Can Profitability and Sustainability Coexist? Industry Trend #7 - Ep 181

Join Victoria Meyer, president of Progressio Global and host of the chemical show. As she speaks with executives across the industry and learns how they are leading their companies to grow, transform, and push industry boundaries on all frontiers. Here's your host, Victoria Meyer.

In fact, Chat GPT and yes, I went out to ask Chat GPT what it thought about the biggest trends in the chemical industry today. Well, Chat GPT told me I was missing four trends. Four. That's a lot. I'm actually going to bundle that into a single yet very complex trend. Sustainability. Sustainability means different things to different people in different companies. And I'm just going to frame this in the context of the chemical industry today.

Sustainability across the industry covers a wide range of topics. We've got clean air and clean water. And what I think of as kind of the roots and the core of environmental sustainability and responsibility that across the industry we've been focused on forever. Right, really and truly. Decarbonization.

Reducing water usage, both industrial, what we're using in manufacturing, in the production of the wide variety of chemicals, um, and other products that we're producing, as well as the final usage, um, at the consumer level, right? So a lot of focus on reducing water usage. Circularity and circular solutions, often plastics, right? So that's the most common place we talk about is plastics, but also carbon.

And if you listen to my interview a couple of weeks ago with, um, Kevin Norfleet from Celanese, we talked about carbon circularity in the form of carbon capture and utilization and, and the repurposing carbon there. Um, also textiles is a really big area. There's a number of, um, startups and other textile focus firms focused in that area because textile recircularity and textile circularity is critical.

In fact, one of the companies I'm doing a lot of work with right now, Carbios, has developed a solution for this, but they and others are trying to solve this challenge. Um, green hydrogen and green methanol. We've talked about that on The Chemical Show. Green electricity, whether it be solar, wind, or water. And if I think about solar and wind, both of which require an abundance of chemicals and other minerals and materials to be successful. Electric vehicles, right?

We can't talk about electrification without talking about EVs, electric vehicles. Biotechnology and bio based chemicals, right? So we've talked about that a lot on the Chemical Show and, and highlighted some innovative participants across the industry, people ranging from Lanzatech to Integrity Biochem to Solugen and others, right? And then sustainable supply chains, right? So. A lot of times that's in the context of scope three emissions.

Sometimes sustainability is in the context of business sustainability and business continuity. But what we're seeing there is around shorter supply chains, alternative fuels and more. So there is no doubt that the chemical industry and it's partners are investing billions and perhaps trillions in sustainable solutions. And yet the question remains, who's going to pay for it? How quickly can it scale? And when is it going to be profitable?

So that brings me maybe to the whole framework of today's conversation. Number one, sustainability is absolutely a key trend driving the industry today, but Can Sustainability and Profitability Coexist? And that's a big question. So when we, when we think about this and when I look at it, there are a number of companies that are rolling back their sustainability goals, right?

So one of the latest ones I've heard is Coca Cola, but I actually went out, I did a Google search really quick just to say, okay, what companies have rolled back their sustainability goals? And these are the headlines "More than 40 Fashion Suppliers Have Rolled Back Climate Commitments. What's Going On?" So that was something that was published just four days ago. Um, another article, "How Companies are Starting to Back Away from Green Targets." Here we go.

"Swiss giant Nestle has Rolled Back Recycling Targets and the Difference Amounts to the Weight of 30 Eiffel Towers.' Um, "Shell weakens it's 2030 Carbons Emissions Reduction Target." So that is just on the first page. You, if we were reading it on a newspaper, we'd call it above the fold. It's before you have to scroll. So there's a lot of concern here, right? So this, this is just a snapshot of the headlines. People are very invested and concerned about this.

And yet at the same time, companies are doubling down. So just this week we heard from Evonik, um, that it's new innovation strategy will focus on bio based solutions. The energy transition and the circular economy, and that Evonik expects these three growth areas to generate 1. 5 billion by 2032, right? So the company is investing heavily in its R& D efforts in other efforts towards what I would categorize as Sustainable Innovation. So clearly. It's of interest.

Again, I've, I've already mentioned, I've talked to a number of companies on The Chemical Show that are really committed and focused. And in fact, their entirety of their business model is really around bio based and sustainable solutions. So, so what gives, right? Can Sustainability and Profitability coexist? Maybe. And I think the reality is it's not going to be fast, right? So there are no fast solutions.

When we talk about the innovators, these innovative solutions don't roll out very quickly. Getting to scale. To the scale that the chemical industry is in is not a fast pace. It took us decades, hundreds of years, depending on which products you're looking at. Right. So there's a lot of things going on here. Um, what I would like to articulate that was maybe some of the challenges that are going on today. So, you know, that headline that said, Oh, Companies are rolling back what's going on.

Well, let's talk about what's going on. And I've talked to companies across the value chain in different parts of the chemical industry, um, to get some of this feedback about some of the challenges that they see, some of the challenges that you

see. So number one is Affordability. It gets back to the profitability. Who's going to pay for it? Corporate purchasing's willingness to pay more for circular or sustainable products is not there. Right. So there seems to be conflicting objectives between a quest to continually lowering costs. Right. Um, which often happens when you're talking with procurement across all industries, right?

They are tasked with reducing costs, with getting the best price, and their willingness and I'm hearing this a lot really across product lines is their willingness to pay more for those products doesn't exist. So even products that we know that are readily available in a recycled format. So let's take a recycled PET. Despite having corporate objectives.

So if we take the plastic bottlers, um, whether it be Coca Cola or Pepsi, whether it be other companies that are using a lot of plastics and a lot of PET and packaging, their willingness to pay more for recycle to help meet their sustainability targets and what their customers are asking for is not there. Right? So misalignment of objectives, that'd be one thing.

Another challenge is really around the individual consumers willingness to number one, pay more for products that are green, sustainable, sourced responsibly, more sustainable supply chains, et cetera. Right? Are we willing to pay more? Oftentimes, not really. Consumer's willingness to have less. Whether it be clothing or other stuff. So that consumerism has absolutely driven demand across the chemical industry and other industries.

And yet at the same time, it also nets out to a problem that we've got more stuff and more stuff that eventually has to be disposed of and disposed of responsibly. So, you know, there we go. Part three related to the consumers. The consumer's willingness to change their behaviors around recycling, right? So talk to anyone involved in the recycling industry, go look at the recycling numbers for plastics, cans, bottles, um, and glass.

It's, it varies, it varies by region, by state when you look across the US, by country, but really it's remarkably low. A remarkably low number, even for those that have and have curbside recycling programs. So one of the things we hear a lot about oftentimes is the inaccessibility of recycling systems, and that is absolutely true.

But I know, and I'm guessing you know, people that even though they have easy and readily available recycling programs, curbside recycling programs, don't take advantage of it. Right. So there needs to be behavioral change and there's a lot of different suggestions out there in the industry and across the industry and beyond that offer up suggestions to that. But individuals. You and I. Our friends and family and people across the world.

Our willingness to change behaviors is critical in order to solve some of the sustainability and profitability and circularity. And on and on. Right. So that's, that's the second challenge overarching.

The third challenge is Regulations and Regulatory Approvals, right? So anyone that is trying to introduce new products, new technologies has faced this. It is, there are hurdles, there are massive hurdles. The pace is slow. This is not just in the US, this is globally, um, so the plastics industry as they are trying to get advanced recycling in place are facing hurdles.

The biotech and the bio based and green chemical innovators as they try to bring new products to market are facing slow regulatory approvals and hurdles to try to get that. So again, we have a misalignment of objectives and actions, right? So we've got objectives and I think we've got objectives globally. We've got objectives at a national level. We've got objectives at a corporate level, um, to achieve certain sustainability goals profitably, we hope, right?

So that's one of the other premises that we're, we're working on in today's episode. But the hurdles that are in place, um, act counter to those objectives. You know, the fourth thing is around investors, investors, willingness and patience. So investing in and supporting businesses through the time it takes to scale through the profitability needs, right? One of the things we see is getting a new technology to scale takes a long time. I'm going to use LanzaTech as an example.

And you guys know I had Jennifer Holmgren on, uh, early in the early days of The Chemical Show. I need to bring Jennifer back on and get an update from her. LanzaTech has been at this for 20 years before they're realizing profitability. Um, Trillium. Uh, was on The Chemical Show last year. Advantium was on The Chemical Show. These guys have been at it for years, seven to 10 years easily. Solugen, which was on recently and I had Gaurab, the CEO of Solugen on recently.

They've been at this for years. It's almost a decade to get to scale much less profitability, right? So what that requires is patient investors, right? A long term view in terms of how to get there, a willingness to experiment, adapt, scale, and grow on things that may or may not be successful. And sometimes it, it takes a long time for these sustainable solutions to become successful. Um, and yet there needs to be a certain amount of willingness and patience.

You know, the other piece that ties into investors is, you know, if we look back over the past several years. ESG investing was all the rage. And there's been a lot of pushback on it recently and people say, Oh, that's, you know, appropriate or inappropriate. I'm not saying it, whether it is or not. Right. So I think investing guidelines, you do what makes sense for you. I think we also, you know, companies are held to certain standards and there are certain regulations. Right.

So I'm not debating any of that, but there was an interesting article, uh, just this week in Harvard Business Review in their online magazine. And it's titled, "It's Time to Unbundle ESG." And part of this is, and why were they together anyway? So environmental, social, and governance, right?

And especially when these things move at a different pace and they've been called different things through the years there's an opportunity to unbundle and maybe it will be unbundled once again, the E environmental, I tie that back over to sustainability is likely to stay. It will stay. We're on this path. I think we're committed to this path, right? And then the fifth challenge.

And when we talk about sustainability and whether sustainability and profitability can coexist is a collective openness and a willingness to recognize that Number one, we don't have all the solutions today. There are alternate solutions. We don't necessarily have the right metrics, right? And so we need to define those metrics more broadly. And in, in doing so, recognizing that one size does not fit all one target. Does not fit all there's a number of variables.

So, you know, if you go back to where I started early in today's episode about all the things that fall under the sustainability umbrella, whether it be circularity or water reduction or cleaner air, green hydrogen, they are. All take us to a sustainable future in a different way, right?

And so with, it requires different targets and different goals and different objectives, and ultimately we need to get to that place and lack of openness around what sustainability may be and where those definitions are and how to draw those hurdles is one of the challenges that, that faces Sustainability and sustainable solutions today, right? So coming back. Can profitability and Sustainability coexist? Yes, I'm going to say yes, but it's not immediate.

Some of these hurdles and challenges that I've identified need to be overcome, but I go back to also where I started, which is, the trends. Sustainability is absolutely one of the key trends for the chemical industry, really for all process industries this decade and beyond.

So that's it for today. I'd love to hear your point of view on this. What do you think? Can sustainability and profitability coexist? Do they coexist today? How will they coexist in the future and what do we need to do to make that happen? So head on over to my LinkedIn page. I'm going to have a post out there. I'd love to hear from you and just see what you have to say. So thank you for listening to today's chemical show.

Keep listening, keep following, keep sharing, and we will talk with you again soon.