According to A.T. Kearney, one of the world’s leading management consulting firms, effective sustainability initiatives present opportunities of unlocked value and, if implemented effectively, could provide the gateway to future growth for the Petrochemical sector in the GCC.
A.T Kearney’s regional and international experience shows that strategically integrated environmental initiatives can be leveraged to drive a new competitive advantage for the Middle East. “Key to the success of sustainability initiatives is the complete, meaningful integration into corporate strategy to build tangible sources of value creation, ensuring both economic and environmental responsibility,” said Louis Besland, Partner, A.T. Kearney Middle East. According to the analysts there are three paths to building value creation through sustainability initiatives: cost reductions, brand enhancement and revenue generation. All require a very high level of innovation in manufacturing processes, products and service offerings as well as in business processes.
Many companies worldwide have used sustainability initiatives to generate top-line growth, whilst cutting costs to achieve meaningful bottom-line returns. Multinational petrochemical companies are ahead in the sustainability stakes and have had some commercial success with sustainability strategies.
“Contrary to popular belief sustainability is not only about environmental benefits, it’s also about profitability,” added Besland. “Experience shows that in many cases a strategic approach to sustainability can enhance profitability”
Companies such as Air Liquide and BASF have both been credited as using their resources up to five times more efficiently than their competitors. Science Daily reported that in 2007 both Air Liquide and BASF companies created a sustainable value of around one billion Euro, creating around one billion euro more cash flow than their competitors would have created, on average, with the same amount of resources.
Middle Eastern chemical manufacturing companies in the region have been slower to respond with sustainability initiatives. However statistical global comparisons have emphasized the importance for the GCC. The Living Planet Report 2010, which presents the individual Ecological Footprint for 153 countries, identified the GCC in three of the top ten countries with the highest values. This along with a persistent global focus on sustainability is creating an impact, leading companies and governments to re-prioritize the topic on commercial and policy agendas. The GCC region is recognizing the potential of sustainability within the petrochemicals industry and sustainable agendas are growing within the sector.
When it comes to maximizing value, there is no ‘one-size-fits-all’ approach to sustainability. Some petrochemical manufacturers can benefit from getting ahead of the curve and reaping the rewards of a strategic approach to sustainability. Others may recognize that these rewards are not attainable in the near term and choose instead to grab the low-hanging fruits such as energy efficiency and waste reduction. Others may conclude that the prudent path is to continue the status quo.
“The key is to align all corporate environmental initiatives with corporate strategy and the creation of shareholder value. Without this link, sustainability initiatives tend to be ‘knee jerk’ reactions or ‘marketing fluff’, offering only lip service to true strategic sustainability goals,” explained Besland, A.T. Kearney Middle East.
He advised that the solution to building value creation through sustainability strategies lies in making informed, strategically aligned decisions, based on individual business operations and an analysis of environmental sustainability trends and their impact on new product/process development.
