CSR & Eco-Efficiency Forum

ASI sits down with representatives of leading chemical manufacturing companies to get their thoughts on corporate social responsibility and eco-efficiency.

Q: How does your company define corporate social responsibility (CSR)?

Bradshaw: The Kuraray Group believes the vital public mission entrusted to a corporation is to fulfill its responsibility to the natural environment and the international community. To actively commit earnings to subsequent development and investment, and to continuously create value required by society. From start to finish, the reason for the existence of a corporation is to do its utmost for people and society. Put another way, we believe that the true meaning of corporate management is to put CSR in practice.

Veneman: For Akzo Nobel, CSR means "doing the right thing at the right time for the right reasons." CSR is the full integration of business integrity, environmental protection, talent attraction and our contribution to society from our day-to-day business operations. As such, CSR is part of our corporate governance framework. At the end of the day, CSR is about good management, and a company's ability to integrate Principles, People, Planet, and Profit. In that sense, it is about balancing short- and long-term interests, and building trust among all stakeholders.

Q: What is your company's policy on corporate responsibility, and specifically eco-efficiency? How does your company implement these plans?

Bradshaw: Conscious of its responsibility as a chemical manufacturer, Kuraray established a special section to engage in environmental preservation activities back in 1970. We have participated in the Japan Responsible Care Council since its establishment in 1995 and have put into practice numerous substitutes for substances that damage the environment. For instance, Kuraray developed vinylon fiber that has been put into good use in buildings around the world as a substitute for harmful asbestos once used as a cement-reinforcing material. Not only do we provide eco-friendly products, but we also apply unique technologies and products to more efficiently and effectively contribute to reducing the environmental load. Also, most of our locations are ISO 14001 certified.

At SEPTON Company of America, we are actively working on the impact of transportation on the environment by reduction of CO2, NO_x. Each year, we report on CO2 emissions by calculating the total volume transported by distance, weight tons and mode. This is tracked year to year to monitor if actions are effective in the reduction of CO2. Some of the efforts are made by finding ways to maximize the utilization of trucks - reducing the total number of truck movements, changing distribution patterns to reduce the number or distance of warehouse transfers, and changing modes, if possible, from truck to rail or to ship.

Veneman: At Akzo Nobel, CSR is considered a strategic issue and a key to our long-term economic success. CSR objectives are part of our regular management cycle, such as the planning letter, operational planning, scorecard, remuneration system, audit and annual letter of representation. At the same time, substantial, non-financial issues - such as energy savings, waste reduction, soil management, management development, the development of new emerging markets for our healthcare products, high standards of business integrity, global HSE standards and so forth - have to be managed like any other business process. We are convinced that CSR is the watershed between the companies with a future and those without.

Eco-efficiency is a business tool that is used to measure the economic and environmental benefits of two alternatives, irrespective of whether they are investment decisions, research strategies, marketing decisions or a review of product-market combinations. The eco-efficiency analysis enables us to select the best of two alternatives, thus delivering competitive advantage. Purchasing, research, marketing and manufacturing are directly involved in the eco-efficiency approach, which strengthens the process of full integration of planet and profit in our day-to-day business process.

Q: How does eco-efficiency affect the production of your products? What eco-efficient products have you developed?

Bradshaw: As a chemical manufacturer that uses vast amounts of raw materials, fuel, water and air to do business, Kuraray is obviously concerned with the well being of the environment. With this in mind, we must continually work at the reduction of emissions of designated chemical substances; improve energy efficiencies; promote the preservation, reuse and recycling of resources; have dialog with the community; and practice public disclosure. We are currently developing and supplying technologies for improving the environment through products with a low environmental impact. A good example of this is Kuraray's business with activated charcoal, a substance beneficial in water treatment and air purification.

Veneman: About 30% of our sales volume is related to products with clear eco-efficiency benefits: powder coatings, which do not contain solvents; antifouling agents in marine and protective coatings, which do not contain biocides and which improve the fuel efficiency of big ocean steamers; and essential, chlorine-free bleaching products in our pulp and paper chemicals.

Some of our businesses currently combine their margin management processes with eco-efficiency. By reviewing the entire product portfolio (e.g., surfactants), only those products with strong economic and environmental benefits will pass the staged review process. The result is a strong product portfolio both on the basis of profit and planet criteria. Once again, integrating environmental criteria into our product portfolio is sound business.

Q: What challenges does your company face while maintaining a social responsibility policy? How have you overcome these challenges?

Bradshaw: Since its foundation, the Kuraray Group has engaged in management that reflects a strong sense of awareness of the role we should play in benefiting society, and we began many activities to promote corporate social responsibility before it became widespread. Accordingly, we did not have to begin CSR from scratch; rather we began by reexamining activities we had been engaged in over the years, and by discovering activities we'd been involved in but hadn't considered from a CSR perspective. We seek to establish a corporate culture characterized by high awareness of CSR and to cause it to take firm root so that our day-to-day business activities themselves are CSR activities. The Kuraray Group maintains business sites around the world, and our environmental, social, and economic presence is increasing everywhere. The expansion and enhancement of CSR activities is an important management task for the coming years.

Veneman: One challenge is to create a clear picture of CSR in the minds of all employees. CSR is, in fact, an unfortunate abbreviation for a simple concept: all employees have a role to play in creating a profitable business based on business integrity, environmental care, good teamwork and their contribution to society. CSR represents nothing less than the collective values of each and every employee.

Another challenge is to find the right balance between short- and longer-term interests. In our effort to practice what we preach, it is not always simple to find the right balance between the P's of People, Planet and Profit. Payback on sustainable innovations with respect to raw materials, energy efficiency, water treatment, research and technology may have a longer time horizon than short-term investors appreciate.

This brings us to another challenge. CSR performance should become key in the decision-making process for analysts, investors and pension funds. CSR is about the management of substantial, non-financial issues. Some issues can easily be expressed in monetary terms: environmental liabilities and legislation (e.g., REACH), return on eco-efficient innovations, cost of absenteeism and serious incidents. Other substantial, non-financial issues - such as creating a talent factory, and our reputation - might be more difficult to value. I personally would not be satisfied if my pension assets were invested in unsustainable companies!

Q: What current issues is your company facing as far as its eco efficiency is concerned, and how are you resolving them?

Bradshaw: The Kuraray Group has identified its high priority tasks, including environmental load-reduction efforts, expansion of green purchasing, procurement and logistics, quantification of the environmental load of Kuraray products, the development and supply of environmentally friendly products, and the strengthening and improvement of communications. SEPTON Company of America is located in an industrial park with over 40 companies that includes a central organization to address issues affecting member plants and/or the neighboring community. We also belong to a Houston organization that is made up of over 120 petrochemical companies in the area. This group focuses on improving safety and environmental performance. We are also members of CIMA, which is a mutual-aid organization of over 125 companies in the area. If a company has a major incident, CIMA members will respond. We try very hard to have good communications with the community, and our key contact is with our Community Advisory Council (CAC), which is made up of citizens from the surrounding community and about 30 other chemical plants. This is an excellent forum for getting a clear understanding of community concerns, and to learn what other plants are doing to improve safety and environmental performance.

Veneman: We are in the process of identifying further opportunities to reduce our oil addiction. Since 1990, our energy efficiency has improved by 19%. Of the energy we use, 72% is derived from low-carbon and zero-carbon energy sources. We want to further improve these indicators. However, the low-hanging fruit has been picked. Further improvements require investment decisions in such areas as the construction of combined heat and power plants. The cost of energy, carbon emissions, taxes, legislation, scarcity of raw materials, pollution, water consumption, transport of fuels and so forth are, of course, an integral part of such decisions.

As the world's largest coatings company, we produce waterborne coatings, powder coatings, high-solids and solvent-based coatings. Product stewardship is an integral part of coatings businesses, as we continue to search for more environmentally friendly products. We use eco-efficiency analysis to ensure that we develop the best product/market combinations for a range of customers.

Q: What are your thoughts on a global standard for reporting CSR, such as the Global Reporting Initiative (GRI)?

Bradshaw: The Kuraray Group is currently using GRI, as well as setting up three subcommittees - Economy, Environmental and Industrial Safety and Social Responsibility - that correspond to the "Triple Bottom Line" analysis laid out in the Sustainability Report by GRI. By using a global reporting system, we have been able to standardize our reporting for all of our locations globally. This creates a clear picture of where we are improving or where additional efforts are needed within Kuraray worldwide.

Veneman: On the one hand, CSR reporting is important to ensure open and transparent communications to our external stakeholders. For external benchmarking and communication purposes, we do report on our progress vis-à-vis GRI guidelines. GRI is doing a good job in constructing one global reporting standard, which brings consistency in the company CSR reporting processes.

On the other hand, CSR reporting strengthens transparency and benchmarking within the company. We have chosen the approach of Sustainable Asset Management / Dow Jones Sustainability Index as our internal standard. It provides us with a clear year-on-year update of our strengths and weaknesses in the areas of governance, risk management, customer relations, HSE, and human resources. We highly appreciate this standard both as an internal benchmark for our business units as well as an external benchmark for our peers in the industry.