SOLVAY Plastics is a leading world producer of specialty polymers and vinyls and has the widest plastics range available.

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2 EFQM is a global not-for-profit membership foundation based in Brussels, Belgium. With almost 500 members covering more than 55 countries and 50 industries, we provide a unique platform for organisations to learn from each other and improve performance. EFQM is the custodian of the EFQM Excellence Model, a business model which is helping over organisations around the globe to strive for Sustainable Excellence. EFQM members share a common goal: the pursuit of excellence. The EFQM Excellence Model provides a common framework and language that facilitates the effective sharing of information between organisations, transcending sectorial, cultural and maturity barriers. As part of this network you are able to engage with like-minded individuals and share experience on the development of innovative solutions that can help your organisation address some of its most important challenges. In line with our promise, to Share What Works, EFQM is uniquely placed to identify good practices that have been adopted by our members. The EFQM Recognition Schemes, which involve independent assessors visiting applicants, help us to identify, verify and share these practices with the EFQM members. In 2010, we launched the Good Practice Competition to enable any organisation, regardless of whether they are a member of EFQM or one of our Partner Organisations, to share an approach that works for them. The applicants are asked to upload a short video explaining their approach. A jury of experts in the field then agrees a short-list of finalists. The final judging process is a combination of a public vote, via the web portal, a vote by attendees at the EFQM Learning Edge, (after the finalists have presented their practice in more detail) and the Jury. The theme of the competition changes each year in line with the focus of the EFQM Forum. The Forum is an annual event for business leaders and the excellence community to share ideas, experiences and knowledge. 2

3 Sustainability is a hot topic; there is no debate on that point. However, it s one of the few things when it comes to sustainability that is not up for debate. On most other aspects, from what we mean by sustainability to what we need to do to be sustainable, opinions and interpretations vary greatly. The objective of the EFQM Sustainability Good Practice Competition was to identify a number of practical examples of approaches that could be shared and would encourage and inspire others. We received a total of 24 applications from 12 countries from Europe, the Middle East and India. The standard of the applications was very high but our jury of experts in the field of CSR narrowed them down to 5 finalists. Solvay s Sustainable Portfolio Management (SPM) approach was recognised as Highly Commended by the Jury of the EFQM Sustainability Good Practice Competition. The jury was impressed with the innovative nature of the tool Solvay has developed. Jury members recognised its potential to significantly contribute not only to Solvay s sustainable development but also to be adapted and adopted in other industries and sectors. 3

4 Solvay is an international industrial group active in chemistry, offering a broad range of products and solutions that contribute to improving the quality of life. The Group is headquartered in Brussels and employs about 16,800 people in 40 countries. In 2010, its consolidated sales amounted to EUR 7.1 billion. The Group has two sectors of activity: SOLVAY Chemicals is the world s largest producer of essential chemicals such as soda ash, hydrogen peroxide and sodium bicarbonate. It is also a global leader in specialty products such as fluorinated chemicals. SOLVAY Plastics is a leading world producer of specialty polymers and vinyls and has the widest plastics range available. Source: Solvay Annual report Solvay sees sustainability as a central aspect of its strategy in a changing world. Since a strategic review in 2008 the company has made a number of steps to accelerate its implementation of processes to improve sustainability, including detailed analysis and reporting and business planning that explicitly considers environmental objectives within product portfolio planning. This effort has resulted in a number of original frameworks, including Sustainable Portfolio Management (SPM) which the company has developed as a management framework to explicitly include environmental risk and opportunities within business decision-making. The strategic goal fixed in 2008 is that Solvay will progressively move to a balanced portfolio of manufacturing and of products in terms of sustainability. By end 2010, approximately 80% of the current business portfolio of the group was assessed using the Sustainable Portfolio Management (SPM) methodology, a proprietary tool developed with Arthur D. Little and the Dutch organisation for Technological Research TNO. These internal assessments also cover 69% of the R&D projects and have been reviewed by both consultancies. 4

5 As an industrial manufacturer of intermediate products used in a wide variety of applications around the world, Solvay is subject to changing global patterns of demand and long term trends that continue to cause major change in the chemical industry. The sector is a major consumer of energy, water and raw materials used in the production of its goods and emits by-products to production, including greenhouse gases, liquid and solid waste materials. These by-products all place the sector under intense scrutiny from external observers who see the cost and impact of a larger environmental footprint as a risk both to society and the sustainability of the chemical companies themselves. Additionally, demand patterns from developed and developing nations are quickly evolving, generating new opportunities and competitive challenges. Researchers regularly present new knowledge that confirms the changes affecting the global climate system, rather than debate the evidence. Solvay prefers to participate in measures to reduce emissions and to target the development of products that contribute to emission reductions. Even though the entire industrial manufacturing sector contributes only around 17% of global Greenhouse Gas ( GHG ) emissions (according to the Emission Database for Global Atmospheric Research), the sector commands considerable research know-how and has the potential to implement processes to mitigate its negative impact. Manufacturing industries are using a heavier proportion of the planet s natural resources, with demand rapidly outstripping supply, whether for oil, water or most industrially useful metals. This is inevitably leading to the scarcity or exhaustion of critical resources. Solvay s main inputs energy and the raw materials of its value chains will be affected. The global population is growing, and ageing. By 2050, there will be nine billion human beings on Earth. But more importantly, for the first time in the history of humanity, people aged 60 or over will be more numerous on this planet than children aged fifteen or under. This unprecedented situation will also see the arrival of over a billion new consumers. This will define new patterns of behaviour and will irreversibly change the demand for manufactured goods. The rise of the BRIC quartet (Brazil, Russia, India, China), heralded during the first decade of this 21st century, is a contemporary reality. Other countries present a growth potential that could transform them into future major economic powers. 5

6 Stakeholder Key objective Trend Investors By end-2010, to evaluate the activity portfolio using validated sustainability assessment tools Distribution of generated economic value EUR Million Society To reduce by 20% the direct and indirect greenhouse gas emissions related to production by 2020 (base 2006) Greenhouse gas emissions related to manufacturing activities Development since 2006 on a constant scope basis Direct and indirect CO2 equivalent emissions (Kyoto Scope 1+2) Customers By 2020, the Solvay group will manage a balanced portfolio of activities showing a better sustainability index, in terms of both production and markets Product information Implementation of REACH Personnel Zero accidents Accidents involving people on Group sites TF1 Site neighbours To reduce global air and water emissions by 20% between 2006 and 2020 Global emissions to water and air Development since 2006 at constant activity scope 1 Source: Solvay Annual report

7 The annual strategic planning process at Solvay begins with a strategic dialogue in which each of the Strategic Development Units (Essential Chemicals, Special Chemicals, Vinyls and Specialty Polymers) is invited to openly discuss its strategy with Corporate Strategy and Development advisors. A key part of the annual planning (and five year planning cycle) is to review sustainability measures and set new and demanding targets. The Sustainability Portfolio Management (SPM) framework described in this case study ensures that the different Strategic Development Units follow a common approach to evaluating environmental factors and market opportunities and that appropriate resource allocation decisions can be made at group level. SOLVAY started its journey towards Organisation Performance (previously TQM) in the early 1990 s. This journey had three main steps: Improve products and services by focusing on client needs; Improve ways of working through process orientation; Improve strategy definition and implementation. Providing a framework for this effort the Performance Cycle Model links strategy, planning, processes and organisation together. Each Solvay entity has the support of a BPIM (Business Performance Improvement Manager). A series of tools support the implementation of the framework: Global Assessment (according to EFQM s RADAR logic), tools for evaluation of innovation and risk management and process surveys. Process efficiency is tracked through KPI s and scorecards, and various lean and six sigma initiatives support process improvement. 7

8 Resource allocation decisions in the chemical industry typically involve long-term investment periods, which could be of ten years or more. The decision to build a new facility or production process needs to be understood in terms of these long-term trends and a careful balancing of risk and potential returns. Traditionally the analysis used to support resource allocation decisions integrates strategic and financial criteria closely, while sustainability would be evaluated in parallel. With the change in strategic objective: to place sustainability at the heart of Solvay s mission, a new tool was required to more closely integrate the evaluation of sustainability with financial and strategic perspectives. The Sustainable Development team at Solvay, together the consulting company Arthur D. Little and the Dutch organisation for Technological Research TNO, has built the proprietary technique Strategic Portfolio Management (SPM). The SPM assessments support strategic decisions by the Executive Committee by assessing the sustainability of a product along two axes: its production and its markets. These two axes of SPM cover the controllable aspects of how Solvay can reduce its own impact on the environment and select products which best position the company to benefit from the increasing market demand for products that deliver an environmental benefit for consumers. The production axis includes the key environmental impact factors related to the manufacturing of the product, such as energy consumption and associated greenhouse gases emissions. On the market axis, the tool evaluates the alignment of a given application of this product with the trends of this market in terms of sustainability. The 3 steps in calculating Operations Vulnerability : 1. Produce an Ecoprofile (or good enough approximation if not available) in accordance with ISO standards and EcoInvent guidelines. 2. Monetization: An approximation is made to place of all the themes on the same money based scale. Authoritative internal and external experts have defined specific costs for each environmental theme. For instance, Global Warming is considered at the potential market price of CO 2 and Human Toxicity is evaluated as the typical cost to avoid human exposure to toxic substances. 3. Operations Vulnerability is the ratio between the Manufacturing Environmental Footprint costs and the sales price (average over the 5 last years, to smooth the impact of up and downturns). In order to understand how vulnerable Solvay s production is to changes in the market and regulation, extensive studies are made of the supply chain and internal processes to ascertain the total environmental impact, measured from when the raw materials are extracted from the ground ( cradle ) to factory exit-gate. An Ecoprofile is the inventory of all environmental footprints of a product considered from its raw materials down to the environmental impact resulting from its manufacturing processes ( cradle to gate approach, Kyoto 1 & 2 scope). A major effort on extending the coverage of Ecoprofiles was undertaken in 2010, and 95% of all Solvay products now have an Ecoprofile. 8

9 Understanding product-applications with an environmental benefit For instance, assessed application helps consumers and/or customers to significantly and measurably: Reduce their GHG emissions Reduce exposure to harmful or toxic substances Reduce their energy use Produce more fresh water Reduce their consumption of raw materials Reduce their consumption of scarce raw materials Increase the production of renewable energy (or make it more competitive) Increase the productivity or yield of food/feed production Increase recycling Increase the production of biodegradable materials (or make them more competitive) Reduce the consumption/use of products that are regulated or in phasing out Improve the end-of-pipe solutions and decrease waste generation Sustainability is also a market opportunity for Solvay. By repositioning the company toward the production of intermediates used in products with an environmental benefit, Solvay anticipates that it will be supported by a long-term growth in demand. The challenge is to fully understand the many product-application combinations in the market, and whether Solvay contributes to stateof-the-art, sustainable solutions. Fortunately it has long been common practice for Business Unit leaders to maintain a continuous dialogue with customers in order to understand their market strategies and so predict requirements for the company s chemical intermediates. As a result of such exchanges, the Business Units have a clear idea how Solvay s products are used and in most cases an understanding of the sustainability of the product-application. An example of an aligned product-application could be the use of polyurethane used to insulate buildings: it is considered to be among the best alternatives for insulation in most situations. For an example of how such evaluations are conducted, read how this was done for PVC in window profiles on pages 10 and 11. A flow chart for considering benefits and obstacles to the adoption of a product solution 9

10 Product-applications are plotted according to their production vulnerability and market alignment using the following grid: Low Operations vulnerability High 3 4 Exposed market alignment, but low operational vulnerability Exposed market alignment and high operational vulnerability Market Alignment Good market alignment and low operational vulnerability Good market alignment, but high operational vulnerability Exposed Neutral Aligned 2 1. Product-application in the zone around (1) is well positioned in terms of solving an issue of sustainability and has a low environmental footprint in its production. 2. Product-Application in the (2) area could be candidates for investment in order to improve their operational vulnerability. 3. Product-Application in the (3) zone is a candidate for an in-depth analysis to assess whether obstacles can be overcome, and if so, in which area it would have been positioned (as negative impacts supersede any positive impact, it might be that the product-application would have been aligned whether the final product would not have contained a toxic ingredient). 4. In this zone the product-applications will be seriously challenged as described for the combinations in the (3) area and, eventually, may be candidates for divestment. 1 Three product-applications are drawn on the SPM grid with the area representing the size of the business. Within the business planning process, BU managers are encouraged to review with the Executive Committee how resources are allocated to the different products. 10

11 We have designed SPM to be as light as possible for the Business Unit Managers to use; it is not meant to be a decision nor a reporting tool, it aims at visualising the sustainability issues in a rigorous and systematic way. The value of SPM is in ensuring that sustainability becomes an integral part of the business planning process, and that management is able to quantify the choices made. Dominique Debecker, Sustainable Portfolio Management, Project Manager, Solvay The tool is used in combination with other strategic analyses, such as relative market share, profitability and growth potential, in order to arrive at an informed view of each of the Business Unit s portfolio of products. The BU Manager is tasked with completing the evaluation of each product portfolio based on the two axes: production and market sustainability. In order to do so, a simple on-line tool guides the BU manager through the steps required to produce the SPM analysis. For production sustainability, expert documents (such as the Ecoprofiles) are referenced, and combined together in a formula using shadow costs for the environmental impacts (of emissions, water and energy) so that a monetary value can be established. In principle, any company following the same procedure as Solvay would come to the same conclusions about the operational exposure of its products. By using this method, Solvay expects the market to make similar long term decisions about environmental costs, wherever the production is based. For the evaluation of market alignment the SPM tool leads the Business Unit manager through a decision tree about how the product is used to solve issues of sustainability and whether this is the preferred solution of the market. The evaluations involve qualitative assessments, but in doing so stimulate debate among the management team about their assumptions and the trade-offs to be made in targeting sustainability and growth. Improvements in the positioning of a particular product-application can be made either by improving sourcing and production processes, by selecting or restricting certain applications for the product or helping customers to improve their use of the product. How SPM is used to consider future scenarios Present state: products and their applications are plotted based on current ecoprofiles and market alignment 2020 Frozen State: uses the production processes of today and the shadow prices scenario of 2020, with the product price of today. No change in market alignment Desired future state: considers how investments in R&D and CAPEX can reduce operational vulnerability and appearance (E) of new productapplications and the disappearance of others (D) 11

12 PVC is the most popular material in Europe for the manufacture of window frames. What is the sustainability case for PVC used in these building applications? Solvay s customers are able to claim an environmental benefit of their product: home owners install double-glazed windows in order to reduce heat losses, and therefore this application of PVC contributes to a reduction in energy usage and consequently lower CO 2 emissions. On the other hand, the chemical components of PVC and its production pose some hazards to human health, and if handled incorrectly (such as incinerating windows at the end of their life) the product could release harmful toxins into the environment. So, is the use of PVC in this application aligned to a market that will benefit from increasing demand for sustainable solutions, or is it the opposite? In order to answer these questions and make evaluations that can be used in the SPM analysis, managers at Solvay reviewed authoritative external research material and consulted with external experts. The internal analysis was compared to that of the external review and a decision made about whether the application has more benefits or obstacles for its use. The Solvay team concluded that the application of PVC in window frames is overall aligned to a positive environmental outcome, based on a comparison of the benefits versus obstacles: Benefits PVC window frames help customers to significantly reduce their energy consumption Significant external proof obtained to support this benefit Obstacles Potential health risks in use and in end of life External evaluation over a number of cases supports PVC as less harmful than alternatives (for instance aluminium) On balance, the production of PVC for applications in window frames is considered to be an attractive market segment from demand driven requirements for sustainability. 12

13 By end 2010, approximately 80% of the current business portfolio of the Group was assessed using the tool Sustainable Portfolio Management (SPM). An ecoprofile is the inventory of all environmental footprints of a product considered from its raw materials down to the environmental impact resulting from its manufacturing processes ( cradle to gate approach). The limiting factor for the remaining products that do not yet have full ecoprofile data is often the difficulty to get data for some of the raw materials used to produce them: they may be very diverse, of multiple origins, with no reliable data yet available from suppliers. This methodology is very eye opening the conclusions of the operational vulnerability study are never trivial and can lead you to conclusions significantly different from your presumptions. in a company that has to handle so many R&D projects, this tool is a very valuable guide in deciding where you may want to put the priority. Of course it has to be complemented with other criteria such as the business relevance or the expected return of your research, but the market and operational alignment from a sustainability standpoint is a powerful criterion as you have to be selective and ensure that your portfolio is best geared towards long term success. Pierre Joris, Chief Scientific & Innovation Officer, Solvay. 13

14 This case study has been jointly developed by Solvay SA and EFQM. EFQM wishes to thank the team at Solvay for their willingness to openly share information with the EFQM network. Contact us via Contact Solvay: Visit our website: Dominique DeBecker, Sustainable Portfolio Management, Solvay SA Call us on: As a member of EFQM, you will enjoy the following exclusive benefits: Expert advice and support for your organisation s journey towards excellence. The EFQM Knowledge Base is a database containing a number of free-to-download assessment, management and improvement tools as well as Good Practices identified from the last 3 years of the EFQM Excellence Awards. Members receive a discount of 20% on EFQM Products & Services, including Training, Publications and Recognition. There are themed webinars throughout the year, with Good Practices and new tools being shared and explained by EFQM and member organisations. The EFQM Learning Edge is a themed annual event - a members-only meeting that allows practitioners to meet, share and discuss experiences in an informal environment. EFQM facilitates Communities of Practice. These are groups of organisations which share experiences to generate new, innovative approaches Good Practice visits, enabling you to learn directly from the experience of leading organisations, recognised through the EFQM Levels of Excellence. Members receive a monthly newsletter, giving the latest information on what is happening in and around the excellence community. 14

15 EFQM is a membership organisation. We rely on input, ideas and suggestions from you to create a vibrant community. If you have any ideas, questions or suggestions, please don t hesitate to contact us via (info@efqm.org) or via telephone ( ). On the 1 st of September 2010, we created The EFQM Network for Sustainable Excellence to facilitate a dialogue between our peers and the wider community. The group is open to anyone with an interest in this area. Over 1800 individuals have already joined our group and shared their experiences. If you have a question, it is a great place to start. 15

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