27 July 2016
Is there chemistry between Corporate Social Responsibility and chemical companies?
Today’s blog is about sustainability and innovation in the Chemical Sector. Chemical producers, polymer producers, biotech companies and other chemical companies have a large impact on our society – albeit not so visible or direct. This blogpost investigates the state of CSR in the chemical industry and concludes with an opportunity for value creation.
The Dutch chemical sector is large and conservative
The chemical sector is one of the largest industrial sectors in the Netherlands. Dutch chemical companies employ 64,000+ people and have a total turnover of over €60 bln (quickscan international CSR in the Dutch chemical sector, CSR Netherlands). Well-known industry leaders are AKZO Nobel and DSM. On the one hand, companies in this sector need to be highly innovative and specialized; on the other hand the initial investments and research requirements are so high that larger corporations tend to be very conservative.
Regulations, awareness and societal trends are drivers for sustainability
Companies in this sector don’t have complete control over their end-products, because they usually supply to other companies instead of to the end-consumer. Therefore one could argue that chemical companies have less influence on the sustainability of their end product than say, traditional manufacturers. However, regulations, increased awareness and societal trends urge the chemical sector to come up with innovative solutions based on sustainability. For example, the societal trend circular economy could imply in the chemical sector that plastics can no longer be wasted or disposed without costs (New Plastics Economy, Ellen McArthur Foundation). Small-scale production in this sector would imply that the investment costs become lower so more innovative small companies could join the industry. Locally, organically produced products are preferred to chemically altered products, which influences end-consumer demand. These are just some examples of societal trends that will impact the chemical industry.
The sector is relatively engaged with CSR
More and more chemical companies are actively engaging in CSR. 82% has at least heard of CSR and 51% has a strategic policy on CSR (source: MVO Monitor 2015, CSR Netherlands). Compared to other industries, these are among the highest scores. Important CSR topics in the sector are caring for the environment (nature), energy usage and good employership. In line with the conservative nature of the industry, chemical companies look for the business case of CSR before selecting projects.
External CSR reporting presents an opportunity for value creation
Our own desk research indicates that the fraction of chemical companies that actually report externally on their CSR progress is much lower. This hypothesis is backed up by research from CSR Netherlands (MVO Monitor 2015, MVO Nederland). Especially chemical companies with fewer then 500 employees fall short: we expect that less than a quarter of these companies report on CSR externally (be it in a dedicated CSR Report, their annual report, a newsletter or via their website).
In our experience, there is a clear business case for reporting externally on CSR. It is in line with the current trend of transparency, it enhances corporate reputation, meets the expectations of investors, builds trust among customers and employees and can give organizations a competitive advantage. For a best practice, see DSM’s annual report, which integrates societal trends deeply into corporate strategy.
In the coming weeks we will be posting more blogs on Corporate Social Responsibility (CSR) and Innovation in different industries. If you have any suggestions, please feel free to let us know which industries you would like to hear more of!
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