Home » Articles » Rosenzweig

Sustainability Proves Its Worth

Study points to considerable cash flow benefits from better performance.

By Mark Rosenzweig, Editor in Chief

Effectiveness in using resources differs markedly among some major chemical companies and that difference has a significant financial dimension, according to a recent report "Sustainable Value Creation by Chemical Companies."

That report assessed the performance of Air Liquide, Akzo Nobel, BASF, Bayer, Dow, DSM, DuPont, Reliance Industries and Shell Chemicals over four years (2004–2007), both in absolute terms and factoring in company size.

Results showed dramatic differences among the companies. BASF and Air Liquide created the highest sustainable value and were the only two firms consistently producing positive results over the entire study period, says the report. BASF created almost €1.2 billion in sustainable value in 2007 alone and Air Liquid almost €900 million then — in effect giving them that much more cash flow than their competitors on average would have generated with the same amount of resources. Taking size into account, Air Liquid actually outperformed BASF and Bayer rivaled BASF. Bayer boasted a positive trend in performance over the period, as did DuPont. In contrast, Shell showed a negative trend.

DSM and Dow were at the bottom of the rankings, with both companies using their resources only about half as efficiently as the group's average. They, along with Akzo Nobel, didn't achieve a single positive sustainable value during the four years. Dow consistently ranked worst in performance. In 2007 alone, it posted a nearly €2.2 billion negative sustainable value.

". . . Differences in the performances of the companies assessed partially stem from differences in the product portfolio," the report admits, adding, though, "the effect of good environmental management can clearly be seen in the results."

A pan-European team authored the report: Frank Figge of the Queen's University Management School, Belfast, Northern Ireland; Tobias Hahn of the Euromed Management School, Marseilles, France; and Andrea Liesen and Frank Müller of the Institute for Futures Studies and Technology Assessment, Berlin, Germany. BASF provided financial support for the work but had no influence on its content or findings, the authors stress.

The team assessed the companies using the sustainable value approach developed by Figge and Hahn.

"The sustainable value approach is the first method that assesses corporate sustainability performance based on the value created with the resources used. By extending a traditional valuation method applied in financial analysis, it assesses not just the use of economic capital, but also environmental and social resources. A chemical company thus creates positive (or negative) sustainable value if it earns a higher (or lower) return than its peers with the economic, environmental and social resources used. An analysis based on the sustainable value approach therefore establishes whether a company is successfully using its resources to create value in comparison with industry peers. In doing so, the sustainable value approach measures corporate sustainability performance in monetary terms. It establishes a link between sustainability and the value-based approach that is traditionally used in management practice and financial analysis," the report notes.

The study looked at 13 economic, environmental and social resources. These included total assets, water use, chemical oxygen demand of wastewater, hazardous waste creation, emissions of green house gases and volatile organic compounds and acidification potential as well as number of employees and accidents. It relied upon data publicly reported by the companies themselves.

"Companies have highly developed tools to measure their use of the resource economic capital. The sustainable value approach now allows them to measure the use of their environmental and social resources in economic terms," says Figge.

"Our study is based on economic theory and provides companies with an unprejudiced assessment of their performance. The results can be used by companies to find out where they stand compared with their peers and also to identify the individual strengths and weaknesses of their performance," he adds.

A pdf of the report is available at www.sustainablevalue.com.

The site also offers a link to an online "Sustainable Value Calculator." This leads you through the steps of a sustainable value assessment, allowing you to calculate how efficiently your company uses economic, environmental and social resources compared to a benchmark. It gives the result as a single financial value.

How do you think your company would fare?

Mark Rosenzweig is Chemical Processing's Editor in Chief. You can e-mail him at MRosenzweig@putman.net.

More From This Perspective

Sustainability Proves Its Worth
03/15/2010
Study points to considerable cash flow benefits from better performance.

U.S. Lead in Science and Engineering Erodes
02/15/2010
Biennial report points to gains particularly by Asian countries.

We Need Another A.C. Gilbert
01/06/2010
Toy maker knew how to interest children in science and engineering.

Grasp All the Lessons of Bhopal
11/24/2009
Industry still hasn't adequately addressed one factor behind the disaster.

Industry Safety Initiative Deserves Applause
09/14/2009
The American Chemistry Council is moving proactively to influence legislation.

Call It "Dereliction of Duty"
08/27/2009
Chemical companies too often don't exercise enough care when deactivating units.

Make the Most of Your Summer Reading
07/16/2009
Two new books provide important insights and guidance about plant safety.

Getting the Right Total Isn’t Easy
06/29/2009
Our vendor rankings account for numerous current and retired brands.

Succession Planning: Avoid a Dumb Move
05/27/2009
Stinting on capturing the expertise of departing employees is a false economy.

Have You Heard the One about the Chemical Engineer?
04/23/2009
There’s really nothing funny about our image as technocrats.

Rosenzweig's Ramblings February 2009: Convince A Child To Explore Engineering
04/09/2009
American kids need more awareness of engineering careers -- and a better education.

Rosenzweig's Ramblings March 2009: Spend Slack Time Smartly
04/09/2009
You finally may have a chance to focus on a variety of worthwhile projects.

Rosenzweig's Ramblings January 2009 : How Should Industry Tackle Threats?
04/09/2009
New report promotes inherently safer technology for hazardous facilities.

Chemical Engineers Crow
03/18/2009
New Web site celebrates the profession's past and prospective achievements

Spend Slack Time Smartly
03/02/2009
You finally may have a chance to focus on a variety of worthwhile projects.

Give An Enduring Gift | Rosenzweig's Ramblings December 2008
02/24/2009
Donating time and expertise can transform the lives of people in the developing world.

Convince A Child to Explore Engineering
01/21/2009
American kids need more awareness of engineering careers — and a better education.

How Should Industry Tackle Threats?
12/22/2008
New report promotes inherently safer technology for hazardous facilities.

Give an Enduring Gift
12/03/2008
Donating time and technical expertise can transform the lives of people in the developing world.

Houston, We Have Lift-off
11/04/2008
Several interesting new products got launched at ISA Expo.

Rosenzweig's Ramblings: Chemical Processing Turns 70
10/24/2008
Chemical Processing's Editor in Chief Mark Rosenzweig notes that chemical manufacturing has changed dramatically over the years and so, too, has Chemical Processing.

Rosenzweig's Ramblings: Wireless Takes Center Stage
10/23/2008
Chemical Processing's Editor in Chief Mark Rosenzweig explains how an intrepid reporter finds how wireless technology is improving plant performance.

Rosenzweig's Ramblings: Make the Most of Control System Migration
10/22/2008
Chemical Processing's Editor in Chief Mark Rosenzweig notes that vintage systems now are subject to stresses for which they were never designed.

Chemical Safety Board Gets Rebuke
10/10/2008
Recent report points to failings and necessary remedial actions

Rosenzweig's Ramblings: ICI Fades Into History
09/23/2008
Chemical Processing's Editor in Chief Mark Rosenzweig laments the loss of one of the greatest names in the chemical industry.

Chemical Processing turns 70
08/27/2008
A focus right from the start on “practical usefulness” has led to longevity

Chemical Processing Magazine celebrates 70 years
08/11/2008
A focus right from the start on “practical usefulness” has led to longevity

Make the most of control system migration
06/17/2008
The right strategy may lead to significant improvements in plant performance

Rosenzweig's Ramblings: Perry's Chemical Engineers' Handbook
06/04/2008
Editor in Chief Mark Rosenzweig lauds the release of a new edition of a long-time engineering favorite.

From the Editor: ICI fades into history
06/02/2008
One of the greatest names in the chemical industry is disappearing

What’s needed in process automation?
05/05/2008
A recent survey of end users provides an extensive wish list

Vendors Should See the Light
04/15/2008
Maintenance staffs would welcome warning LEDs on equipment

New president will grapple with greenhouse gases
03/13/2008
All the leading potential nominees favor “cap and trade”

Deflect a double whammy
02/13/2008
Consider new options for tackling economic and environmental concerns.

Just call it alchemical engineering
02/05/2008
Technology really can transform worthless materials into gold.

Deflect a double whammy
02/04/2008
Consider new options for tackling economic and environmental concerns.

New edition of pre-eminent handbook released
12/10/2007
For more than 70 years, if one reference has epitomized what chemical engineering is all about it’s been "Perry’s Chemical Engineers' Handbook." Now, a new edition — the first in a decade — has just come out.

Celebrity cheers on U.S. manufacturers
10/29/2007
Editor Mark Rosenzweig discusses how an actor is drawing attention to thriving plants and the importance of manufacturing, in this month's From the Editor column.

Exceed environmental expectations
09/27/2007
The chemical industry is making environmental progress but needs stretch goals, says Mark Rosenzweig, in this month's From the Editor column.

China teems with harmful exports
08/28/2007
Problems with Chinese manufacturing go well beyond defective and dangerous products, Mark Rosenzweig, editor in chief, notes in this month's installment of From the Editor.

Attack equipment problems along several fronts
08/01/2007
A successful approach demands looking at more than maintenance, advises Editor in Chief Mark Rosenzweig, in his monthly column.

Get safety under control
07/06/2007
Check out a different approach to safety analysis and a valuable new reference in this month's column from Editor Mark Rosenzweig.

Hardening plants is hard work
06/06/2007
Industry should welcome the new, first-ever federal security rules, advises Editor in Chief Mark Rosenzweig in this month's From the Editor column.

Distillation deserves a high profile
04/30/2007
Columns often present abundant opportunities for improvement, says Editor in Chief Mark Rosenzweig in his monthly column.

Publishing suffers a deep loss
04/12/2007
Longest-serving editor embodied the best of the profession. Mark Rosenzweig pays tribute to the late Nick Chopey.

Are companies ready to break the cycle?
03/01/2007
Executives say chemical industry must focus more on employee retention, according to Editor in Chief Mark Rosenzweig, in his monthly column.

The chemical industry needs fresh eyes
01/30/2007
Team looking at BP’s safety failings benefited from its diverse membership. Editor Mark Rosenzweig interviews panel member Dennis Hendershot for an insider's perspective.

We’re starting the new year off right
01/03/2007
The magazine and Web site are gaining significant enhancements. We’ve ratcheted up our efforts to identify ways of better serving you. As a result, we’re launching several features that we hope will make Chemical Processing and ChemicalProcessing.com even more valuable to you.

NeSSI’s success should be a lock
11/29/2006
The New Sampling/Sensor Initiative or NeSSI that replaces tubing, fittings and other hardware in a sampling system with miniature modular components makes sense. Enhancements now in the works should assure its success.

Wireless devices may get a shake up
10/31/2006
Last month’s ISA Expo in Houston clearly showed how much attention wireless technology is attracting. However, concern about the reliability and life of batteries remains an issue. That’s why harvested or scavenged power is attracting interest.

Security poses an inherent industry dilemma
09/21/2006
Industry faces the threat of draconian demands from Congress as chemical plants remain an attractive targets for terrorism attacks, according to Mark Rosenzweig, editor in chief of Chemical Processing.

Curriculum change isn’t enough
09/11/2006
Chemical engineering students deserve better teachers, according to Chemical Processing's Editor in Chief Mark Rosenzweig.

Product stewardship takes a grave turn
08/17/2006
European Union mandates have impacted products produced and sold in the U.S., and will ultimately affect the chemical industry, according to Editor in Chief Mark Rosenzweig.

Mississippi plants show their grit
06/28/2006
As the first anniversary of Hurricane Katrina approaches, life remains far from normal in many areas of the Gulf Coast. Amid the destruction, though, some hard-hit chemical plants provide proof of what can be accomplished.

Let’s cut through barbed wireless
06/16/2006
Divergent standards could snag efficient deployment of devices.

Typewriters send a somber message
06/07/2006
Lack of skilled technicians and parts can doom otherwise useful equipment.

Protect the perimeter and the process
04/12/2006
A visit to Honeywell's Geismar plant reminded Editor in Chief Mark Rosenzweig how to integrate security and control.

Repair your maintenance program
02/28/2006
Take a fresh look at how to improve staff productivity and skills.

Savor your slide rule
02/20/2006
This long-time symbol of engineering has retained its value, says Editor in Chief Mark Rosenzweig in his monthly column.

Hard lessons worth sharing
01/24/2006
Editor-in-Chief Mark Rosenzweig writes that the causes of two incidents should get attention from other processors.

Let’s heat up efforts to save energy
12/21/2005
Ample opportunities to boost efficiency certainly exist at most plants.

Vaaler Award Winners
11/27/2005
Editor in Chief Mark Rosenzweig congratulates the winners for CP's annual Vaaler awards, given to the products and services that most improve the operations and economics of plants.

SOCMA makes a momentous move
10/25/2005
Replacing Responsible Care is anything but irresponsible.

What price is right?
09/27/2005
Minimizing costs is only one part of the economic equation for profitability.

Take safety up a notch
08/25/2005
There’s still room to improve industry’s good safety performance, says Editor in Chief Mark Rosenzweig in his monthly column. Mechanical integrity programs generally need more attention.

Going from erector sets to chemical plants and beyond
07/25/2005

Be careful when getting bids
06/23/2005
When getting bids, don't invite trouble, as well as proposals.

Chemical industry and academia must move closer
05/25/2005
The 7th World Congress of Chemical Engineering is nearly upon us, and "industry people" need to have a larger presence at these types of meetings, says Editor in Chief Mark Rosenzweig.

German company proud of chemical ties
04/04/2005
While American companies make an effort to rebuff their chemical industry ties, BASF embraces them.

The Lark provides a serious lesson for the chemical industry
03/10/2005
The key to the long-term vitality of a chemical corporation does not lie in its business acumen, but in its ability to continue to make innovative chemicals. Editor in chief Mark Rosenzweig says executives should show more enthusiasm for this process.

Process management: Raise an alarm about alarms
01/19/2005
Sure, having more alarms is a plus if they contribute to better plant operation. But nowadays, more and more plants have numerous alarms that are causing more trouble than they are worth.

Let's close some glaring gaps
12/06/2004
We need effective collaborative efforts to address technical and professional issues

Adapt or perish
11/08/2004
Embrace changes in our profession to survive and succeed

It's time to untangle the Web
11/05/2004
Our new site goes well beyond the magazine and provides focused, actionable information

Stay ahead of your peers
10/07/2004
Earning an MBA can take your career in new directions

Where are chemical engineers headed?
08/05/2004
Will opportunities in today's "hot" sectors , such as pharmaceuticals and biotechnology, among others, allow chemical engineering to continue to thrive?

Let's honor real gold-medal performances
07/01/2004

Go outside for internal standards
06/01/2004

The evolution continues
05/13/2004

Sophistication only goes so far
04/02/2004

A disheartening disconnect
03/29/2004

A dangerous visit
03/03/2004

Starting the Year Off Right
03/01/2004

A baffling issue?
12/18/2003

A welcome package
12/05/2003

Focus, not hocus-pocus
10/23/2003