As the demand to reduce carbon-based raw materials intensifies, companies are not only looking at how they can reduce their consumption, but also at how they can find appropriate replacements for fossil fuel-based raw materials.
To meet this challenge, a number of forward-thinking companies in the chemicals industry are developing strategies aimed at driving a successful transition to renewable alternatives. But how do companies successfully manage this transition? And what are the challenges?
It is important to recognize that many carbon-based raw materials have been in development for over 100 years and have been refined over time to maximize economic efficiency. By contrast, renewable alternatives are often immature in their development and so struggle to compete commercially. Although this is often a temporary situation, this commercial bottleneck can stop many excellent projects from getting off the ground.
The availability of viable renewable alternatives is also a challenge. Despite significant media attention, bio-based materials still only account for a very small proportion of the chemical industry’s feedstocks. And so the challenge is to find, amongst the little that is being offered, those materials that can offer the “win-win” of sustainability and economic competitiveness. Furthermore, the majority of bio-based materials available are ‘first generation’ feedstocks that are derived from food commodities — which presents its own challenges in terms of social acceptance. Moreover, they can be subject to some security of supply issues and price volatility. Finally, although demand for sustainable alternatives from end users is strengthening, they are generally unwilling to pay a premium for them.
Despite these challenges, there are a number of reasons why companies should be focusing on bio-based alternatives at this time. Some renewable materials are becoming far more viable now and there are significant advantages for companies that are first to market with them. And whilst recent oil price volatility has made the business case far more compelling for some renewables, we can’t yet be sure that prices won’t drop in the near future. But perhaps most significantly of all, any company that believes that it is at the forefront of sustainable development and wants to cut carbon across the full value chain, needs to take this matter seriously.
At AkzoNobel, a little less than 10 percent of our raw material spend is already bio-based, and this puts the company amongst the industry leaders. To expand this further, we have created a structured and disciplined strategy that focuses on partnering with selected companies in our value chain to make bio-based products commercially viable. Earlier this year AkzoNobel and Solvay struck a deal for the supply of renewable-based epichlorohydrin from 2013-2016. Under the deal, AkzoNobel will work to buy volumes of glycerine-based epichlorohydrin (Epicerol) indirectly via the epoxy resins it purchases from Solvay’s customers.
We also struck a deal this year with biotechnology company Solazyme to develop renewable oils sourced from algae. Under the terms of the deal, we will start product development this year with Solazyme, with a view to improving the environmental footprint of a number of our paints, coatings and other products. We expect products to hit the shelves in 2014, with "competitive" prices based on Solazyme's cost of manufacturing.
Deals of this nature necessitate an open and collaborative approach. They require an ability to tap into the emerging science and technology developments taking place in the outside world. By engaging with people outside the company, not only can you uncover exciting new ideas but you can also get those ideas to market much faster than would be possible through traditional research and development models.
However, establishing these kinds of partnerships is not easy and they not only require imagination to get them started but commitment to see them through. There needs to be genuine mutual benefits to make the partnership work for all parties involved and a tailored approach taken for each partnership – no one size fits all.
In summary, businesses that are able to manage the transition to bio-based materials successfully will ultimately stand to benefit. To achieve this, companies need to have the necessary vision to understand the long-term advantages of expanding the use of renewable alternatives but also the ruthless efficiency to deliver this vision. This is not an easy road to take but a vital one to travel in the long term.
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Published Jul 23, 2014 4pm EDT / 1pm PDT / 9pm BST / 10pm CEST