Leading global excellence in procurement and supply

Masdar City Tour CIPS Abu Dhabi Branch Event 5th September 2018

Leading global excellence in procurement and supply

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18:15 - 18:30

Welcome note by Sam Achampong, General Manager - CIPS Middle East, North & West Africa

18:30 - 19:00

Creating a Green Supply Chain: Practical lessons learnt from Masdar’s ‘Green Supply Chain by Faisal Saleem, Masdar City

19:00 - 19:30 Tour of Masdar City

19:30 - 20:00

Closing Remarks and Open Networking

Agenda and program

Leading global excellence in procurement and supply

CIPS Welcome Note

Sam Achampong FCIPS General Manager - CIPS Middle East, North & West Africa

Leading global excellence in procurement and supply

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Leading global excellence in procurement and supply

Creating a Green Supply Chain: Practical lessons learnt from

Masdar’s ‘Green Supply Chain’

Faisal Saleem Masdar City

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Creating a Green Supply Chain: Practical lessons learnt from Masdar’s ‘Green Supply Chain’

Faisal Saleem

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Introduction

Supply chain professional with over 14 years of international experience in diverse industry verticals

Currently holds ‘Supply Chain Specialist’ position with Masdar; transformed the supply chain of construction materials into a world class ‘green sourcing’ function.

Achievements

Winner of the CIPS Middle East Young Procurement and Supply Chain Management professional of the Year Award, 2014.

Winner of the ‘Best-in-Class Strategic Sourcing & Category Management’ Award by the Institute of Advanced Purchasing & Supply (IIAPS) for EMEA region, March 2013

Winner of the CIPS Middle East Award 2012 for ‘Best Contribution to the Reputation of the Procurement Profession’ for developing ‘The Future Build’

Education

B.Sc. Mechanical Engineering

M.Sc. Engineering Business Management, Warwick University, UK

Leadership & Management Program, Harvard Business School Executive Education

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Outline

Understanding sustainability in supply chains and the associated challenges & issues

Building the business case for implementing sustainable supply chains

What are today’s leading green supply chain practices and trends in the industry?

How Masdar implemented a ‘green’ supply chain, enabled companies in the ‘green’ market, and advanced innovation and the adoption of ‘green’ building materials and products in the region

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What is ‘Green Supply Chain’?

a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, whilst minimising damage to the environment.

‘Sustainability is still a differentiator at present, but will be your license to operate

in the future’, AkzoNobel

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Supply Chain and Potential Sustainability Issues

Green supply chain overview

Labor Use Pollution Land Use Water Use Social Impacts Depletion of resources Energy Use Forest Conversion Waste

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Drivers of ‘Green Supply Chain’

Regulatory Pressure: New government policies are prohibiting products made from environmentally destructive materials and polluting processes

Market Demand: Consumer demand for environmentally friendly products is increasing.

Cost Reduction: Reduction in total cost of ownership linked to reduced energy costs, reduced over-specification, reduced consumption and reduced social and environmental compliance costs

Risk Reduction: Financial impact on brand value from bad supplier practices (e.g., child labor, local pollution); economic cost of supply chain disruptions (e.g., noncompliance with environmental regulations)

Revenue Growth: Additional revenue through innovation of eco-friendly products/ services, price premium or income from recycling programs

Improved Brand: Improved company-level image due to better quality and environment stewardship

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Barriers to Green Supply Chain

Lack of education and awareness: A survey found that it was not investment costs, but a lack of information on regulations and green supply chain environment best practices that left organizations with a limited view of what to do and implement.

Supply chain complexity: Global sourcing making tracing of carbon footprint difficult.

Greenwashing

Resistance due to perceived cost

Lack of tools and resources: Lack of tools and frameworks to optimize and implement green supply chain

“Despite the widespread perception that companies have to choose between what is good for the environment and what is good for the bottom line, GE believes this is a false choice and that

companies can do the both”. Rajat Kapur, Project Manager, Ecomagination, GE

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Green Supply Chain Best Practices

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A CASE STUDY OF IMPLEMENTING ‘GREEN SUPPLY CHAIN’ IN MASDAR CITY

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Masdar City

Masdar City is a low-carbon low-waste emerging development that aims to be one of the world’s most sustainable cities

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Sustainability Issues with Construction Materials

• MASDAR recognizes that many of the social, economic and environmental impacts reside in our supply chain

• The building sector is responsible for more than one third of global resource consumption annually

• The manufacture of building materials consumes about ten percent of global energy supply

• Materials/products form a large part of the overall environmental impact of buildings. The choice and use of materials affects resource depletion, pollution, embodied carbon and health

• Construction and demolition waste contribute about 30 percent to solid waste streams in developed countries

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Masdar Green Supply Chain Objectives

Help companies to

increase their ability in the ‘green’ building

marketplace

Attract new business start-

up

Promote ‘green’ supply chain leadership

Drive product innovation through industry-driven

research

Advance the adoption of ‘green’ building materials

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Sourcing Strategy Description

The overall approach to material sourcing for Masdar is to consider the major impact materials.

Source materials from local sources where possible.

Where required materials are not available, Masdar will engage with suppliers to develop the materials e.g. use of recycled materials in their products

Support and promote local and regional skills and the local and regional economy, through developing local skills and purchasing local construction materials.

Develop a restricted materials list e.g PVC, Aluminum etc

Develop a supplier code of conduct

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Category Management Approach

• Understanding of user wants and needs and aligning these with corporate sustainability commitments

• Early engagement with the stakeholders

• Integration of sustainability into procurement policy

• Employing subject matter experts

• Creating and delivering category sourcing plans

• Collaborative sourcing approach

• Effective cross functional and collaborative team working

• Change management

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Challenges

• Lack of education & awareness: what does it mean to be green?

• Supply chain complexity: Global sourcing makes tracing of environmental impacts within the supply chain difficult.

• Greenwash: Unsubstantiated or irrelevant environmental claims by suppliers

• Stakeholders concern about the risks associated with using new products

• Unwillingness of industry to change

• Resistance due to perceived cost

• Not enough time to innovate products

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Indicators and Targets – Construction Materials

Indicator Target

1. Embodied Carbon of construction materials

1. Phase 1 research target; suggest less than 550kgCO2/m2 and track embodied carbon of Construction (excluding podium). 1.1. Subsequent phases work to achieving the target set out in phase 1; continue tracking embodied carbon of construction.

2. Percentage of recycled materials in construction. 2. Phase 1 benchmark recycled content of construction 2.1. Subsequent phases increase recycled content of construction up to 25% total by mass for phase 6.

3. Percentage of sustainable timber 95% of timber from FSC or PEFC certified sources

4. Masdar Code of Conduct 100% compliance to Masdar code of conduct

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Achievements

Embodied Carbon

MIST 1A 450 kgCO2/m2 (BAU 740 kgCO2/m2)

MIST 1B 500 kgCO2/m2 (BAU 980 kgCO2/m2)

Siemens 290 kgCO2/m2

Recycled Content

Concrete up to 60% cement replacement with GGBS

Rebar 100% post consumer recycled content

CMU up to 50% recycled aggregates

Aluminum up to 90% recycled content

Timber 100% FSC or PEFC certified wood

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MASDAR CITY ‘GREEN SUPPLY CHAIN’

BEST PRACTICES

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Masdar’s 15 Point Sustainability Criteria

Is the product made with salvaged, recycled or agricultural waste content?

Is the product available locally?

Does the product conserve natural resources?

Does the product avoid toxic materials or emissions?

Does the product save energy or water?

Does the product contribute to a safe, healthy indoor environment?

Energy Efficiency

Water Efficiency

Waste Reduction

Renewable Energy

Recycled Content

Packaging

Reusability

VOCs

Biobased Content

Durability/Performance

Maintenance

Embodied Carbon

Availability

Affordability

Code of Conduct

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Green Concrete

Concrete is the second most commonly used material on earth; however, just one cubic meter of concrete generates approximately 240kg of CO2.

The cement industry produces 5% of global man-made CO2, a major contributor to climate change

Masdar Best Practice

Designed own concrete mixes replacing up to 60% cement with GGBS thereby reducing carbon emissions by 30%-50%.

By producing the concrete on site, transportation costs are lower, as is the associated environmental impact

Replacing up to 30% cement with GGBS/Fly ash in CMUs and 50% recycled aggregates

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Green Aluminum

Aluminum is the most energy intensive metal (215 MJ/kg) and the Aluminum industry produces 3% of global industrial CO2

The Aluminum billet suppliers in the Gulf use only primary/virgin Aluminum from their smelting production

Masdar Aluminum Story

Rio Tinto Alcan approached Masdar City in 2008 about using Novelis FF2 aluminium sheeting in the city’s buildings. Alcan imagined it would be a straight forward pitch and sales process that would highlight the product’s durability, flexibility, light weight and cost effectiveness

But Aluminum is on Masdar restricted materials list due to its high embodied carbon.

“That was a challenge to us,” explains Santosi, managing director for Africa, the Middle East and India of Alcan International Network. “Usually the only thing that contractors are interested in is the mechanical properties and price.

Masdar City was the first in the market to introduce a product’s carbon footprint into the equation.”

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Green Aluminum (contd.)

Masdar set a target of 90% recycled content for Aluminum sheet; far higher than anything that Rio Tinto Alcan, or any of its partner companies, had ever attempted.

The solution required working with Alcan’s partner company Novelis, which had extensive expertise in recycled aluminium.

Novelis did a custom run of 100 metric tons of FF2 Eco aluminium sheeting at one of its renewable energy-powered aluminium smelters in Iceland

Working with its partners, Masdar supply chain team lowered the embodied carbon from 10.44kg CO2e/Kg to 0.98kg CO2e/kg

The next challenge was to use recycled Aluminum for extrusions – windows and door frames; the aluminium used in such construction requires a totally different alloy

Masdar City set a target of 32% recycled content

Gulf Extrusions emerged as the only serious extrusions manufacturer in driving the development of recycled Aluminum extrusions in the UAE

70 tons of recycled aluminium was produced in Europe at the plant of Alcan’s partner E-Max in the Netherlands, it was shipped to the UAE – the first recycled aluminium billet to be delivered to the Middle East

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Green Elevators

Elevators contribute for around 5%-15% of a building’s electrical load depending upon the other installed services.

Power consumption in the operational phase is typically 70% or more of the total consumption in an elevators life cycle

Masdar Best Practice

Masdar adopted the Total Cost of Ownership (TCO) approach to source elevators

Bidders were advised to submit Life Cycle Cost of their elevators at certain parameters

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The Masdar Code of Conduct

We believe the actions of our suppliers are increasingly important factors in our sustainability performance and that they should therefore be viewed as partners in our sustainability aspirations.

We take great care in selecting the companies who supply us with products and services, and expect each of them to operate to internationally recognized standards and appropriate codes of practice.

We seek out suppliers who share our commitment to best practice and continuous improvement in ethical business practices, in management practices that respect the rights of all employees and the local community, and in minimizing our impact on the environment

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‘The Future Build’ Supply Chain Portal

The portal was built with the aim to become the sought after source for sustainable products and supply chain knowledge for “green” buildings.

• The first resource of its kind to originate in the Arab world, The Future Build provides the building community with a range of online and offline tools and services to help them achieve their green building objectives in an efficient, cost-effective manner

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Sustainable Supply Chain Training

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Other Best Practices

Green Certifications

Most of our major impact materials have either Life Cycle Assessment (ISO 14040) or Environmental Product Declaration, EPD (ISO 14025) both third party certified.

Concrete – Environmental Product Declaration

Building Blocks - Environmental Product Declaration

Aluminum – Life Cycle Assessment

Reverse Logistics

KIMMCO, a subsidiary of Alghanim Industries, worked with MASDAR City to provide thermal and acoustical insulation, cut to size slabs and provided a proactive take-back program for waste after construction thereby providing a closed-loop system. Working with three different subcontractors involved in the building of the Masdar Institute they supplied 240 tons of insulation with only 2% of waste generated which was taken back.

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Key Lessons

• Secure top management commitment

• Sustainability is a value driver, not a cost driver

• Provide training & capacity building

• Put your effort where it will do the most good

• Implement green efforts at an early stage

• Engage and collaborate with your suppliers

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Thank You

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Creating a Green Supply Chain: Practical lessons in achieving sustainability objectives from Masdar’s ‘Green Supply Chain’

by Faisal Saleem

Thursday, September 6, 2018

Leading global excellence in procurement and supply

Tour of Masdar City

Leading global excellence in procurement and supply