Can Profitability and Sustainability Coexist? Industry Trend #7

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Sustainability is a key trend influencing all industries.    Yet, can Profitability and Sustainability Coexist???   

In this episode of The Chemical Show, host Victoria Meyer discusses the significant trend of sustainability in the chemical industry. She elaborates on the different facets of sustainability including clean air, water usage reduction, circularity, green hydrogen, green methanol, biotechnology, and sustainable supply chains. 

Victoria also  addresses the hurdles faced by the industry such as regulatory approvals, affordability, consumer behavior, and investor patience.

Finally, we pose the critical question of whether sustainability and profitability can coexist, citing examples from various companies and noting the challenges and solutions needed for the future.

00:00 Introduction to the Chemical Industry

00:46 Host Introduction and Previous Episode Recap

01:00 Unveiling the Missing Trend: Sustainability

01:31 Exploring Sustainability in the Chemical Industry

04:22 Challenges in Achieving Sustainability

07:43 Affordability and Consumer Behavior

11:25 Regulatory Hurdles and Investor Patience

15:05 The Path Forward: Can Sustainability and Profitability Coexist?

16:52 Conclusion and Call to Action

HBR Article:
It's Time to Unbundle ESG


Other episodes referenced:
Kevin Norfleet, Celanese, Carbon Circularity
Jennifer Holmgren, LanzaTech, 20 Years to Success
Gaurab Chakrabarti, Solugen, A Green Chemistry Unicorn
Corey Tyree, Trillium, Scaling Up
Tom van Aken, Avantium, Commercializing New Technologies

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Creators & Guests

Host

Victoria Meyer

Host of The Chemical Show; founder and President of Progressio Global

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voiceover: A key component of the
modern world economy, the chemical

industry delivers products and
innovations to enhance everyday life.

It is also an industry in transformation
where chemical executives and

workers are delivering growth and
industry changing advancements while

responding to pressures from investors,
regulators, and public opinion.

Discover how leading companies
are approaching these challenges

here on the chemical show.

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.

VictoriaM: Hi, this is Victoria Meyer.

Welcome back to The Chemical Show
where Chemicals Means Business.

Last week, I talked about the Six Trends
Driving the Chemical Industry Today.

Some of you told me I
was missing a big trend.

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.

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