neglect can savings glut, Stiglitz questioned this. How lead to matters getting worse!

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SUPPLY CHAIN AND LOGISTICS LEADERS BREAKFAST

elcoming participants, the TACTICAL COLLABORATION IN BV, Dow Europe GmbH, Den Hartogh Lo- session’s chair Johan Devos, CHEMICAL SUPPLY CHAINS gistics BV, Cargogator BV, and VNCI – and W Bertschi AG’s Group Sales which is aiming for a 5%-10% improvement Director, said the aim was Professor Jan Fransoo is Professor of Opera- in the current chemicals capacity to generate both discussion and ideas tions Management & Logistics, School of utilization rates of 60%. about how to improve supply chain and Industrial Engineering, Technische Universiteit logistics performance across the industry. Eindhoven & VP of DINALOG – the Dutch The project identified four key reasons for He explained that the session would Institute for Advanced Logistics. less than optimal capacity utilization: an begin with a brief presentation from imbalance between the location of pro- Jan Fransoo’s main message to the European duction and consumption; empty returns; chemical industry was clear: to achieve a short-term focus on optimization; and competitive advantage and sustainability, limited flexibility for carriers to plan ship- “We also need a neutral pursue tactical collaboration, which requires ments. While it cannot impact the first a redefinition of product flows rather than issue, 4C4Chem is addressing the others in platform to organize simply sharing transportation. three stages: Plan, Bundle, and Combine. To date, collaborative initiatives have fo- Plan involves improved forecasting and collaboration” cused on operational collaboration, the planning of transportation needs, and better DINALOG vice president said. This is un- short-term coordination between on-site derstandable, because it delivers relatively and off-site logistics. Put simply, the aim Jan Fransoo from DINALOG, focusing short-term, quick wins through working is better alignment between shippers and on collaboration opportunities, followed together. However, Fransoo feels that a carriers, by taking into account items such by round-table discussions and reports lot of the low-hanging fruit in this area has as end-to-end costs and turnaround times, on five specific topics: Shale Gas; Global been picked. And while strategic, structural and having transparency so trade-offs can Trade and HSSE Standards; Collaboration/ collaboration is possible – through joint be made in terms of investment costs in DINALOG; Global Trade and Intermodal; and ventures, – it extra assets. The project has also developed Shipping. Workshop output will be used requires major commitments to change. a tool available to all partners to enable to guide future work planning by EPCA’s them to evaluate product swaps. Supply Chain and Logistics Committee. For this reason, the time is right to pursue the many potential opportunities in the Bundle is focused on bundling barge Devos reminded the workshop of how area of tactical collaboration, which involve transportation flows on the Rhine from much progress has been made through forward planning and replacing material the upstream chemical cluster to down- EPCA’s Supply Chain and Logistics ini- flows with information flows to add value stream users. tiatives. These have produced around to the supply chain, Fransoo continued. 20 important publications and led to the Combine is focused on minimizing flows of creation of working groups and their reports, DINALOG, the professor explained, is a by creating a virtual pipeline – all of which continue to push the boundaries public-private partnership focused on hori- based on the ARG ethylene pipeline model of increasingly strategic supply chain and zontal collaboration between producers and – by pooling production and inventories. logistics activities. Devos said: “Already in logistics providers, and which is 2014, the Talent & Technology workshop has currently active in projects involving about Fransoo said that achieving a 10% improve- highlighted the importance of bringing in 200 companies from several sectors. One ment in capacity utilization is a conservative new, creative people to complement skilled of these projects is 4C4Chem, which is a target, but added that “While achieving this staff in designing and implementing supply partnership between several organizations will take real commitment, it is definitely chain and logistics innovations, to enhance – Technische Universiteit Eindhoven, SABIC worth getting out of bed for!” industry competitiveness and sustainability.” Petrochemicals, Shell Chemical Europe

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JOHAN DEVOS PROFESSOR JAN FRANSOO EPCA Supply Chain Program Committee Chairman, Professor of Operations Management & Logistics, SALES MANAGER BERTSCHI AG SCHOOL OF INDUSTRIAL ENGINEERING, TECHNISCHE UNIVERSITEIT EINDHOVEN

is an issue about information sharing and particularly the smart phone and related ROUND-TABLE trust. We will always require some kind of technology for organizing communications. intermediate organization or layer to start But implementing new technology and facilitating this, both in terms of IT systems new ideas requires management of change DISCUSSIONS and in terms of trust and transparency. and a new culture. We also need a neutral platform to organize collaboration. TABLE 7 | FRANK ANDREESEN:

Our table’s consensus was that having TOPIC: SHALE GAS REPORTS: talked about collaboration for 15 years, there • What is the likely impact of shale gas are still not many really great examples in terms of logistics and existing sup- – DINALOG being an exception. We feel ply chains? TOPIC: COLLABORATION there is still resistance to collaboration. The • Do the regions which import shale gas further you go upstream in the chemical have sufficient infrastructure to receive it? AND DINALOG supply chain the more collaboration you • How will this intercontinental/land trans- Do we agree that tactical collaboration is have. The further you go downstream, and be organized? key for survival and that most other col- as you interface with many customers, • Are there specific HSSE items to take laboration “low hanging fruit” has been the more difficult it gets.We also feel that into account? picked up? while vertical collaboration is relatively • Are we ready for imports/transport of How do we see the redefinition of informa- simple, horizontal collaboration is much shale gas? If not, what is the time frame? tion flows? How is this to be implemented? more challenging. So, it’s very important What are the required set of tools and skills? to implement the best practices we’ve Are we prepared? If not, what is the time mapped at so many conferences, and to TABLE 1 | PAUL GOOCH: frame to get ready? make sure that we have the right levels What are the barriers against tactical col- of change management and leadership They say 10 days is a long time in politics. laboration, if any? How strong are these for collaboration, which relies so much Well, two days is a long time in shale gas! barriers and can they be overcome? on information sharing. Our table decided that products will flow, but this is not a simple picture: it’s not going TABLE 4 | PATRICK MEERSMANS: TABLE 9 | JEAN-CHRISTOPHE to be all LNG(*) or all polyethylene. It’s not HERMAND: going to happen overnight as there are a lot We had a lively discussion, as our table of serious issues about infrastructure in the included procurement staff from the Collaboration is not new, but we feel there US: $140bn of announced investment is not shippers and people from the Logistics is still a lot of low-hanging fruit that can going to happen overnight, and there will Service Providers (LSPs). Our thoughts are be harvested and this is a good time to be serious engineering capacity restraints. that collaboration is not rocket science, but do it because we are greatly helped by Who will be the enablers – the players that more about common sense. However, there new technologies and new thinking – will make this product flow happen? That’s

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“Is shale gas a short-, medium- or long-term proposition?”

PAUL GOOCH Managing Director, THE LOGICAL GROUP

proposition? Who’s going to make the especially with regard to local competition. investments – producers, Logistics Service This could be a serious issue, but we need ROUND-TABLE Providers (LSPs), ? What will governments to pick this up. happen in Europe regarding investment in shale gas receiving facilities? Will there be DISCUSSIONS regional exploitation of reserves? Will there be TOPIC: GLOBAL TRADE AND arbitrage? Will we see smaller players exiting the market, and less competition? If there INTERMODAL are fewer players, will we see collaboration • What remains to be done to make a critical question. There are two players becoming even more relevant? We need transcontinental and European inter- who have already announced they have much more information to understand what modal really work? the scale and muscle to deliver and build is likely to happen. • What is the role of equipment standards the capacity and receiving facilities. But and infrastructure in this connection? they may be subject to the implementation • How is Europe placed compared to the restraints that we’ll see in the US. Looking TOPIC: GLOBAL TRADE AND rest of the world? at the demographics and the economics of • What is the effect of the subsidiarity Europe, we see a stable, ageing population, HSSE STANDARDS principle? which is unlikely to increase demand, and we • Do we agree there is a need for global also have low or no growth and recession, HSSE(*) standards in SC implementation which make life difficult. However, shale and what should be done to achieve this TABLE 5 | ROMUALD DE HAUT DE SIGY: could be the trigger for some new capacity implementation of Responsible Care in in downstream units in the future. There is Europe and elsewhere? We started by talking about the rigidity and also a view that shale gas may even save • How do we overcome subsidiarity obstacles lack of flexibility in the system, and issues some European crackers and refineries (freedom of nation states to deal with to do with port facilities. We also talked because they are flexible, and have a wider details of implementation of legislation) about the trade-off between passengers slate of products being generated. in this context? and over waiting times, and about barriers in the system – how to collaborate (*) Liquefied natural gas (*) Health, Safety, Security and Environment across intermodal providers, how to cope with disruptive natural events, and human events, like strikes. We also see some stand- TABLE 2 | ANTHONY ELWINE: TABLE 3 | KEES VAN SEVENTER: out issues around standards, particularly 60-foot, when lots of us are working in Our feeling is that there’s a lot of We talked a lot about HSSE standards 40-foot. Another key issue is rail regulation confidentiality about what’s going to happen and differences in them. Our conclusion and lack of standardization across the EU. with shale, and a lot of questions to be was that companies should take the answered. We really need to have more lead in trying to harmonize these and information about tariffs, legislation and encourage institutions, such as CDI, to shipping. And what about longevity? Is facilitate this process worldwide. There shale gas a short-, medium- or long-term are cost elements, which we can’t hide,

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TABLE 8 | PETER MARSHALL: TABLE 6 | DR. ANGELA STIEGLITZ: SUGGESTED FUTURE SC/LOGISTICS TOPICS FOR EPCA TO ADDRESS IN Our table feels that in Europe today we Our discussion focused on trade and THE NEXT 3 TO 5 YEARS: have a pretty well-established intermodal infrastructure, and we had a good operation, with a pretty dense network that combination of shippers, LSPs and port • Review progress made against the work functions quite well, although it can always representatives. There are ample examples of previous EPCA think tanks and work- be improved. We contrasted that with the of infrastructure bottlenecks, such as truck shops. How are we doing? What progress US, where intermodal is underdeveloped. driver shortages in the US, or congestion is being made? Where are the gaps and But how do we connect up today’s network what are the barriers? more globally, particularly regarding flows • What’s changing in European supply from the Middle East and elsewhere? chains and logistics as a result of changes In the we need more multimodal “Our thoughts are that in global flows? terminals, and IT infrastructure for tracing • Where are we on European infrastructure? and tracking, etc. We also looked at what collaboration is not • Can we better synchronise delivery from is a very interesting topic: the relationship the shipper with when the customer between shippers and their customers, in needs to receive the material, to improve terms of changing daily or weekly flows, and rocket science, but more space/time performance? how these impact LSP capacity utilization. • Look at practices outside chemicals sec- We looked at whether it’s possible to work tor – perhaps automotive – and look at together to iron out inefficiencies, although about common sense.” technological breakthroughs and develop- we acknowledged this was moving into a ments, such as driverless trucks. tricky commercial space. in European and Asian ports. There are • Intermodal technology: what’s needed capacity issues at ports and with hinterland to make the system work better? equipment, facilities, personnel, etc. It’s a • Look at connectivity tools to iron out TOPIC: SHIPPING broad topic. In the next 30 years, transport problems in the intermodal system. • Global trade and ocean port & hinter- demand is set to double, which means • Look at intermodal capability develop- land connections a significant challenge. Will we be able ment, especially from the perspective of • Are chemical regions ready for in- to cope? New ports are being built, but extending collaboration outside of Europe creased exports / imports? there is also a need to upgrading existing to develop global trade. • What is the impact of infrastructure? facilities. There are big issues of timing • Better coordination and collaboration for What is to be done to improve it? By given the long lead times on infrastructure activities between EPCA, CEFIC, ECTA and whom? investment, even if the political will exists. the many other associations in Europe. • Impact of new regulation on low There are issues between the private and • Responsible Care®(*): 5 years after the sulphur gasoil /diesel on marine trans- public sector, and there are broader political introduction, it is time to examine progress. portation? issues to be addressed. Companies can address some of the short-term issues (*) Responsible Care® is the global chemical industry’s through investment and collaboration, but unique initiative to improve health, environmental we need to work across industry sectors, performance and security, and to communicate with and across governments. stakeholders about products and processes.

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