Supply-side sustainability
23 Feb 2005
With the REACH regulations looming, process companies in the chemicals sector are taking stock of their environmental profiles.
The emphasis is on sustainability, as has been true for several years; but increasingly, companies are trying to make sure that their sustainability extends all the way along their supply chain.
The message from the Business Issues Conference was that knowing where your raw materials come from is just as important as ensuring that your own practices are sound.
Unilever is a good example of a company that reaches across a wide range of process sectors. Although many of the company's chemicals operations are now part of ICI, it is still a major player in the detergents and soaps sector — its Dove brand is one of the largest soap brands in the world.
Moreover, it is active in the UK's fastest-growing process sectors, food and beverage, which makes up half of its business.
Derek Lewis, Unilever's senior vice-president for the supply chain for Africa, told the conference that the company has three main sustainability initiatives, covering fish, water and agriculture.
By the end of 2003, he says, half of the fish going into the company's products came from sustainable sources, and this proportion is increasing. The company is involved with a wide range of water conservation activities, from use of water in agriculture, to its use in manufacturing activities, and downstream in consumer use. For agriculture, it has been cooperating with other companies in the sector, including Sara Lee, Danone and Nestle, to produce guidelines for the sustainable management of its five key crops: palm oil, peas, spinach, tea and tomatoes.
Unilever is concerned with REACH, firstly because it sells the chemical industry's materials in its products, and also because it sees the regulations as being a 'key component in improving public and consumer confidence in the chemical industry,' Lewis said.
This is a key point, he stressed. Cooperating with REACH — and being seen to cooperate — is vital to keeping the public's confidence in the chemical industry. 'We need to own the agenda, before it's taken away from us,' he said. 'Whether you agree with the issue or not, if consumers are not confident, the effects are disastrous. The fallout from the GM issue is still with us.'
Public confidence is at the absolute forefront of the business strategy of the Body Shop, as its head of regulatory affairs, Paul Wilkes, explained. The company was set up on the basis of ethical, environmentally friendly products and trading, and its customers demand high standards.
It's this approach, along with its huge international retail presence, that has given the Body Shop its stature, Wilkes said: although the company's turnover doesn't even match Unilever's sales of Dove, it is the 28th most recognised brand in the world.
One of the largest parts of Wilkes's job is dealing with ingredient issues. With new regulations being passed constantly, and confusing and sometimes alarming stories appearing in the press, the Body Shop has to have reliable and up-to-date information from chemical companies so that it can answer consumers' questions and allay their concerns.
'Consumers talk to us,' Wilkes said. 'When stories appear in the paper, we have a day to respond to questions. These can range from "I am allergic to such-and-such an ingredient, which products do not contain it", to "Parabens are alleged to cause breast cancer, so which products are safe to use"', he said.
Like all cosmetics and personal care products, Body Shop products contain ingredients from the chemicals sector. What the Body Shop needs from suppliers is assurances that raw materials do not contain chemicals of concern; an outline of the synthetic process, which helps it to prepare for adverse media coverage if concerns over ingredients arises; and details of raw materials and outputs to the environment.
'Suppliers should be more willing to proactively provide useful information,' he said. 'And chemicals suppliers need direction to understand the requirements of the customer.'
Sidebar: Chemical investment 'recovering' in 2004
Capital investment in the UK chemicals sector is estimated to have increased by 2% in 2004, the first improvement for two years, according to market research organisation MBD. Investment in the sector exceeded £2.1billion in 2004, it says in a new report. Overall, UK process plant capex increased by 1% in 2004, topping £5.9billion, the report says.
The only sector to record growth for the majority of the five-year period was food and drink, with a 4% increase in capex to almost £1.5billion. Much of this spending was connected with packaging, the report says. 'Packaging tends to have an impact on manufacturing processes, and in the current climate where consumer spending is buoyant, packaging becomes even more important to attract the customers' attention.'
Water and sewerage saw 9% investment growth from 2000-2004, reaching £1.2billion. This, according to MBD, reflects 'the increased expenditure on assets and infrastructure in the run-up to the European Water Framework Directive and new price limits for the period between 2005 and 2010.'
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