Sustainable portfolio management guide

Sustainable Development Goals – Goal 12 (logo)Sustainable Development Goals – Goal 12 (logo)

How the methodology works

SPM considers both:

  • the environmental manufacturing footprint and its correlated business risks and opportunities,
  • the marketplace and how, in its specific applications, a product brings sustainable benefits or faces challenges.

To be considered a part of the “Solutions”, products must serve in an application that demonstrates a direct, significant, and measurable benefit (social or environmental) to society at large. They must not exhibit any sustainability concerns and must have a low environmental manufacturing footprint compared to the value they bring to society.

If a sustainability roadblock is identified, or if its environmental manufacturing footprint is too high, the product-application combination (PAC) will be ranked in "Challenges".

The results of the SPM analysis are presented by a heat map showing the revenue breakdown by category: Solutions, Neutral, and Challenges.

The guide on Solvay SPM methodology will be finalized and published before summer 2017 and made available on the Solvay corporate website.

2016 SPM Heat Map

SPM Heat Map (graphic)SPM Heat Map (graphic)

Solvay’s strategic objectives:

2018 mid-term

40%

Raise the proportion of sustainable solutions to 40% of Group sales

2025

50%

Generate at least 50% of the group sales in “Sustainable Solutions”

Baseline 2014

Results of the SPM analysis

Revenue breakdown by SPM heat map categories

% of turnover

 

2016

 

2015

 

2014

Solutions

 

43

 

33

 

25

Neutral

 

33

 

39

 

39

Challenges

 

8

 

16

 

15

Not evaluated

 

16

 

12

 

21

By the end of 2016, 43% of product-application combinations in the assessed portfolio qualified as “Solutions”, a significant progress compared with the previous year. This improvement comprises:

  • six percentage points due to changes in scope (Cytec acquisition, Emerging Biochemicals and Acetow divestments)
  • two percentage point from non-recurring quick wins reflecting faster growth in Solutions
  • two percentage points from innovation programs aimed at developing more sustainable business.

SPM global and systematic assessment involves an evaluation of the portfolio in 2016 based on 2015 turnover. Changes in scope during the year are taken into account in the scope of 2016 SPM analysis.

External validation

Since 2009, Arthur D. Little (ADL), our partner in developing and improving the SPM methodology, has performed in-depth verification of the Market Alignment results.

In 2016, ADL screened all the PACs in the database and selected 150 PACS for deeper review, 100 with higher value for Solvay based on multiple criteria, and 50 on a random basis. In addition, Solvay submits 50 PACs per year to ADL for review. All the PACs in the database will be reviewed at least every five years. By the end of 2016, ADL had reviewed 48 PACs.

ADL reaches the same conclusion for 89% of PACs, a more positive conclusion for 9%, and a more negative conclusion for 2%. The impact of the corrections is too small to affect published figures.

Correlation between SPM analysis and sales growth

SPM is designed to boost Solvay’s business performance and deliver higher growth. Over the last three years, Solvay’s products have experienced significantly different annual revenue growth rates depending on whether customers and consumers are seeking out Solvay’s products to match their unmet social or environmental needs.

Annual growth rate per SPM category:

  • Solutions (unmet needs to achieve higher social or environmental standards): +9%
  • Challenges (sustainability concerns or roadblocks): -3%

(based on turnover with same product, same application, and same SPM ranking over the last three years representing 45% of Group revenue).

SPM in key Group processes

The Corporate Sustainable Development function manages the Sustainable Portfolio Management methodology and deploys it in close cooperation with Business Units and Functions in key processes: Strategy, Research and Innovation, Capital Expenditures, Marketing and Sales, and Mergers and Acquisitions. The SPM methodology is part of the Solvay Way framework and helps to measure the maturity of Global Business Units and Corporate Functions with regard to how well sustainability is integrated into their business practices.

  • The SPM profile is an integral part of the strategic discussions that each of the Global Business Units holds with the Executive Committee.
  • Mergers and Acquisition (M&A) projects are also evaluated through SPM to analyze the feasibility of the investment according to the Sustainable Portfolio targets. As an example, Composite Materials was expected to deliver 86% of its revenue in Solutions according to the SPM analysis done prior to the acquisition of Cytec, and turned out to have reached 84% when assessed in depth on its real performance in the first year after the acquisition.
  • Decisions about investments (capital expenditure above €10 million and acquisitions) made by the Executive Committee or the Board of Directors include a sustainability challenge that encompasses an exhaustive SPM analysis of the contemplated investment.
  • In 2016, 576 Innovation projects were evaluated with the SPM methodology, accounting for 100% of projects for which resources were allocated. Of those, 60% are expected to deliver additional revenue in Solutions.
  • In Marketing and Sales, SPM makes it possible to engage customers on sustainability fact-based topics aimed at differentiating and creating value for Solvay and the customer, such as climate change action, renewable energy, recycling, and air quality.

Towards a reference framework for active portfolio management

Solvay co-chairs two coalitions that are instrumental in setting the industry reference framework for active portfolio management:

  • The World Business Council of Sustainable Development’s Portfolio Sustainability Assessment initiative aims at creating a high standard and common framework to guide industries on its implementation as a specific methodology for the chemical industry. Benchmarking and sharing best practices among peers make the SPM methodology more robust and enable better decision-making.
  • TNO’s joint research program on Sustainable Chemical Product Performance aims at setting a reference methodology for measuring product performance, with a strong scientific background.

Business cases

Composite Materials completes its first SPM analysis

The Composite Materials (CM) GBU has the highest percentage of sales through sustainable solutions covering the two business lines, Aerospace and Industrial; this is in line with Solvay’s expectations when it acquired Cytec. The CM business provides lightweighting materials in Aerospace to reduce fuel consumption. The industrial segment comprises applications for automotive, tooling, and recreational products, among others. In automotive, CM products help make vehicles safer (thanks to their excellent energy-absorbing capabilities) and improve their fuel efficiency.

The market value of products in the CM portfolio versus their environmental impact is very favorable, making them ideal alternatives to more environmentally impactful products.

For CM, this was an opportunity to analyze its product portfolio with fresh eyes. By asking new questions through SPM, CM gained a better understanding of how its products contribute, for example, to aircraft parts that are more durable and have a longer lifespan. These are additional sustainability features that CM’s marketing efforts can leverage.

For CM, the journey is only beginning. SPM is supporting action plans such as a deep dive to determine where CM wants to drive its product portfolio and more interactions with key accounts to use SPM findings as a growth lever to help them achieve their own sustainability goals.

Sustainable Development Goals – Goal 13 (logo)Sustainable Development Goals – Goal 13 (logo) Sustainable Development Goals – Goal 11 (logo)Sustainable Development Goals – Goal 11 (logo) Sustainable Development Goals – Goal 3 (logo)Sustainable Development Goals – Goal 3 (logo)

OPTALYS® product range in road transport emissions control

According to the latest figures from the International Energy Agency (IEA Statistics 2015), transport accounted for 23% of global CO2 emissions, of which road transport represents 75%. The majority of automotive exhaust gas is non-toxic, being nitrogen (N2), water vapor (H2O), and carbon dioxide (CO2), but incomplete fuel combustion generates toxic substances such as carbon monoxide (CO), unburnt hydrocarbons (HC), nitrogen oxides (NOx), and particulate matter. The latter item comprises fine and ultrafine soot particles that cause serious health problems.

Internal combustion engines cannot be optimized for highest fuel efficiency and lowest emissions at the same time. The operating conditions of modern automobile engines are optimized for fuel efficiency, and exhaust after-treatment devices, such as catalytic converters and particles filters, are required to further reduce engine-out emissions to meet the WHO’s air quality recommendations. Solvay’s OPTALYS® range offers high-performance cerium and zirconium oxide products that support the new technologies for catalytic converters and particle filters that will enable the automotive industry to meet forthcoming emission reduction regulations for both diesel and gasoline engines in the USA, Europe, China, and India.

Sustainable Development Goals – Goal 3 (logo)Sustainable Development Goals – Goal 3 (logo)

Specialty Polymers and surgical instruments

The Specialty Polymers GBU, working with Medacta International – a leading manufacturer of orthopedic implants, neurosurgical systems, and instrumentation – and independent sustainability consultant Swiss Climate, completed a unique study comparing the carbon footprint of single-use and reusable surgical instruments. The study challenges the perception that single-use medical instruments have a more negative environmental impact than reusable instruments.

Applying the ISO 14044 standard for life cycle assessment, the group focused its study on the cumulative environmental impact of a surgical instrument kit for knee replacement manufactured by Medacta. The kit is available either with all-metal reusable instruments (GMK®) or with single-use instruments (GMK® Efficiency) injection molded from several high-performance medical grade polymers from Solvay.

The study demonstrated that the annual CO2 equivalent emissions of the GMK® Efficiency single-use instrumentation are neutral when compared with the re-usable metal instrumentation. The study made metal-to-plastic conversion more viable for these applications. Additional input from Swiss Climate found that the GMK® Efficiency single-use instrumentation eliminates the need for repeated washing and sterilization, which can save up to 435 liters of water for each surgical knee procedure.

Aside from this conclusion on environmental impact, demand for single-use instruments is growing quickly due, in part, to their potential for reducing hospital-acquired infection.

Building on Solvay Specialty Polymers’ innovative products, Medacta’s latest innovation, GMK® Efficiency, demonstrates a constant commitment to providing safe and highly competitive solutions that deliver sustainable economics while respecting the environment.