At SB ’15 San Diego last month, chemical giant BASF and sustainability software and consulting company thinkstep announced their collaboration in making BASF’s Sustainable Solution SteeringTM method — for management of, and transition to, a sustainable product portfolio — available for wider use. The two organizations have signed a licensing agreement that extends their existing partnership to support companies in any industry in assessing and steering their product portfolio in line with sustainability criteria.
The goal of BASF’s Sustainable Solution Steering method is to leverage opportunities for profitable growth with sustainable solutions and to mitigate risks of losing business with less sustainable solutions. Therefore, the method systematically segments products into four sustainability performance categories.
- Accelerators, which make a substantial contribution in the value chain to sustainability;
- Performers, meet the standard market requirements for sustainability;
- Transitioners, for which specific sustainability issues have been identified;
- Challenged, solutions with a significant sustainability concern.
I recently spoke with Dirk Voeste, BASF’s VP of Sustainability Strategy, to learn more about Sustainable Solution Steering and its potential for improving product portfolios in and beyond the chemical industry, and how identifying and acknowledging issues around certain products can lead to fortuitous partnerships and solutions.
While partner thinkstep (formerly PE International) pioneered life cycle assessment (LCA) of individual products with its industry-leading GaBi software, Voeste says Sustainable Solution Steering is a logical next step, taking the assessment of a whole portfolio to a new level.
“LCA is a long-standardized and very sophisticated methodology which I think has extreme benefits and has driven the agenda in the last 10-15 years,” he explained, “[but] when you look at how we can holistically steer a broad portfolio — we're reaching a certain point where LCA doesn't answer all the questions we need to address.
“Assessing product portfolios, there is more to it - we are seeing how we are literally reacting to certain products’ constraints and customer demands: What are customers’ reactions to the product? To identify these is a critical step for portfolio segmentation. So Sustainable Solution Steering is not a pure data-crunching exercise — it is more an exercise in understanding holistically what are the sustainability needs and value drivers in a given market, then drawing conclusions: Is the assessed product application a significant contribution to sustainability? Do we have gaps and can those be filled via new innovations?”
Voeste gave the example of refinish paints used in auto-body repair shops, saying that waterborne paints represent a significantly more sustainable option. Particularly in Asian countries, where solvent-based car repair paintings are still the standard, introducing waterborne paints to these markets would therefore be considered an ‘Accelerator,’ driving the standard and making a significant contribution to industry sustainability in the region. In contrast, in European markets water-based repair and refinish paints are already standard market requirements.
“LCAs are essential to prove that solvent emissions have a significant adverse effect to the environment,” he said. “However, they hardly include the different market standards and behaviors. So you need to find a different way of looking at things, combining quantitative and qualitative assessments with market and value chain demands to really grab a hold of sustainability drivers.”
The methodology is rolled out in a workshop format to discuss and achieve alignment on specific topics with colleagues from product safety, strategy, marketing, sales, communication, regulatory units and sustainability. Since its launch last fall, BASF has integrated it into its R&D processes, so all research projects in its R&D pipeline are matched to the same sustainability criteria as products in the market. Voeste hinted that the company has already gained enormous insights from this approach, which resulted in numerous actions.
“Where is our pipeline in terms of Accelerators? How do we really meet future market demands? How do we succeed in integrating and driving this? We will be able to answer these questions in the future very concretely as we have now continuous metrics throughout our portfolio.”
Voeste admits that, not surprisingly, BASF had intentionally reservations about designating any of its products as “Challenged,” but it turned out that Accelerators are not the only driving force for innovation and partnerships.
“Although the Transitioners and the Challenged solutions are safe and fulfill the legal requirements in their respective applications, society or our customers have sustainability concerns — for example, with regard to toxicological properties or a related issue. First, we were a little bit nervous to say that we have solutions in our portfolio with a sustainability concern.” he said. “But our concerns were uncalled-for — we received positive feedback for the openness. Also customers and supply chain partners said, ‘You have identified challenges — can we further cooperate to mitigate such risks?’
“Our R&D experts said, ‘a Challenged is not the beginning of the end — it's the beginning of something new, because now it is triggering innovation to overcome this challenge.’ And a lot of customers talked to us and we have developed some very interesting partnerships jointly working on solutions. So the Challenged and Transitioner [categories] really turned out to be one of the inspiring points for our R&D and partnership relationships.”
Voeste says Sustainable Solution Steering has already proven to be an extremely powerful tool, both in terms of broadening BASF’s understanding of the sustainability attributes of its own products, and in helping its customers to understand and optimize their own offerings, creating a whole new value proposition for BASF.
“Let's say you're selling a product for insulation — it may have an impact on resource efficiency, it may also have an impact on the reduction of climate change; these things are very helpful to our customers because they understand much more about the sustainability contributions they can make,” Voeste said. “We can also match our portfolio segmentation with the demands of our customers — identify gaps and opportunities, and then enter into an enhanced dialogue. So it's really the beginning of an improved business relationship, and the next level of helping our customers to understand the impact of our solutions to their portfolio in more depth and make the right decisions to improve.”
Now, with thinkstep’s help, BASF is making the methodology available to the global business community. When customers began asking about the possibility of using Sustainable Solution Steering to steer their own portfolio, Voeste said thinkstep, as a leader in sustainability consulting worldwide, stood out as an ideal partner for disseminating the tool.
“Much of Sustainable Solution Steering is designed to be pragmatic in implementation and broadly applicable — this methodology, this understanding, goes beyond chemistry. [We’ve had] so many requests from other industries and interest, that we thought, this opportunity needs to be proposed and made available for other industries as well. So that's certainly one key area thinkstep will work on — driving it into other industries.”
Voeste says rolling out the Sustainable Solution Steering methodology through workshops, instead of simply having departments send each other spreadsheets, helps companies as a whole learn more about their products as they engage not only on sustainability, but across a multitude of functions.
“This is an extremely valuable discussion, because everybody - business, marketing, sales, technology, communications, regulatory, research, etc — is engaged on something they have in common: the product,” he said.
“We facilitated the first workshop in 2011; since then, we conducted more than 200 workshops with the involvement of more than 2,000 experts. We structured the workshops and included expertise from the global perspective. It helps to engage, it helps to integrate and it helps to get a better result. If you get 8-10 people talking about their product, there is an enormous amount of know-how going into it. And this is why we also encouraged thinkstep to maintain the workshop format.
“Therewith, we want to support our customers and other organizations in assessing and steering their product portfolio in line with sustainability criteria. Furthermore, we are supporting the agenda for guiding principles for portfolio segmentation tools. Together with other companies, we established a new working group within the World Business Council for Sustainable Development that is on its way to develop a common framework for sustainability portfolio optimization. This will further help customers and stakeholders to meet their own sustainability objectives.”