Chemical industry: From suspect to sustainable

Janez Poto?nik, European commissioner for environment chemical industry speech to the annual meeting of Eurpean chemical industry association CEFIC and the ICCA (International Council of Chemical Associations):

London — I am aware that in these times of economic instability, thinking about the environment and sustainability is considered by many a luxury we cannot afford. But it’s the opposite… Not thinking about sustainability is a luxury we cannot afford.

Preserving our planet, the planet’s natural resources we all depend on - water, energy, raw materials, or land - is essential, not only for our survival and well-being, but also for our longer term competitiveness and growth.

As you might imagine, my take on sustainability and resource efficiency policies always starts from an environmental perspective. But, I never lose sight of the fact that environmental, social and economic policies are so deeply linked that one cannot develop as if the others did not exist. The value of resource efficiency is that it brings these areas together and makes their connections more obvious.

Resource efficiency goes far beyond the boundaries of traditional environmental policy. Efficient use in resources can help us achieve policy goals in many other areas. In a vast majority of cases longer term planning with resources in mind, leads not only to environmental protection, but also to very sound social and economic policy.

Increased efficiency builds stability, while bringing opportunities for improving our lives in many ways. Using less today means saving money, but also having more for the future. It means doing less damage now, so systems (and ecosystems) can recover. It also means more resilience to future fluctuations in markets and to changes in environmental conditions.

We have for a long time associated competiveness with labour productivity. But as resources become scarcer, and their supply and prices more volatile, it is natural that we pay more attention to resource productivity and just as resource productivity is increasingly important to our economies, the other element of resource efficiency - limiting the impact of our resources use on the environment - is increasingly important to our quality of life and to the planet itself.

In brief, what we need is a new model of growth; one that drives future prosperity and job creation, while at the same time reversing negative environmental trends. This is why the European Commission has placed resource efficiency at the centre of the EU 2020 Strategy.
Using our natural resources in a more efficient way is about giving an answer to the present economic instability, and about shaping our future.

Why is it so important to go in this direction?

Because Europe uses a lot of resources; Resources are getting more expensive; because we import most of our material resources; and because today resource scarcities and pressures will be a major constraint on growth in the future.

This means that the transition to a more sustainable growth model is inevitable. It is no longer a question of “if”, but only a question of “when”. And if we start planning the “when” now, we can benefit from the many advantages of this transition and take a leading position worldwide.

As the world recovers from financial and economic turmoil, we must look ahead and focus, not only, on jobs and growth, but also on the type of growth we want. We must promote competitiveness, prosperity and quality of life without risking future ecological crisis. What we need is to fundamentally change the way we produce and consume.

We need to stop wasting resources and start living within the physical and biological limits of the planet: using less virgin material; recycling and reusing; and, where possible, increasing the added value we get from the same materials.

Our objective is not to slow growth, but to move towards the right kind of growth. The advantages are many.

To give you an example, by setting benchmarks of environmental performance, the first 9 Ecodesign measures adopted under the Ecodesign directive, will allow yearly savings by 2020 equivalent to nearly 16% of present EU electricity consumption. Just imagine if we get these kinds of results, not only for energy efficiency, but also for wider resource efficiency.

Industry will have to play an important role in this transition. Of course, it is for public authorities to provide the right signals, incentives, direction and most importantly leadership. But, it will be for industry to push the transition forward and to make the right investments towards change.

To make this possible we have to go beyond the traditional ‘three C’s’ - command, control and compliance - and the polluter pays principle, and put the accent on - innovation, incentives and integration.

The transition will not be simple. We need to move from an approach based mainly on a short-term vision - to one based on a long-term vision. As the situation is today, the financial, business and economic world takes a too short-term view; politicians tend to work too tightly only around electoral cycles; and market forces are too slow and imperfect. This will have to change!

Do not get me wrong, we live in a market economy and the role of the free market will continue to remain central. But, public authorities and governments - at local, national and EU level - will need to give clear signals to the private sector (including industry), so that it can make long-term decisions and the up-front investments needed to become more resource efficient.

But industry will also have to do its part. How can you, the chemical industry, contribute to the sustainable growth of our economy?
All sectors with a high demand on resources will depend on the innovativeness of the chemical sector: energy, water, housing, transport, and even food. The chemical industry will be a key player and one of the main drivers for innovation.

In Europe, we have the advantage of decades of environmental awareness. We have made great progress in chemical legislation over the past decade. REACH can be considered one of the most important partnerships between industry and regulatory authorities. It promotes sustainability in the chemicals industry because it aims at enhancing competitiveness and innovation, as well as protecting human health. I strongly invite you to continue in this direction.

The chemical industry has come a long way. It has innovated to an impressive extent. By taking responsibility to address the societal challenges of sustainability, you can become part of the solution to today’s and tomorrow’s many challenges.

Before concluding I would like to draw your attention to a recent article published in the Harvard Business Review: “Companies that invest in sustainability do better financially”.

The article draws attention on two important relations that emerge from the analysis of data on corporate sustainability:

The first: “Resource efficient companies - those that use less energy and waste and create less waste in generating a unit revenue - tend to produce higher investment returns than their less resource efficient rivals (with annual returns for 2012 of just over 9% compared to 8.17% for less resource efficient companies).

And the second: “Resource-efficient companies also display high levels of innovation and entrepreneurship, pushing core value metrics above the average large cap global business.

(With for the period from January 2005 to September 2012, net margins of more than 12%, return assets of more than 6% and return on equity of 16.45% compared to 6.27%, 3.16% and 5.51% respectively for less resource efficient companies).

Concluding that, and I quote: “investment strategy based on resource efficiency, not only produces returns in excess of global benchmarks, it also identifies management teams that are forward thinking, aware of the economic imperatives brought by resource constraint.

“Resource efficiency, therefore, is not just nice-to-have quality. It is a leading indicator of economic performance and one that every investment manager should be tracking.”

Well, the gains are remarkable and the data speaks for itself.