Sustainable Portfolio Management (SPM) Monetization of environmental impacts

Alain Wathelet

Solvay Confidential

LCM2017 – September 6th, 2017

Key decisions-making toolBetter Business because more Sustainable

Sustainable Portfolio Management SPM in a nutshell

AGENDA

Business Solutions

Solvay’s AmbitionSPM steering portfolio toward Business Solutions

SPM Reference Guide Integrate sustainability in business strategy

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Solvay Confidential

LCM2017 – September 6th, 2017

SPM is Solvay proprietary approach to assess business sustainability risks and opportunities

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Op

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Market Alignment to sustainability

From a sustainability standpoint and a consumer

perspective, is our product used in selling

propositions that are part of the solutions or part of

the problems?

One PAC - Product-Application Combination

(e.g., 30 GF PA6.6 in Electric Protection Devices)

Sustainable Portfolio Management (SPM) map

1 € revenue cannot be

created at (too) high

environmental expense.

The lower the environmental

footprint, the lower the risk

of substitution by less

impacting solutions

Low Risk

High Risk

Problems Solutions

Solvay Confidential

LCM2017 – September 6th, 2017

SPM methodologyin a nutshell

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Environmental footprint vs Value

The higher the environmental

footprint, the higher the risk of

substitution by less impacting

solutions

From a sustainability standpoint and a consumer

perspective, is our product used in selling propositions

part of the solutions or part of the problems?

Solutions

Challenges

Neutral

Solvay Confidential

LCM2017 – September 6th, 2017

Impact(kg CO2eq)

Shadow cost(€ / kg CO2eq)

Operations Vulnerability formula is based on monetized Ecoprofiles

Average

sales price(€)

Operations

vulnerability(%)

=xΣImpact(kg CO2eq)

Shadow cost(€ / kg CO2eq)

Environ. Impact(kg CO2eq)

Shadow cost(€ / kg CO2eq)

Global warming Global warming

….

Energy….

Energy

• LCA bound to cradle-

to-gate

• ISO 14040/44

standard

• Produced by Solvay

3E experts

• Estimation of the “cost for

the planet”, theoretical

• Science-based approach

(“polluter pays” principle)

• Defined by external

authoritative bodies

• CO2 shadow cost, e.g. =

75€ (≠ CO2 internal price)

• Also used to consolidate /

compare impacts

/

Monetized Ecoprofile

Ecoprofile

• 5-year rolling

average to smooth

the impact of

economic

fluctuations

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Solvay Confidential

LCM2017 – September 6th, 2017

Step 1 : Impact Assessment

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Step 1: Impact Assessment

Material &

Emissions

Inventory (kg)

Impact

Equivalent

(Eq./kg)

Impact

(Equivalent)

• LCA « Cradle-to-Gate » - ISO 14040-44

• 19 indicators (Environmental and Energy) – Mid-points CML and CED

• Quality assessment

GWPBiogenic

Coal EnergyGaz Energy

WaterLand Use

Human ToxEcotox

Acidification Etc …

Solvay Confidential

LCM2017 – September 6th, 2017

Step 2 : Impact Valuation

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Step 2: Impact Valuation

Impact

(Equivalent)

Shadow Cost

(EUR/eq.)Impact Value

(EUR)

• Shadow Cost = « cost for the planet » (Polluter Pays), defined by

external authoritative bodies

• To prevent environmental or human toxicity damage (avoidance cost

route)

• To remediate the damage caused (repair cost route)

• Time Horizon >10 years

• For comparison of products / technologies

Solvay Confidential

LCM2017 – September 6th, 2017

Step 3 : Operation vulnerability

Step 3 : OperationVulnerability

Impact Value

(EUR)

Sales Value

(EUR)

Operation

Vulnerability

(%)

• Assess the financial risk of negative impacts (externalities)

• Comparison

monetized environmental footprint

VS

value added by our product / activity (proxied by the sale price)

• Lower OV High opportunity to displace of less

environmentally-friendly product (< 80 %)

• High OV High sustainability risk for the product (> 100 %)

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Solvay Confidential

LCM2017 – September 6th, 2017

Zoom on Operations Vulnerability components

Operations Vulnerability by midpoints (or impacts)

Illustrative product with projection on Heat map

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Solvay Confidential

LCM2017 – September 6th, 2017

MORE BUSINESS SOLUTIONS

Launch of a simple & digitalized SPM Guide

● Executive summary

for Business Leaders

● Detailed explanations for

Practitioners

● Presentation of SPM Fast

Track (simplification)

● 3 precise Business Cases

● Glossary and Q&A

http://www.solvay.com/en/binaries/Solvay-SPM-Guide-154709.pdf

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Solvay Confidential

LCM2017 – September 6th, 2017

Objectives on Business Solutions O

pe

rati

on

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vu

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Market alignment

43%

8%

33%

% Group sales

High Risk

Problems Solutions

Low Risk

Solutions

Challenges

Neutral

Solvay Solutions• Climate Change (28%)

• Resource Efficiency (17%)

• Safety & Prevention (14%)

• Very low environmental manufacturing

footprint (13%)

• Human Toxicity (7%)

• Environment Toxicity (4%)

Example: Composites

Reducing the weight of a passenger car by 1 kg

represents 10 kg CO2 eq. saved during its full life

time (Climate Change benefits)

50%

2016 2025

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