1950 delegates, politicians and high-level

speakers from environmental organizations attended the

43rd Annual Meeting of the European Petrochemical

Association (EPCA) in Berlin, from the 3rd to the 7th of

October 2009. The EPCA 43rd Annual Meeting gave

delegates and speakers the opportunity to engage in an

open debate on long-term approaches to cope with

financial, environmental and social challenges.

The EPCA 43rd Annual Meeting focused on how to take the

petrochemical industry through the global economic

downturn and financial crisis with the help of sustainable

development recommendations. With keynote speeches

and panel discussions, it has been demonstrated that

sustainability is a shared interest for all and that the chemical

industry is a key sector to deal with the world’s social,

economic and environmental challenges.

Content

day 1Keynote Speeches: p2

Turbulent Times For Chemicals:

COPING WITH CHALLENGES THROUGH

SUSTAINABLE DEVELOPMENT

Dr Albert Heuser, Stephen Pryor

Panel Discussion: p6DOWNTURN, SURVIVAL &

SUSTAINABILITY:

URGENT ACTION ITEMS

Moderator Nadine Dereza

Joschka Fischer, Dr. Gerd Leipold,

Nikhil Meswani, Frank Rinderknecht

day 2Keynote Speeches: p8

Turbulent Times For Chemicals:

COPING WITH CHALLENGES THROUGH

SUSTAINABLE SUPPLY CHAINS

Phil Browitt, Dr. Ulrich von Deessen

Panel Discussion: p12Turbulent Times For Chemicals:

COPING WITH CHALLENGES THROUGH

SUSTAINABLE SUPPLY CHAINS

Moderator Nadine Dereza

Edouard Croufer, Joschka Fischer, Hervé Montjotin, Dr. Ulrich von Deessen

Closing Lunch: p16HOW TO ACHIEVE GLOBAL

SUSTAINABLE DEVELOPMENT IN AN

ECONOMIC DOWNTURN AND

GEO-POLITICAL UNCERTAINTY

Prof. Condoleezza Rice

Turbulent Times for Chemicals :

Coping with Challenges throughSustainable Development

43rdANNUAL MEETING

3-7 October 2009

Hotel InterContinental Berlin

eport

In his opening speech Dr Albert Heuser,

EPCA President, heartily welcomed

some 2000 delegates to the 43rd annual

EPCA business meeting dedicated to

“Coping with Challenges through

Sustainable Development”.

In times of suffering economies and

customer industries which have been

drastically affected by this unprecedented

crisis, the petrochemical industry has

shown its ability to act quickly and

efficiently. The chemical industry has

reacted to the crisis pro-actively by cutting

production, by introducing part-time work

and with the closure of less efficient plants

Looking forward, Dr. Heuser expressed his

deep conviction that despite difficult times

“keeping focus on continuing implementing

sustainable development in the way we

operate our businesses is the key to cope

with today’s and tomorrow’s challenges”.

Dr Albert HeuserPresident Petrochemicals BASF

President of EPCA

KEYNOTE SPEECHES:

Turbulent Times for Chemicals:

Coping with Challenges through

Sustainable Development

Introduction

day 1

“keeping focus on implementing

sustainable development in the

way we operate is the key to cope

with today’s and tomorrow’s

challenges”.

He invited the petrochemical industry to view

the current difficulties as “an opportunity to

show that not only it deserves its licence to

operate, but that the chemical industry is a

great industry, which is and will be part of the

solution when it comes to sustainable

development and better life”.

produce fuels, he continued, which were

also a source of reactive olefins for the

emerging petrochemical business. The

advent of catalytic cracking in the 1930's,

followed by steam cracking in the 1940's,

finally provided larger volumes of lower-

cost ethylene, which drove product

innovation. “But it was the

commercialization of polyethylene in the

1950's that spurred the development of

lower-cost ethane cracking.” Since the

1960's, ongoing innovation in catalyst

development and monomer generation

resulted in an explosion of new

products.

Over the past century, the interplay of

innovation in the use of lower cost

feedstock, more efficient and cleaner

manufacturing processes and game-

changing products has created “what is

today a three trillion dollar per year

global industry (…) whose products are

Steve Pryor, President of ExxonMobil Chemical, shared his views on the economic, socialand ecological challenges ahead and presented examples of ExxonMobil’s past andfuture commitment to sustainable development.

Sustainability as a key to succeed

Having experienced already three economic down cycles in his

career, Pryor had learned that only “a disciplined, long-term

approach through the ups and downs of the business cycle is

key to long-term success.” Despite the current significant

challenges including very weak business conditions, unprecedented

capacity additions of about 15 % in the near future, and the

challenge of reducing greenhouse gas emissions, “we must continue

to deliver ever-increasing value to customers and to society while

reducing our environmental impact”. In other words, Pryor said: “To

be successful, our industry must be sustainable.”

Sustainability, he explained, means "meeting the needs of the

present without compromising the ability of future

generations to meet their own needs”, as defined by the United

Nations in 1987. It required balancing economic growth, social

development and environmental concerns. “The key is finding the

balance, because as the World Energy Council stated in a 2007 report,

policies which fail to contribute to economic and social development

will themselves not prove sustainable”, he pointed out.

The challenge of sustainability is not a new one. “I would submit that

over the past century, our industry has been successful, because it has

been sustainable, continuously raising the bar in delivering products

that keep us safe, healthy, warm, cool, fed, in motion and connected…

while, at the same time, reducing its environmental impact.”

Continuous innovation in feedstock, in manufacturing

processes and in products “has and will continue to underpin

the chemical success story”, Pryor said. He invited the audience to

take a brief historical look at how innovation had shaped the industry,

with a focus on the ethylene chain as “the foundation of the

petrochemical industry.”

Historical focus

At the turn of the last century, the modern day chemical industry

started in Germany using coal as the primary feedstock. “Over

time, however, the increasing cost of coal along with safety,

health and environmental concerns drove the industry to

refinery-based liquids as the primary feedstock.” Starting in the

1920's, U.S. refiners were equipped with thermal crackers to

Survival through Sustainable Development for Chemicals:

An Industry View

2 &3

“To be successful, our industry

must be sustainable.”

Stephen PryorPresident ExxonMobil Chemical

Vice President ExxonMobil Corp.

an essential part of every facet of the

modern economy, touching 96 percent

of all manufactured goods.”

Major Improvements

In addition to these economic and social

achievements, the chemical industry had

always made a major contribution to the

environment as well, Pryor pointed out.

Referring to a recent study conducted by

McKinsey and Company and reviewed by

the Öko Institute, he claimed: “For every unit

of carbon dioxide emitted by the chemical

industry over the product lifecycle, more

than two units of carbon dioxide are saved

by society through the use of products and

technologies enabled by our industry.” The

world's greenhouse gas emissions were

thus up to 13 percent lower today than

they would be without the use of

products of modern chemistry.

Improvements in the energy efficiency of

chemical operations contributed to this

positive impact, he added. While chemical

production rose by 60 percent in the EU

from 1990 to 2005, energy consumption

remained stable. “This equates to the

chemical industry reducing its energy

intensity by 3.6 percent annually, equivalent

to a 30 percent absolute reduction in

greenhouse gas emissions”, Pryor concluded.

3 examples of sustainable

chemical products

The president of ExxonMobil Chemical

then presented three examples of

sustainable chemical products which best

Turbulent Times for Chemicals: Coping With Challenges through Sustainable Developmentday 1

illustrate how the industry delivers economic, social and

environmental benefits to society. His first example dealt with

sustainability in textiles and fibres. “Many would assume that

cotton, a natural renewable fibre, better promotes sustainability than

polyester, a derivative of the petrochemical, paraxylene.”

But cotton, he recalled, “requires large quantities of water, competes

for available land and has higher production costs and lifecycle

greenhouse gas emissions than polyester.” Given the versatility of

polyester and the engineered performance of the new polyester

microfibers, polyester has become the world's fibre of choice, and

demand keeps growing. “Just because a natural material like cotton is

renewable,” he said, “it doesn’t mean it can match the balanced

sustainability benefits of the products of modern chemistry.”

His second example illustrated the sustainability of chemical

products in automotive applications. Pryor explained that

modern light weight plastic parts helped reduce the weight of the

average automobile by nearly 10 percent, leading to a 6.6 percent

improvement in fuel economy. Other fuel-saving products were

being developed such as synthetic lubricants and butyl rubber inner

liners for tires which “use 80 percent less raw material than current

inner liners and improve air retention by 10 percent”, he explained.

“If just one-third of the U.S. auto fleet used them, it would save

about five billion gallons of gasoline annually and reduce greenhouse

gas emissions equivalent to taking eight million cars off the road.”

Finally, chemistry had “revolutionized the electronics’ world,

transformed how we communicate, and (will) usher in a new

generation of hybrid and electric vehicles”, he said, presenting the

example of battery separator film, a business ExxonMobil helped

pioneer. Battery separator film is a polymer film used in lithium-ion

batteries, which helped miniaturizing the electronics’ industry by

replacing nickel cadmium batteries. “Continuous improvements in

the separator film helped make lithium-ion batteries lightweight, with

higher energy and power capability.” Most portable electronics, from

laptop computers and cellular phones to power hand tools were

nowadays powered by lithium-ion batteries today. Cellular phones

triggered a revolution in developing countries as they allow broad

access to telecommunications, for the first time.

Battery separator film therefore “is a compelling example of how

modern chemistry is changing the world”, Pryor said, explaining that

new polymer and processing technologies have led to the development

of new separator films that can withstand the more demanding

requirements of hybrid and electric vehicles. “If 10 percent of U.S. cars

were hybrid vehicles, the greenhouse gas emissions reduction would be

equivalent to taking another five million cars off the road”, he noted.

According to Pryor, the three examples perfectly illustrate that

the chemical industry has been successful because it has been

sustainable - delivering economic, social and environmental

benefits. But what’s next? “Looking to the future, how can our industry

4 &5

continue to prosper and grow in the challenging environment ahead?

How do we raise the bar and build a more sustainable future?”

Looking to the future

First, the industry must continue to invest in innovation,

especially in low-cost feedstock, manufacturing processes and

products, Pryor believes. Exxon, for example, will pursue

improvements and breakthroughs in steam cracking, invented in the

1940s. “Even after some 70 years of technology development, we still

see enormous opportunities for innovation.” Although bio-based

feedstock and products will play a growing role, history shows that

development, scale-up and penetration of new technologies take

decades. “Hence, our industry must continue to invest in

petroleum-based technology and production capacity, while

pursuing alternative sources”, he said.

The chemical industry must furthermore help improve consumer

use of energy and increase their sustainability performance by

developing product solutions that save energy and reduce

product usage, Pryor said, mentioning the example of metallocene-

based film resins produced by his company which allow customers

to use less packaging while maintaining performance. “Demand for

these value-added resins has been recession-proof,” he pointed out,

“proving that sustainability is good business.”

Pryor also stressed out the necessity to help “policy-makers

understand that our industry is part of the solution to climate

change.” Sound public policy in Europe or North America should

not impede the chemical industry’s ability to compete, he believes.

Otherwise, it will cause “the leakage of production, emissions and

jobs to countries without costs on greenhouse gas emissions”.

Finally, public confidence must be enhanced through

strengthening product safety management and pursuing the

objectives laid down in regulatory acts such as REACH, the U.S. Toxic

Substance Control Act or of the Global Product Strategy developed

by the International Council of Chemical Associations. “But

regardless of the regulatory framework in your region, product

safety is every company's responsibility”, he insisted.

“Voluntary efforts to provide transparent, standardized

information on the safety of priority chemicals should be

accelerated (…) and our industry should support research and

innovation in product safety testing methods.”

In his closing address, Pryor said that he was very optimistic about

the future of the industry. “According to the World Bank, the global

economy will nearly double to about 75 trillion dollars per year by

2030. ExxonMobil estimates that

petrochemical demand will continue to

grow faster than the economy for the

foreseeable future, especially in Asia-Pacific,

which will represent over half of world

petrochemical demand by 2015.”

But to participate successfully in this

growth “requires looking through the ups

and downs of the business cycle and

steering a steady course (…) continuously

improving operational integrity,

environmental impact, product

performance and long-term shareholder

returns”, he recalled. “And as in the past,

innovation in chemistry will enable

progress throughout the world and help

to build a more sustainable future.”

Following his keynote speech, Pryor

reaffirmed his company’s strong

commitment to sustainability when asked

about immediate actions to be taken by

the industry. ExxonMobil, he said, was

exploring continuously other sources of

energy (such as algae) and developing new

technologies to enable economically viable

solutions to penetrate the market. “We

must be sustainable, it’s not an option,” he

stressed out. “If you do not continue to

deliver better value, your business will be

marginalized on the market; if you don’t

succeed to improve sustainability, (…) you

might ultimately lose your licence to

operate.”

“We believe that climate change is a

serious problem that requires action on a

long-term approach”, he concluded.

Furthermore, sustainability required

enhanced responsible “cooperate

citizenship”, he said, in order to address

economic and social problems, especially in

developing markets, by combating

corruption, fostering education and

improving transparency, even within the

industry itself. To raise more than 1,5 billion

people from poverty, energy and

sustainable products of the petrochemical

industry are needed. “We are part of the

solution.”

PANEL DISCUSSION

Downturn, Survival and Sustainability:

Urgent Action Items

Participants were Joschka Fischer,

German Foreign Minister and Vice-

Chancellor 1998-2005, member of the

Green party, Dr Gerd Leipold, Executive

Director Greenpeace International, Nikhil

Meswani, Executive Director Reliance

Industries (India) and Frank Rinderknecht,

CEO and founder of Rinspeed (Switzerland).

As a former politician, Joschka Fischer

started the debate by putting the current

downturn into perspective. “In the past

decades, we experienced changes no one

thought were possible”, he said, referring to

the Soviet collapse, the dismantling of the Wall

and the fulgurate development of the Chinese

economy driving globalisation. Nor had

anyone expected a crisis like in 1929 and

obviously, “our political and economical

systems are not prepared to anticipate

such chocks and deal with them, in fast

changing modern worlds”.

The obvious trend of the 21st century,

Fischer noted, was anything but sustainable,

as the BRIC countries throw all their

efforts into following the path of western

living standards. “And there is no political

power able to stop this process, not even

the Chinese government.” The economic

minority model based on waste is about to

become a majority model and volatility of

markets will return with growth, he

warned. Although the financial turmoil put

the frightening increase in prices of energy,

raw materials and food on temporary hold,

the problem will arise even more

dramatically with the next boom. Only radical change could avoid

a new collapse, Fischer claimed: “We have to use all the tools

to turn around in an almost revolutionary way!”

Fischer recognized, that “the debate is no longer a confron -

tation of environmentalists and the chemical industry or any

other industry – as a matter of fact, without the chemical

industry, modern lifestyle would not be possible.” The actual

question according to him, “is whether the chemical industry has the

capability to innovate now – not in decades. We don’t have the time.”

“We have to use all the tools to turn-around in an almost

revolutionary way”, Fischer told the audience. “And we have to be

much more ambitious to succeed.” With an eye on the upcoming

climate conference in Copenhagen, he concluded with the striking

formula: “Innovate or perish! Those who are the great innovators will

be on the winners’ side.”

Greenpeace’ executive director Gerd Leipold very much agreed on

the urgency of changing our ways of producing and living

dramatically. “If everyone had as many cars as Americans do, the

world would have to cope with 5 billion cars and we would face a

climate problem six times bigger than we have now.” He said he

would have never imagined to hear a keynote speech on

sustainability delivered by ExxonMobils’ executives, “because in past

encounters, I’ve experienced the chemical industry rather as an

industry dragging its’ feet whenever legislation was under the way to

increase safety for environmental purposes.” But he welcomed the

change and invited the sector to stand up for a good result in

Copenhagen, rather than “talking about exemptions you need

to overcome the crisis.” Without climate legislation of any

substance in the US, he believes it would be very hard to find an

agreement in Copenhagen. The industry’s credibility is challenged:

“Don’t think you can defend your interests as long as you can and

then come along and talk about sustainability”.

Nikhil Meswami, representing the fast growing petrochemical industry

in India, acknowledged that “legislation is always a step in the right

After the keynote presentation by Steve Pryor, moderator and journalist Nadine Derezaintroduced the panel for a lively discussion on the double challenge of coping with the severeeffects of the economic crisis and embracing sustainability to fight climate change.

day 1Moderator : Nadine Dereza

Panel : Joschka Fischer Foreign Minister and Vice-Chancellor Germany (1998-2005)

Dr. Gerd LeipoldExecutive Director Greenpeace International

Nikhil MeswaniExecutive Director Reliance Industries

Frank Rinderknecht CEO Rinspeed

direction”, but equity had to be ensured. Innovation and new

technologies, he believes, are the keys for coping with the huge

domestic demand in the BRIC countries where 65 % of the World’s

young population lives, and still comply with environmental legislation. “It

will only take one generation”, he believes. Extreme energy-efficiency

would drive innovation in the emerging economies probably faster than

in the Western world as India has proven already, e.g. by producing

Nano-cars. “If the world doesn’t give us more time, we have to make

them even more efficient. Once you have the obligation to solve the

problem, people will raise to the challenge”, he stated.

Asked whether the car industry will undergo a revolution fuelled by

petrochemical innovation, Fischer said that “electric cars will appear

much faster than many of us think today.” China, he believes, is taking

the lead, whereas the traditional car manufacturers head for

intermediate hybrid solutions. “But we are facing a revolution!

Those who invest in innovation will succeed, others disappear.”

To him, it seems clear that the chemical industry will play a much

more important role in the automotive production in the future

than the steel industry. On the other hand, eCars would require

more sustainable production of electricity.

Car pioneer Frank Rinderknecht has been working on visionary, 0-

emission concept cars for the past decade. He explained that

reducing weight without losing comfort and safety was the key factor

to convince consumers to turn to more energy-efficient cars. Down-

sizing of cars and engines should be the first step in order to

develop electric cars for large urban usage, with bigger cars to follow

as soon as improved batteries were made available. “But for a long

time, the car industry has invested in too much capacities and

overslept future innovations”, he criticized their lack of ambition and

slow speed in developing electric cars.

Recalling Pryor’s definition of sustainability, Nadine Dereza asked Leipold

to comment on the actual balance between social, ecological and

economical objectives. “Emission reduction must be the overriding

objective”, he responded. “There is still far too little consideration for

environmental aspects”, he said, urging the chemical industry to seek

collaboration and dialogue with “non-experts”. “The problems we are

facing are much more complicated than they used to be. For the

chemical industry, thinking ‘we are just producing materials’, is not

thinking far enough”, he believes.

“The evolution of renewable energies has perfectly illustrated that we

can learn very quickly”, Leipold recalled. In his understanding, the

example perfectly showed that so called non-experts were the ones

who drove the right development and he invited the chemical industry

to go after such ‘non-experts’. “They may not be always pleasant

partners, but they anticipate society’s needs and help learning from

science.” Together with the chemical industry, NGOs could help

politicians develop ‘smart’ regulations, after solid discussions and even

disagreements. “But we should provide the political system with

a balanced view to make it easier to

take decisions.”Yet, he said he couldn’t see

the chemical industry capable of doing so.

“But once you recognize that we need

smart regulation for the future and not

only to meet your interests, we can talk

together very well”, Leipold said.

Every crisis, every difficulty offered new

opportunities, according to Meswani who

advocated an optimistic view given that the

sector is providing the basic materials to

cope with the challenges. Although the

industry has become a global industry,

solutions and innovation might be found

more and more on a local level, he believes.

Fischer too, wished to conclude on a

positive and encouraging note: “You are the

guys who will create the solutions,” he

addressed the audience, “do not get

depressed by considering the current

situation as a stress, but as a huge

opportunity.” The industry leaders should

no longer consider innovation as a threat to

profits, but take advantage of the crisis to

write a new story. “CEOs should not be ‘up-

to-date. They should be ‘up-to-the-future!”

“No doubt - the chemical industry is a key

sector to deal with climate change”,

Leipold stated in his final address. “But if

you are already satisfied with what you do

at the moment, you’ll miss both the

opportunity and the responsibility you have

towards future generations.” The industry

should not expect to change its’ bad

reputation from one day to the other and

get immediate reward for talking about

sustainability. “But if you take the

opportunity seriously, this sector eventually

will be recognized as making a very

important and crucial contribution to

society”, Greenpeace’s director concluded.

6 &7

“Innovate or perish! Those who are the great

innovators will be on the winners’ side.”

End-to-end supply chains have always

been a key era for cost control and

improvements, in particular on the

outbound dispatch. Reduction of emissions

and carbon footprint, better visibility and

measurements will increasingly contribute

to more sustainable and efficient supply

chains, Browitt believes.

KEYNOTE SPEECHES:

Turbulent Times for Chemicals:

Coping with Challenges through Sustainable

Supply Chain

day 2

On the short term, the industry must be prepared to cope with “a

few problems such as shortage of ship capacity, road equipment and

drivers, a general loss of expertise and expended supply chains, once

we pull out of recession.”

These challenges can only be dealt with through global solutions,

according to Browitt, and the industry should actively seek common

global standards in order to achieve sustainability in supply chains.

Phil BrowittChairman of EPCA Supply Chain

Programme Committee

“We need global

solutions to cope with

today’s and tomorrow’s

challenges”

Introducing the second workshop and paneldiscussion, Phil Browitt, Chairman of the EPCASupply Chain Programme Committee, gave a shortoverview on challenges and opportunities in thechemical supply chain.

Introduction

BASF’s business strategy relays on the principle that value-adding

growth can only be successful if economic success is combined

with environmental protection and social responsibility, Ulrich von

Deessen stressed out. “We are committed to sustainable

development in all our activities.” According to BASF values and

principles, economic considerations do not take priority over safety,

health, environment concerns. “We fulfil the request of our business

partners and of relevant groups in society and comply with the RC

(Responsible Care) initiative.”

Risk Management

One of the drivers of sustainable supply chain management at BASF,

von Deessen explained, was risk management to ensure continuity

of supply and to deliver products safely to customers. “As far as we

can influence it, we evaluate and reduce the impact of our

supply chain activities and work closely with our partners and

Logistic Service Providers (LSP’s) on improving our overall

performance.” BASF had for example developed a certified load

securing systems in collaboration with authorities and LSP’s.

Von Deessen furthermore explained how BASF applied the

company’s values and principles on its’ procurement procedures in

order to put sustainable supply chains into practice with raw

materials suppliers. In 2008, BASF purchased approximately 500 000

different raw materials and technical goods. The selection of

suppliers, he stated, was not only based on economic criteria, but

also on their commitment to environmental protection, occupational

safety and social responsibility standards. “Our suppliers have to

meet these requirements in line with RC guidelines.”

Risk matrixes help BASF to identify high-risk suppliers who are more

closely checked. “First they are asked for self-assessment, to raise

their awareness. Next, we conduct onsite visits to assess them. In

cases where the supplier does not meet BASF standards, an action

plan for improvement is discussed with suppliers”, he explained the

process. “In 2008, more than 500 visits were carried out by our own

experts.” With suppliers who do not fully

meet the required standards, BASF actively

promotes sustainable development by

supplying support and offering training. “In

2008, we organised trainings in India and

China on environmental safety and social

standards, and also carried out special

projects such as the so-called ‘1+3’

project”, he mentioned.

Inside the “BASF fence”, production plants

and energy stream were highly linked

through the “Verbundsystem” contributing

to highly efficient use of energy and

resource conservation. At BASF, for

example waste heat was captured for

downstream production, von Deessen

explained. “As a result, about 45 % of our

steam requirements are supplied by the

use of waste heat.

Sustainable Supply Chains in the Chemical Industry

8 &9

Dr. Ulrich von DeessenBASF President Competence Center

Environment, Health & Safety

45 % of our steam

requirements are supplied by

the use of waste heat.

Environment, Health & Safety, BASF held a keynote speech on sustainablesupply chain management at BASF.

partnerships, for instance through the ‘green loop’ project, enabling

customers to return used electronic chemicals to BASF for recycling.

In 2008, more than 5000 tons of electronic chemicals were recycled

through the ‘green loop’.”

BASF transport and distribution activities follow the same path.

“They are part of our corporate social responsibility and we apply

uniformed standards for transportation and storage of chemical

products.” BASF safety advisors ensure that internal and international

transportation standards and requirements are fulfilled. “If an

accident occurs, they provide us we special reports that help us to

develop strategies and implement measures to avoid similar incidents

in the future”, he explained.

BASF relays on SQAS to evaluate the performance of its’ LSP and

chemical distributors. “When using ships for the transport of

liquids, we screen each seagoing vessel and barge”, he stated.

“We check the inspection reports before selecting a ship and only

ships which are approved in our database may be used by our

logistics procurement teams.” By using SQAS, the chemical industry

in Europe had developed a cornerstone for LSP’s, von Deessen

believes, enabling LSP’s to participate in the RC initiative. “Our LSP’s

have taken up the initiative in a very positive way,” he reported.

“Today we are confident that this highly contributes to

achieving higher economic and ecological performance along

the supply chain with all our partners.”

All together, the primary energy savings

add up to 2,6 m tons of oil equivalent

per year and allow to save 6 to 7 m of

CO2 emissions per year”, he stated.

“This is a very good example on how

economic benefit can go hand in hand

with environmental improvement.”

Safe handling of products by LSP’s and

customers is very important to BASF, von

Deessen stressed out. “We set for

ourselves ambitious product stewardship

targets and we review all our substances

based on risk assessment in line with

REACH specifications and even beyond

statutory requirements.” To foster safe

use of products by customers, BASF

supports customers with training,

workshops and comprehensive

information on applications using

state-of-the-art internet-based

information systems. “We even provide

tailor-made information depending on the

kind of customer and their specific needs”,

he added.

Sustainable Development

According to von Deessen, sustainability

has become an increasingly important

success factor for BASF’s business partners.

“We see great opportunities in extending

our safety competence to our customers

Turbulent Times for Chemicals: Coping with Challenges through Sustainable Supply Chainday 2

BASF 1+3 Project

One of the most speaking examples of successful partnerships that

help reduce risk and create value is BASF’s 1+3 project, he believes,

a project established in China “to build a responsible value

chain by spreading and sharing the principles and practice of

sustainability.” Targeting mainly small and medium sized

enterprises, BASF formed teams with 3 business partners (a

customer, a supplier and a LSP) to promote sustainability by offering

guidance through Best Practice, expertise and customised solutions.

The three partner companies than introduce the same concept to

three other business partners in their own value chain, he explained.

“Up to now, the initiative reached more than 60 partners in

different sectors all over China and was rewarded last year as

Best Practice by UN Global Compact.”

BASF started carbon footprint evaluation and calculation on raw

materials (28 m tons CO2 annually) and on production (25 m tons)

in 2007. On the other hand, 252 m tons of CO2 were saved by

customers and society by using BASF products such as insolating

materials, catalysts and lightweight plastic components for cars, he

explained.

“But when we look at the entire value chain, we realise that the

amount of emission from supply chain activities which we are able to

influence is extremely low”, he noted. “We therefore first focused on

our suppliers of raw material, on our own

activities and on waste management.”

Nevertheless, “we all know that supply chain

management is at the very core of our daily

business and therefore of utmost importance”,

he stressed out. The examples he had

mentioned show that “pursuing these values

puts you ahead of your competitors, by

managing risk and creating value not only

today, but also for tomorrow”, von Deessen

concluded.

10 &11

supply chain management is

at the very core of our daily

business and therefore of

utmost importance

PANEL DISCUSSION

TurbulentTimes for Chemicals:

Coping with Challenges through Sustainable

Supply Chains

day 2

After Ulrich von Deessen’s keynote

speech on BASF’s efforts towards

sustainability and carbon footprint

reduction, Nadine Dereza invited speakers

from different sectors to join von Deessen

on the podium for a discussion on “Coping

with Challenges through Sustainable Supply

Chains”.

Better and more practical

regulations

Referring to Ulrich von Deessen’s

presentation, Joschka Fischer

congratulated BASF on the “huge success

story”, recalling nevertheless that this was

“the result of very bitter fights, about

regulations and after experiencing disasters

by other companies.” But in the end, he said, sustainability turned out

to be a business success for BASF, not only an environmental success.

According to Fischer, this is the message to be learned, also with

regard to future cap & trade systems. “I predict that in ten years,

cap and trade will be realised around the globe. The

discussions will rather be about improving the system.” The

industry, Fischer pointed out, should really understand these success

stories as “a combination of skills, of learning curve in the company,

of good regulations and of pressure from the outside, from NGOs

and the society.” “It’s a complicated process, but at the end it

contributes to the economic success of a company or an industry

that is really indispensable”, he said.

“We had learned our lessons the very hard way, 20 years ago”,

Ulrich von Deessen recognized. “But you mentioned something

very important: better regulation. My recommendation today is

that on all these issues, we have to step much closer to

politicians to lobby in a positive way”, he said. “Not that we

don’t want regulation, but we need to talk about practical

regulation.”

“a combination of skills, of

learning curve in the company,

of good regulations and of

pressure from the outside,

from NGOs and the society.”

Moderator : Nadine Dereza

Panel : Edouard CrouferArthur D. Little, Director, Leader of the Global

Chemicals and Health Care Practice

Joschka Fischer Foreign Minister and Vice-Chancellor Germany

(1998-2005)

Hervé MontjotinTransport Division Executive Vice President,

Norbert Dentressangle

Dr. Ulrich von DeessenBASF President Competence Center Environment,

Health & Safety

Optimization outside the fence

From his experience of 30 years in the chemical industry, Edouard

Croufer, consultant at A.D. Little, drew an overview on optimization

of supply chains achieved over the past decades. “In the last 30, 40

years, the chemical industry has optimized what is within their full

control, within ‘the fence’, often including feedstock. We are very

good at this and never stop improving.” But today, he recommends:

“We really need to look what happens outside the fence,

throughout the supply chain, using the same skills that we

have used to optimize inside the fence.”

Hervé Montjotin is head of the transport division at Norbert

Dentressangle (ND), a 30 year old French family company which

expended to an international player, running logistics and transport

activities in all European countries. From the point of view of a

haulier, he said, “we have to search for operational excellence

through recruitment, training of drivers, investments in fleet

and in security - this is our operational basis.” Following new

requirements on greenhouse gas reduction, ND has invested on

trucks with cleaner engines and fuel-saving tires, “as trucks are – and

will stay - the key element in the supply chain, and thus the key to

reduce our environmental impact.”

Talking about a more solution-orientated approach, Montjotin said,

“the only way to transfer goods from the road to containers, for

instance, is to work with our customers to design specific solutions

and establish together measures of our carbon footprint.” From his

experience, he stated that for the chemical industry “it’s difficult to

skip from very short-term tenders to a more adapted

process to adopt a solution approach. There is still a big gap

between general views shared by the industry in

conferences on sustainability, and the day-to-day reality in

the plants and with the procurement teams.” From his

experience, he said that is was easier to set up more

innovative solutions in the field of fast moving consumer

goods, “especially on carbon footprint where we were able

to set up CO2 statements with some customers.”

Quantifying approach

Croufer invited the industry to adopt a

quantifying approach. “Shipping and all

supply chain operations outside the fence

stand for about 15 % of cost”, he said.

“Assuming that we have not optimized

these 15 % as well as inside the fence,

there are 20 % of saving to be made, i.e. 3

% bottom line, which means 5 % on capital

employed. This can shift us from 8-10 % to

13-15 % of capital return - which is quite a

lot!”

He also stated that the chemical industry

very poorly optimizes clusters. “We take

for granted that being in a cluster, we

have already optimized. But clusters

are living organisms and there are 20 %

of savings to be achieved.” The next step

would be to better integrate logistic service

providers including warehousing. “There is

an enormous amount of work to be done”,

Croufer believes, if the industry succeeds to

overcome one major obstacle: “We are

prisoners of our system of profit and

loss and often do not create the cake

because we don’t know how to share

it.” But he firmly believes that “we need to

adopt a partnership approach with

suppliers, shipping companies etc, using the

same skills that we use inside the fence.”

And in the end, include customers, by

setting up recycling mechanisms like the

“green loop” mentioned by von Deessen.

Reduction of CO2 emissions

Fischer too, believes that supply chains will

be of key importance to achieve the goal

of reducing CO2 emissions by 20 %. “This

12 &13

“There is still a big gap between

general views shared by the industry in

conferences on sustainability, and the

day-to-day reality in the plants and with

the procurement teams.”

Turbulent Times for Chemicals: Coping with Challenges through Sustainable Supply Chainday 2

will require more than only technical

improvements”, he said, “we will need to

answer questions such as: is transport really

needed or a result of bad management?”

Once the economic recovery will be back,

more integrated and more intelligent

solutions will be needed, Fischer said. “But

will you wait until regulation takes over the

driver seat - or will you act as an industry

together with your partners beforehand?” If

the industry does not act, he believes,

“regulation will follow swiftly on a

European level.

Holistic approach at the

European level

Montjotin shared Fischer’s view, that “we

need a European regulation on CO2

rather than fragmented national

approaches like the French carbon tax

which is only a new tax put upon the

economy!” But he fears that it will be too

slow to come.

“Hopefully, Copenhagen will be a success,”

Fischer replied, “although I doubt it. But

sooner or later there will be firm

commitments. “I don’t think it will easy,”

Fischer said, “as a lot of domestic interests

will play in. But there is a ‘must’ for lower

carbon footprint. Besides, the car industry

has an interest to sell vehicles with new technology and customers

demand for sustainable products will play a very important role.”

Fischer believes that the electronic industry will be one of the first

industries to be confronted with green labelling and sustainable

product life cycle. “And this will include, in a substantial way, the

chemical industry and its supply chain.”

Von Deessen stressed out that it would be crucial to establish a level

playing field. “France for instance has a totally different carbon

footprint because of its nuclear power plants. This means 40 bn. Euro

less to be paid annually to the cap and trade system!” When focusing

on greenhouse gas emissions, one should not forget that the

ecological footprint is much more, he added. “We neglect a huge

amount of other problems behind the door and I would favour

a much more holistic approach.”

With regard to the Copenhagen negotiations, Croufer said that the

debate had to be brought on a broader level, to avoid isolated

optimization in Europe only. “With regard to the main factors in

supply chains - speed, reliability and cost - we need to identify which

kind of network to activate to reach our customer, how to manage

the supply chain and which metrics to use in order to measure if we

really reach our goals”.

According to Montjotin, choices have to be made between a very

opportunistic procurement approach (tender lane-by-lane)

and a truly collaborative approach to share with the

petrochemical industry. “But until now, we have not been very

successful”, he recognizes. “If you consider a global logistic and

transportation field on a middle-term-approach, we should think

about shifting goods from road to container, work on carbon

footprint and build monitoring systems etc.” Unfortunately, the

transportation market was very fragmented and overreacted to all

economic events, he said. “You can make the choice to surf on the

market, year by year… but I consider that’s not the relevant choice

for such industry”, Montjotin added.

Fischer wondered why the industry was complaining about different

standards in different parts of the world. “They are our competitive

edge!”, he said. “The others will follow us, not the other way round!”

Progress won’t happen, “if we wait until everybody moves”, he

warned. “But it drives me nuts that we see our advantages as a

burden!” He believes that Europe should develop a different self-

perception, put its competitive edge upfront and forget about

China’s short-term cost advantages. “We need to invest to defend

and increase our competitive edge in technology, in

environmental standards, in integrated systems delivering more

accurate information to make the most efficient choices”,

Fischer said. Those regions which will be the first to implement an

efficient cap and trade system, will have a huge advantage, he

believes. “It’s a break-through challenge!”

supply chains will be of

key importance to achieve

the goal of reducing CO2

emissions by 20 %

14 &15

Croufer agreed, but “you can’t change the mind-set of people in a

minute”, he added. “We should take the lead on better information

systems, otherwise we will be confronted with a new virtual industry

taking our assets, our most precious piece of value, and use them to

take the profit.” Croufer said he was confident that the industry will

continue to become more open. “There is no reason that we

can’t take the next steps of strategic partnership and

virtualisation.” Besides optimizing clusters, the industry should

study its supply chains “to reach our customer with a more flexible

system. We need systems that are transparent to our customers -

without necessarily building a plant next to them.”

But it won’t happen “by accident”, Croufer warned. “In your

organisation, you need to raise the issue from the level of shipping to

the level of supply chain and partnership integration.” He recom -

mended “there should be one person in the organisation whose only

responsibility is to monitor the related benefits, just the same way

you act inside the fence to increase the efficiency of the plant.”

Trust issue

Von Deessen mentioned trust as a very important factor in

partnerships. “In Ludwigshafen e.g., some of our LSPs have status of

‘very very reliable LSP’. They can enter our site through an electronic

system without being checked again and optimize waiting and

loading times”, he explained. “For some chemicals, they can load the

truck by their own. But it’s very important to check and readjust

the system”, he recalled, “and it’s a real investment in the beginning,

in personnel resources and in money.”

When the question of standardising 44 t trucks in Europe to reduce

carbon footprint was raised, Montjotin answered that to him this “was

a typical example of lack of political courage, blocked by irrational

reactions”. Fischer responded that rather than being disappointed, the

sector should “address the problem, form alliances and work

through together.” He added: “It would be very interesting to have

your agenda: What are the transport sector’s proposals or requests to

improve your carbon footprint? Once you put this on the table, the

debate will show how valid your positions are.”

Phil Browitt from EPCA put the question on a broader level: “Some

of the models we use have carbon footprint overlays. But how close

are we to do selection on carbon footprint and cost basis?” Von

Deessen said he did not believe in carbon footprint measurements

on a product level, too complicated to be right. “But it’s different for

“We need systems that are transparent to

our customers - without necessarily building

a plant next to them.”

companies: you can count everything and

work on it to reduce your carbon footprint.

At BASF, we have the goal to reduce our

carbon footprint by 25 % in 2020”, he

explained. Montjotin said he was less

optimistic with the transportation market

being a very fragmented market and

lacking standards on CO2 measurements.

In his final address, Montjotin again asked

the industry to “open the box and give to

transportation and logistics providers the

opportunity to address real partnership

solutions to improve sustainability.” Von

Deessen encouraged his peers to “set up

small projects, look over the fence, go to

one of your partners in the supply chain,

openly discuss changes and implement

them step by step.” Whereas Fischer said

that progress will depend also on right

pricing. “As long as prices are extremely

low, progress won’t happen on an efficient

level”, he warned. “Pressure will come,

sooner or later, from regulation.”

“open the box and give to

transportation and logistics providers

the opportunity to address real

partnership solutions to improve

sustainability.”

According to Professor Rice, the current global financial crisis

bears the risk that people as well as companies are

overwhelmed by the difficulties and loose focus on what needs to be

done for long-term stability on a global scale. As a principle,

economic growth has to be driven by the private sector, she believes,

based on open trade, creativity, innovation and risk-taking.

“On the short run we have an advantage on technology and

education.” But research and development investments by the

private sector in the U.S. and in Europe have to be stimulated and

dissemination of new technologies encouraged by low trade barriers,

in particular for new climate-linked technologies, she suggested.

The WTO, she stated, “is not perfect, but it’s our only way of creating

a level playing field, setting up product safety standards and

protecting intellectual rights among other things.” Economic

protectionism would be the wrong answer to the current difficulties.

Rice stressed that economic growth, secure energy supply and

environmental protection are tightly linked. “But if China and India do

not participate in the process, we lose pace”, she said.

India is making progress despite cumbersome bureaucracy, but

“China clearly has some political strains”, she said. “How long do

they think they can censor the internet, for example, and still benefit

from it?” Nevertheless, Rice believes that China is, and will continue

to be, a responsible international partner.

Rice also spoke about the geopolitical importance of failing or failed

states, “We need to keep an eye on failed states,” she said. The

Western world should not give in to temptations to reduce its

efforts, but continue help build responsible states able to deliver to

their people in order to leave no room for anti-democratic populism.

This included guaranteeing freedom of expression and of religion,

education to boys and girls and democratic elections, she

emphasized.

Desig

n by

MCI

Bru

ssel

s •

brus

sels@

mci-

grou

p.co

m

In her closing speech, Prof. Condoleezza Rice, US Secretaryof State (2005-2009), expressed her conviction that opentrade, common standards and the private sector’s creativitywill drive economic recovery. Efforts to help builddemocracy, protect the environment and combat povertyworldwide have to be intensified.

day 2Prof. Condoleezza RiceUS Secretary of State (2005-2009)

© EPCA, 2009

EPCA

a.i.s.b.l. The European Petrochemical

Association i.v.z.w.

Avenue de Tervueren 270

Tervurenlaan

1150 Brussels, Belgium

Phone + 32 (0)2 741 86 60

Fax + 32(0)2 741 86 80

CLOSING LUNCH

How to Achieve Global Sustainable Developmentin an Economic Downturn and Geo-political Uncertainty