1 September 2006 Ian Hudson
DuPont is a company both criticised and praised for its environmental record. Ian Hudson, president of DuPont's EMEA operations, tells Nigel Ash how the company is using cutting-edge science to maximise its profits while minimising environmental damage.
The corporate world is notorious for its management fashions, often wrapped up in neologisms that are as vacuous as they are inelegant. However, corporate social responsibility and sustainable development should not be considered fads, at least not when we're talking about industry leaders.
The speed at which the world's fragile environment is changing compels companies to clean up their act.
But with this imperative also comes opportunities, especially for high-science firms like DuPont, whose biofuel partnership with BP, announced in June 2006, promises to be ground breaking, both in terms of its beneficial impact to the environment and for DuPont's bottom line.
"We don't see there being a conflict between making money for our shareholders and doing good things for the environment and society," says Ian Hudson, DuPont's president, EMEA. "We actually think it makes sense for the bottom line and we have some good examples of how that works. For instance, over the last few years we have probably saved in the region of $2bn by implementing strong environmental policies."
"Since 1990, we have reduced our greenhouses gas emissions by something like 72% – a huge amount – at the same time as increasing our business growth. We have done this by focusing on production processes, bringing our innovation and science expertise to bear to make them more efficient, and also by setting some very tough targets for our businesses."
"In fact we have gone beyond those targets. Our target by 2010 was a 65% reduction and in 2003 we hit 72%, so we got there a few years ahead of schedule."
DuPont's high-science specialities also mean that it will profit from the innovations of other companies to clean up their acts. For example, the June deal with BP and British Sugar, a subsidiary of Associated British Foods, concerned the production from sugar of biobutanol, a higher-energy biofuel than corn-derived ethanol.
Biobutanol produces 95% of the energy of conventional petrol, which means that it could be used by existing engines, with minimal or no modifications.
Initial production next year from a UK plant will be nine million gallons, but larger-scale plants are planned by 2010, when biobutanol sales are also slated to start in the US. These would use more advanced technology and C-grade sugar.
LEADERSHIP ON CSR
Some analysts have in the past taken a slightly jaundiced view of the corporate world's discovery of environmental responsibility. Five years ago one pundit opined that boasting green credentials was almost exclusively a marketing exercise. Companies saw that they needed to be seen as green and socially responsible.
The reality did not matter as long as they were not caught sourcing products from Asian child sweatshops or saddled with an environmental disaster such as Union Carbide's Bhopal fiasco.
Though this analysis may have been applicable to managements that were slow to see how rapidly the issue of environmental responsibility was bearing down on the corporate world, it certainly was not the case at DuPont, says Hudson.
A major reason for this is that the multinational is led by a CEO, Chad Holliday, who is passionate about sustainable growth. He co-wrote with two others, including the then chairman of Royal Dutch Shell, Philip Watts, the influential Walking the Talk: the business case for sustainable development, published in 2002.
The impact of this book lay in the fact that after presenting a cogent case for why merely making the right noises about environmental responsibility was no longer enough, it got down to cases and included 67 studies of the way companies had addressed or were then addressing sustainability issues.
Holliday is also an active member of the World Business Council for Sustainable Development (WBCSD), an umbrella organisation that brings together hundreds of multinationals and leading regional companies, many of them normally bitter commercial competitors, to look for best corporate practice in tackling environmental challenges.
In a groundbreaking move, he co-chaired an innovation, technology, sustainability and society working group along with Jurgen Dormann from Aventis.
The results of this project are now integrated into all the work that the WBCSD is engaged in. Though cooperation between rivals is always haunted by anti-competitive legislation watchdogs, Hudson believes that within such constraints there is still a great deal that the leading chemical companies can achieve in defining sustainable development for their industry.
HOW GOVERNMENT CAN HELP
DuPont's investment in cleaning up its own environmental act is of course dwarfed by its R&D effort towards the creation of sustainable products and processes. In both Europe and North America the authorities have been keen to accelerate such R&D and the US government has produced financial incentives by, for instance, taking a half-stake in a bio-fuels consortium.
Hudson explains: "When you look at the risk involved in some of these new technologies – and our bio-based materials area is a good example – for one company it is very difficult to take the risk on its own. So for the last four years, we have partnered with the US Department of Energy and we led a consortium looking at the development of technology for what is called an integrated corn bio-refinery (ICBR)."
"This does not take corn as the feedstock for bio-based activities or fuels but rather the waste products, the switch grass or the corn stover, which is some of the stuff left in the field after harvest. Breaking these down, you can get the sugar out of them and then use that to drive your bio-based process."
DuPont is not working with any of its commercial rivals within the ICBR consortium but rather it is working with other companies in the value chain. "To put complex technologies together," says Hudson, "you need collections of different skills. No one company has all the skills. DuPont has very strong biotech and process engineering bases."
"However, at the corn bio-refinery, one of the other partners is John Deere, which makes tractors, and that is because you need to collect the raw material. Another partner is an enzyme company, because you need someone with that area of knowledge to break down the products and extract the sugars."
MORE REGULATION TO COME?
The carrot of government financial incentives seems certain to be backed up more and more by legislation to make targets happen, especially now that so many Kyoto signatories are discovering that they will not deliver on their commitments.
In three years time, a new US administration may no longer reject the principles underpinning Kyoto. Is there then the possibility of an environmental equivalent of SOX legislation? Hudson is unsure, but he points to the EU's Registration, Evaluation and Authorisation of Chemicals (REACH) legislation, which in the case of DuPont means that the company will ultimately have to register over 500 substances and their uses.
"We are putting a lot of resources into this, both manpower and finance. The whole chemical industry worldwide has to go through this process if it wants to export products to the EU. Whether you call that a 'SARBOX' or not, it is a key piece of legislation that the chemical industry is going to have to comply with."
DuPont has not, however, flagged up a headline figure for this investment in its environmental initiatives, because, says Hudson, "it is just part of our doing business, as we improve sites and processes. We can give all sorts of figures for how we reduced emissions and have done this and done that, but our shareholders are interested in the bottom line and our financial performance, and we are maintaining this in a socially responsible way that is not increasing our environmental footprint."
CLEANING UP THE ACT
With the best intentions in the world, any company can have a potential negative impact on the environment. With a chemicals company the size of DuPont, some impact, and even litigation, is inevitable. What's interesting is how it deals with the impact and responds to concerns of regulators or the public.
In December 2005, DuPont settled litigation brought by the Environmental Protection Agency (concerning reporting of data from its fluoropolymer manufacturing in West Virginia) out of court for $16.5m, $6.25m of which was set aside for supplemental environmental projects, including investigating nine of the company's own fluorotelomer-based products and whether they break down into perfluorooctanoic acid (PFOA).
DuPont is also investing in West Virginia school science with the aim of promoting safe science through 'green' chemistry.
SEEING IT CLEARLY
Implicit in the whole debate on sustainability is a hard reality that has not yet been widely recognised and will be painful to accept when it is. This is that, alongside their environmental impact, the growth of companies and profits must also be sustainable.
Markets will have to accept that the impetus of the last 30 years, which saw a constant drive solely to expand the bottom line, must change. Furthermore, Holliday believes the idea that the environmental challenge can be tackled without pain in advanced societies is entirely myopic.
Addressing the UN when his book was published, Holliday warned: "Given existing technology and products, for all six billion people on the plant to live like the average American, we would require the equivalent of three planet Earths to provide the material, create the energy and dispose of the waste."
Since this option is not available, far more eco-efficient and socially equitable courses of development have to be pursued in order to allow poorer nations to raise their standards of living. This will require every large business to start taking the sort of action pioneered by DuPont. What remains to be seen is whether industry can become truly self-regulating on sustainability, or if governments will start wielding the stick.