Reporting back from EPCA

CHEMICALS MIT SCHLAGSAHNE

REPORT • THE PROCESS OF GLOBALISATION THAT HAS HELPED INDUSTRY GROW OVER THE PAST THREE DECADES IS OVER; A NEW APPROACH IS NEEDED, EPCA’S ANNUAL MEETING HEARD

THE EUROPEAN PETROCHEMICAL Association (EPCA) held its 52nd Annual Meeting in Vienna this past 7 to 10 October with a focus on the low-carbon economy, sustainability, energy efficiency and climateresilient cities. All of these are vital topics in respect of the long-term viability of the European petrochemical industry and well worth discussing, but it was perhaps not the conference sessions – nor the unseasonably warm early autumn weather than made Vienna such a beautiful location – that drew almost 2,750 registered delegates to the event.

Rather, EPCA’s Annual Meeting provides a focus for chemical and petrochemical manufacturers, their customers and their logistics service providers (LSPs) to meet in one convenient venue and discuss business for the upcoming year. While they are doing so, they can take advantage of the insights offered by high-profile speakers during the business sessions, while also being treated to a sumptuous opening buffet dinner at the elegant Rathaus. The meeting, of course, also offers a bonus for many of the hotels in Vienna, not least the three venues ringing the Stadtpark where many delegates were staying and where the main events were held.

And of course the Annual Meeting reflects the business conditions under which industry is operating. Marc Schuller, executive vicepresident of Arkema France and appearing at the Annual Meeting for the first time as president of EPCA, explained in his opening address at the start of the first business session that the sector is now “living in interesting times” – the emerging trade wars, uncertainty over the price of oil, the unknowable impact of Brexit, and so on.

On top of that, there are broader trends that will undoubtedly affect how the petrochemical industry operates around the world, not least the push for decarbonisation and sustainable production and logistics. EPCA’s mission is, Schuller said, to support sustainable petrochemical operations. The Annual Meeting would, he added, focus on how industry can manage the transition to a lowcarbon future, something that will bring both challenges and opportunities.

Schuller had some supportive words for delegates in attendance. Europe remains one of the largest markets for petrochemicals and has a strong record of innovation. It is, then, well placed to drive developments.

LISTEN TO THE CHAIN Introducing the keynote address, regular moderator Nadine Dereza explained that the session would look at sustainability through the prism of energy-efficient and climateresilient cities. Some in the audience may have wondered how that focus on the ‘smart’

cities of the future could have relevance for the petrochemicals sector but, by the end of the session, they were left in no doubt.

The keynote speaker was Prof Carlo F Ratti, director of the Senseable City Lab at the Massachusetts Institute of Technology (MIT) and founding partner of Carlo Ratti Associati. He focused on the role of cities in modern life and their impact on the environment: cities take up just 2 per cent of the earth’s surface but are home to half of the world’s population, he said; more importantly for a sustainable future, they also create 80 per cent of global pollution. As a result, focusing on ‘smart’ cities can make a big difference in the long term.

“Today we know very well where things come from – but not where they go,” Ratti began. Addressing ‘sustainability’ has to take into account the disposal chain, not just the manufacturing and delivery chain. In any sustainable city, waste management is a key issue.

Prof Ratti reported on an experiment carried out to track goods being put into the disposal chain by individuals in Seattle. He had been surprised by the length of some of those chains, especially those that ended in recycling rather than just disposal to landfill. Indeed, he said, some chains were so long that they used far more energy in transport than could ever be recovered by recycling.

The experiment had relied on some new technology to track and map the movement of wastes and Prof Ratti explained that investment in such technology was worthwhile. It is only through having the data available that behaviour can be changed. And, he said, “When you get machines to talk to you, they tell you unexpected things.”

ROLE OF INDUSTRY Prof Ratti was joined in the session by two other speakers. First was Saori Dubourg, member of the board of executive directors at BASF, who said that the petrochemical industry has grown in recent years by globalising and taking advantage of the emergence of new demand areas; the industry is now having to look at value rather than just volume. Part of that involves sustainable operations.

“If you react, you are too late,” Ms Dubourg said. And as a leader in the global petrochemical sphere, BASF took it upon itself to speak to leading non-governmental organisations to discover what it is they need from industry to deliver a more sustainable future. It was clear that sustainability must encompass energy efficiency, the end of carbon-based energy and the creation of cities designed for sustainability.

Ms Dubourg had a few questions. How can the petrochemical industry contribute to improving the sustainability of existing buildings? What does in mean for new buildings? And what can be measured in terms of the impact of any changes?

Taking a practical approach, BASF looked at its own Brunck district, which had been created in the 1930s to house workers at its Ludwigshafen plant. Through the use of innovative materials and design, it has achieved an 80 per cent reduction in carbon dioxide emissions and cut heating fuel consumption by more than 75 per cent.

In terms of new construction, one of the major environmental impacts is found in concrete, production of which accounts for around 5 per cent of the world’s total carbon dioxide emissions. There are ways to mitigate this, Ms Dubourg said, such as the use of recycled materials (fly ash, for instance) in the manufacture of concrete. A more radical solution is to move away from concrete altogether and to use a modular system of construction that applies reusable and/or recyclable materials, and in which individual elements of the building can be taken apart and moved elsewhere. Echoing her introduction, she said: “It’s about creating value, not volume.”

In response to a question from the floor, asking whether this move from ‘volume’ to ‘value’ means a greater concentration on niche activities, Ms Dubourg said this is not necessarily the case. What is important is that the industry has to speak up and address the emotional needs of the public.

THE COST OF DOING GOOD Ms Dubourg also provided an insight into BASF’s thinking on financial reporting. In this new world where environmental concerns and sustainability goals are becoming ever-more important, are established accountancy practices relevant any longer? BASF has been looking at accounting for the environmental and societal impact of its activities, she explained.

Ms Dubourg provided some figures that, she said, had never before been seen in public. They showed how BASF had managed to account for the environmental impact of its operations and products but, in the opposite column, it also took account of the buying »

power of its workforce and the taxes it paid: industrial activity provides benefits to the broader economy. Happily for BASF, this extended P&L sheet still showed the company in the black.

Also on the panel was Yousef Abdullah al-Benyan, vice-chairman and CEO of Sabic (below). He agreed that the aim of ‘smart’ cities is to reduce emissions, energy consumption and waste generation. Homes already exist that can do that and they, along with other sustainability efforts, will be employed in the new ‘Neom’ development planned by Saudi Arabia. Neom aims to be the new commercial and technological hub for the kingdom, located in a 26,500-km² area on the Red Sea coast and powered entirely by solar and other renewable energy forms.

The plans revealed by Al-Benyan supported his contention that sustainability is a common theme for the petrochemical industry across the world. It will take innovation and changes to perception, mindset and business models, he said.

During the panel session that followed, AlBenyan said that the chemical industry has to get away from its internal focus. It has always used a B2B business model but it is becoming increasingly important to look at B2C models. “Think of solutions, not projects,” he urged. Europe needs to focus on its strengths in technological innovations – this is where it has a ‘feedstock advantage’, he said.

Carlo Ratti agreed that a B2C focus would help the petrochemical industry find the course it needs to take, but also stressed the need for collaboration, for instance with architects. Ms Dubourg agreed, adding that an open and honest dialogue is needed with governments and non-governmental organisations. As part of that, industry needs to be honest about what is technically achievable.

Discussion moved on to the increasingly high-profile issue of plastics pollution which, it was said, “has the potential to ruin the [petrochemical] industry’s reputation”. There are technologies that can help, said Ms Dubourg, but there is a need for more collection and recycling schemes and more collaboration between industry and public authorities. “It’s a wonderful opportunity,” she said. “Consumers will still need products and the petrochemical industry will have to come up with solutions.”

Al-Benyan agreed, but, returning to his earlier comments, he said that there is a need to bring end consumers into the loop if producers are to be able to effectively take their polymer products back and disrupt the disposal cycle.

WHERE’S THE TALENT? That ‘feedstock advantage’ mentioned by Al-Benyan in terms of Europe’s history of innovation will rely on industry’s ability to recruit the talent necessary to come up with new ideas in the modern world. This has been one of EPCA’s main work areas in recent years and, once again, an entire session was devoted to talent and diversity, introduced by Nathalie Brunelle, senior vice-president of corporate affairs at Total Petrochemicals & Refining and chair of EPCA’s Talent and Diversity Inclusion Council (TDIC).

As moderator Nadine Dereza said ahead of the presentations, the European petrochemical industry has to rethink its position in an increasingly competitive environment. That means it needs to recruit and retain talent – all talent, regardless of gender, age, etc.

The keynote speaker was Prof Wayne Visser, holder of the BASF-Port of Antwerp-Randstad Chair in Sustainable Transformation at Antwerp Management School (AMS). He described three current crises that have a bearing on talent in industry: 85 per cent of employees report a lack of engagement with their work. This leads to lower productivity, more errors and greater staff turnover; The wage gap between men and women is getting bigger, despite efforts to highlight the issue; and ocean pollution has suddenly rocketed into the public consciousness.

Prof Visser also highlighted what he described as a “huge” generation gap, with young people – some of them future leaders – feeling that industry is not delivering a social function.

Paying attention to sustainability can help overcome these issues; a survey carried out by AMS and ING earlier this year found that, while the main drivers for a company paying attention to sustainability are national and international standards and legislation, the ideas of employees are not far behind. Similarly, the benefits to a company of taking sustainability seriously include an improved corporate image but also enhanced employee engagement; companies also report that a sustainable image makes them more attractive to potential employees.

Quoting another 2016 study, Prof Visser said that sustainable companies experience improved employee morale, 38 per cent better loyalty, reduced staff turnover – by between 25 and 50 per cent – and financial savings on recruitment activities.

This is, though, not a stand-alone initiative. A focus on integrated value looks for innovation synergies through solutions that are not only sustainable but are secure (resilient), smart (using advanced IT), shared (connected) and satisfying for employees.

SUSTAINABLE SUPPLY For many HCB readers, it would have been the logistics and supply chain session that would have been the big draw, although to focus solely on that would have led delegates to miss out on some challenging presentations elsewhere. But EPCA had certainly done well to get Prof Yossi Sheffi, Elisha Gray II Professor of Engineering Systems at MIT and director of the MIT Center for Transportation and Logistics, to give the keynote address.

In introducing Prof Sheffi, Johan Devos, chair of EPCA’s Supply Chain Programme Committee and sales director at Bertschi, noted that the subject of the session, ‘Innovation and Innovative Concepts for a More Sustainable Supply Chain’, was in line with the rest of the EPCA Annual Meeting and represented a core part of EPCA’s strategy in respect of logistics and supply chain management.

Coming straight to the point of his topic, Prof Sheffi said that “going green is not black and white” and promised to give the audience a balanced and realistic view of what can and should be done to promote sustainability in the chemical supply chain. It is not straightforward to determine where to start: for most companies, two-thirds of their end-to-end carbon emissions are found in their upstream supply chain but for others most emissions are in the use phase. There is, therefore, no simple way to determine a company’s overall environmental impact.

To illustrate the point, Prof Sheffi looked at the comparative environmental impact of different ways of drying hands – paper towels, cotton towel reels, electric dryers, and the new breed of Xlerator and Dyson jet dryers. One variable is the source of the electricity used – which can make standard electric dryers the worst of all in environmental terms, if dirty fuels are used to generate the power. »

EPCA TAKES THE ISSUE OF DIVERSITY SERIOUSLY AND

THIS WAS REFLECTED THROUGHOUT THE SPEAKERS

Not only is a carrying out a lifecycle environmental impact assessment an uncertain business, but it can be exceptionally lengthy and costly. Retailer Tesco started with a project to define the lifecycle impact of the products in its stores but it took a year to look at 125 product lines; as it has around 90,000 lines, it would take centuries to get through everything.

Nonetheless, Prof Sheffi said, even for sceptics it makes a lot of sense to act on sustainability. Eco-efficiency saves money; taking a stand on sustainability guards against consumer boycotts; and developing an offering in the ‘green’ market is attractive to a lot of consumers, not least the young.

But, as we know too well from elsewhere, consumers may conveniently overlook their desire for green alternatives if they turn out to be more expensive or less convenient.

Companies looking to asses or improve their lifecycle sustainability may well not know who their ‘deep tier’ suppliers are as there is no commercial relationship between them. This is particularly true in commodity markets. Ultimately, Prof Sheffi said, it is difficult for OEM producers to become more sustainable. A ROLE FOR ALL In recent years there has been a lot of talk of the ‘triple bottom line’ and the need to balance profits with people and the planet. But, Prof Sheffi said, a more pertinent balancing act happens between people who want a clean environment and people who want jobs and affordable stuff – especially as they are the same people! There has to be a trade-off.

Government regulation is not the answer and, Prof Sheffi said, can even become part of the problem, pushing consumer behaviour in the wrong direction. Manufacturers – and this includes the chemical industry – must develop a closer relationship with their end customers; they are the ones who will tell manufacturers what they want and what they will be willing to pay.

Appearing on the panel alongside Prof Sheffi were Dr Christoph Gürtler, head of catalysis and technology incubation at Covestro Deutschland, and Jörg Erdmann, senior director of sustainability management at Hapag-Lloyd. Dr Gürtler outlined how Covestro is “re-investigating raw materials”, leveraging its expertise to investigate new ways of creating hydrocarbon-based chemicals.

Petrochemicals rely on carbon, which are primarily sourced from oil and gas – these are finite resources, so there is a need for new feedstocks, Dr Gürtler said. Ideally that would involve the use of carbon dioxide. Covestro has already developed a way of using carbon dioxide in the production of polyurethane foam, via CO²-based polyols. Mattresses using such foam are already on sale and Covestro is now looking at other applications.

Covestro is also examining other sources of carbon, including biomass, which is easily available and can be applied to the manufacture of bio-aniline, and at noncarbon polymers. In all these applications, there is a need for the right catalyst, which is where Covestro finds a role. There is also a need for collaboration as there are various skills needed.

Jörg Erdmann explained how the container shipping industry is playing a role in improving sustainability in the supply chain; the maritime sector as a whole is currently looking at ways to meet the restrictions on

sulphur content in bunker fuels imposed by the International Maritime Organisation (IMO) that will take effect in January 2020. Erdmann revealed that Hapag-Lloyd is investigating hybrid fuels; he also said that refiners and terminal operators are making preparations to meet the new requirements. There are, though, some problems to be resolved: location will be an issue he said – will shipowners be able to take on the right fuel in the right place? Also, he noted, there is as yet no ISO standard for 0.5 per cent sulphur fuel oil.

WORDS FROM THE WISE Prof Sheffi began the subsequent panel discussion by observing that much of what business says about sustainability is “mostly for show”. It is important, he said, “to separate the PR from the numbers”. For instance, while there is a new focus on plastics in the ocean, most plastics waste begins its journey into the seas from rivers in China and elsewhere in Asia. So, while action is now being taken, it is in the wrong place.

“If we’re going to move the needle rather than the PR, it will take global action to find solutions to carbon sequestration, maritime and atmospheric pollution and other issues,” Prof Sheffi said. This will take a whole lot of money – but to make it seem more affordable, perhaps a sum of around 1 per cent of global GDP would make the difference.

More fundamentally, though, any change will require a different metric that the world – including the financial world – can agree on that will help track developments.

The finale of the EPCA Annual Meeting takes place over lunch; each year the Association finds a speaker of the highest calibre to address delegates and this year was no exception. Prof Steven Chu, former US Secretary of Energy from 2009 to 2013, Nobel laureate and Professor at Stanford University, took up where last year’s speaker, former UN secretarygeneral Ban-Ki Moon, had left off, talking about the challenges and opportunities that lie in “solving the climate change challenge”.

Prof Chu opened by saying he had some bad news and some good news to impart. The bad news is that there is now doubt about the impact of anthropogenic climate change, which started in earnest in the 1970s. That is driving more frequent forest fires, more frequent droughts and more intense storms, each of which is delivering its own problems.

On the upside, wind energy and solar power are now cost-comparable with gas-powered electricity generation in the US – without subsidy. Still, costs will need to come down yet further if renewables are to be the main source of energy. The world will still need back-up sources and then there is the cost of installing new distribution systems and working out the best ways to store energy.

Prof Chu listed some of the current developments, not least the increasing use of ‘pumped storage’ – this is particularly useful where there are hydro-electric dams already in place, and involves pumping water up above the dam when wind or solar power is available, so it can be released to generate power when it is needed. In addition, machine learning systems are being developed to design new distribution networks, and the falling cost of batteries is prompting greater use of electric vehicles. New battery technologies, such as those based on sulphur, also offer hope of further cost improvements.

GOODBYE AND GOOD LUCK Prof Chu’s good news was, then, that technological solutions to climate change problems are on their way and, he said, the petrochemicals sector has the “technical chops” to make that change – though it will take at least 50 years. He advised industry to start with decarbonisation and energy efficiency; he also urged businesses to collaborate with other sectors, especially academia and national laboratories. And be brave: “Imagination sets things in motion,” he stressed. “New approaches will transform where we are going.”

Bringing the EPCA Annual Meeting to a close, EPCA president Marc Schuller said that we are seeing the end of business-as-usual in the industry. The petrochemicals industry has grown through globalisation but the future will have to be different. Focus on new thoughts and ideas, he said, and remember that the best way to survive is to take a long view.

Before heading home, delegates were advised that next year’s 53rd EPCA Annual Meeting will take place in Berlin from 6 to 10 October; get those hotel room reservations in now. HCB

NEARLY 3,000 DELEGATES TURNED UP FOR THIS YEAR’S

EPCA ANNUAL MEETING, MANY OF WHOM WERE GREETED

BY FANFARES AT THE SUMPTUOUS OPENING DINNER