Responding to the Green Challenge

Mike Lancaster

GC&C 1 November 2004

Agenda

• Industry background

• Current and Future Challenges

• Commitment to sustainable development

• Examples of achievements & best practice

The UK Chemical Industry - Important

• Turnover of £46 billion

• Accounts for 10% of manufacturing industry’s gross value added

• UK manufacturing’s number 1 exporter

–Exports of almost £30 billion

–Trade surplus of £5 billion

• Employs almost 250,000 people directly

• Spend £2 billion pa on capital investment

£25 of chemicals each week

The UK Chemical Industry - Responsible

• Reduced emissions of volatile organic compounds (VOCs) by over 70% since 1995

• Employee accidents (per 100,000 hours worked) reduced by over 60% since 1986

• Transport incident rates reduced by over 60% since 1990

• Agreement to improve energy efficiency by 34% between 1990 and 2010

• 80% of member sites operate a recognised HSE management system

Challenges ahead

• Reputation

• Regulation

• Competitiveness

Favourability to the Chemical Industry General Public – Trends 2004 Mori survey

0

10

20

30

40

50

60

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Base: All general public

Favourable

Unfavourable19%

Unfavourable

Favourable

23%

Trend in favourability 1979-91, 1992-2004Trend in unfavourability 1979-1991, 1992-2004

Change 2002-2004

Favourable 0Unfavourable -2NET FAV +2

2004

0

-2

-14-2

+3+5

+7

+11

+5+3

+5

+11

+4

Key Groups - Demographics

Base: All

All adults

Change ‘02-’04

MenWomen

Age

Net Favourability

Sex

15-1815-2425-3435-4445-5455-6465+

ClassABABC1C2DE

+2

+3+3

-10+2+7+5+5-5

0+2+3

0

Key findings

• Net favourability up 13% amongst communities and 20% amongst friends & family

• Trust in the industry up by 11%, but still negative

• The trend about increasing concern over products continues

• 1 in 5 recall a NGO campaign, this has lead to more people boycotting products.

• Improvements in safety and pollution prevention increasingly recognised.

Regulation – REACH

• Industry not against new legislation

• Must be proportionate & workable

• Would like to see

– Mandatory sharing of animal test date

– Strong central agency

– Substitution must engage downstream users

– Even global playing field

– Full business impact study

• Disproportionate impact on SMEs

– Full study on competitiveness

Commitment to sustainable development

• Long recognised by many companies that SD is good for business

–Survey of 481 European CEOs – 91% say SD is important

–Responsible Care now 15 years old

• Industry involvement with:

–Green Chemistry Network

–Crystal Faraday

–Natural step

• Public commitment to SD in July 2004

Responding to public agenda

• Growth of product and social concerns – Responsible Care not enough (hence REACH)

• We were not listening: “Goals / targets, not history!”

• Agreement to develop SHE performance goals

• CIGT exposed industry’s :

- communication skills gap

- lack of common vision

• Prescribed SD commitment as basis for reputation improvement, profitability and survival

VISION FOR A SUSTAINABLE CHEMICAL INDUSTRY

Meeting Needs & Expectations

A competitive and economically sustainable industry, adopting innovative business solutions that help satisfy society’s needs while:

• optimising the use of resources• demonstrating good practice in ethical behavior• adopting the highest standards of corporate governance and accountability. • respecting the culture and rights of individuals• ensuring that we have taken all reasonable steps to prevent harm to human health and the environment

Guiding principles

• Safe products and operations

• Productivity and resource efficiency

• Innovation (to satisfy customer needs)

• Fairness

• Respect for people and communities

• Working environment (that motivates)

• Transparency / openness

• Leadership (at company and industry levels)

• Compliance (with laws and regulations)

• Endorsement (and use of management systems to assess progress)

Goals - 1

• All CIA members to have endorse goals & principles by end 2005

• Improve industry productivity by 6%pa

• Workplace information and consultation

• Employability - skilling

• Diversity / equal opportunities policy in place, with graduate recruitment as proxy indicator

• Health and safety – 50% reduction in LTAs and 30 reduction in reportable diseases

Goals - 2

• Fewer incidents – Comah incidents reportable to EU down to zero by 2010

• Resource use reductions – energy(11%), water (20%), hazardous waste (25%) per tonne product

• Environmental burden cuts – atmospheric acidification (50%), global warming (25%), photochemical ozone formation (15%), human health effects (40%), aquatic oxygen demand (40%), eutrophication (20%)

• Create database of products marketed in UK

Achievements & Best Practice

• Environmentally friendly paint strippers

• Targeted pesticides

• Life (style) enhancing (legal) drugs

• Degradable packaging

• More energy efficient & safer cars

• Increasing use of renewable resources

The Consumer has an important role to play in driving change

Commodities (1)

• Large tonnage but low margins

–Significant movement out of UK to Asia

–Cost driving factor to further improvements

• Titanium dioxide (4.3 mtpa)– paints, white pigments, sunscreens, cosmetics (Millennium chemicals)

– ore use increased from 93 – 96%

–Chlorine use reduced by 13%

–Waste reduced by 16%

Commodities (2)

• Acetic acid (6.5 mtpa) – paints, cigarette filters, food flavourings (BP)

–30% reduction in energy use

–Capacity improvement up to 75% (avoids new plant)

–CO utilisation increased by over 5%

–Reduced distillation requirement

Making waste go away

Getting heart disease under control

Getting a better grip

Some developments in leather manufactureKey Stages Traditional method New technologies

Liming Lime, caustic sodium sulfide

50% reduction in COD

(avoids hair decomposition)

Washing Ammonium chloride

(NH3 / H2S evolved)

Carboxilic acids or carbon dioxide

Tanning Veg, mineral & synthetic Al replacing Cr, low phenol and phosphonium syntans

Fatliquoring Minera oils, veg oils Modified veg oils

Dyeing Traditional dyes Reduced toxicity, more efficient

Renewables – creating the right business environment

• Biodiesel

– Transesterification of vegetable oil

–Simple process, poor economics

–Historically more incentives in Europe

–Small plant in W. Midlands & large plant under construction on Teesside

–Consumer not willing to pay more

–RDA & Government grants essential to viability

Polymer from Lactic AcidCargill Dow - NatureWorks

O

OHHO

H

Lactic Acid

CH3

O

O

H CH3

poly(3,6-dimethyl-1,4-dioxan-2,5-dione)

n

PLA

H3CO

OCH3

O

O

Lactide

H2O

Coated papers

Packaging Opportunities

Valuable Attributes• Heat Seal• Clarity and gloss• Stiffness• Barrier - flavor, oil• Processability

Films

Rigid containers

Twice as many by 2025 – can we cope?

The UK chemical industry “meeting

needs & expectations”

Summary: opportunities & challenges

• Global growing requirement

• Demand for greener products

• Proven ability of industry to adapt

• Signs of support from RDAs & Government

• Improving co-operation with stakeholders

• Sustainable development

• EU regulation

• Competition from Asia

• High energy costs

• High oil prices

• Cost & technology barriers for renewables

• Declining skill base

• Consumer pressure to reduce costs

• Reputation