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Solvay - Sustainable Portfolio Management (SPM)

Added on 22-03-2013

Company

Solvay

Year

2010

Business challenge

Understanding the meaning of Sustainable Development for any industrial company is essential, both to minimize the potential negative impact on the bottom line and to enable appropriate allocation of resources to capture opportunities in the marketplace. This necessity drives the development of the SPM methodology in Solvay. This methodology is used to assess, one by one, every key product in every key application, in order to review the overall portfolio of businesses,  and subsequently implement strategic decisions to move to this  portfolio so as to make it balanced from a sustainability perspective. 

Description

Objectives of the solution:
The developed methodology at Solvay aims to assess and visualize, at strategic level, two potential aspects of its Business portfolio :
  • The monetized  risk related to the environmental impact of the  manufacturing  of its products;
  • The extent to which its products/solutions are part of the solutions consumers are seeking to address their own sustainable development concerns (for example reduced energy bills, reduced exposure to harmful substances, and greater use of renewable energy).
A strategic assessment process
  • The SPM profile is an integral part of the strategic discussions of each of the Global Business Units (GBUs) with the Executive Committee (Comex);
  • Decisions about investments (capital expenditure and acquisitions) taken by the Comex or the Board of Directors include a sustainability challenge that encompasses an exhaustive SPM analysis of the contemplated investment;
  • The SPM work plan is discussed each year between each GBU and the Sustainable Development Function. Priorities and workloads are defi ned based on the results of the SPM evaluation of the previous year and including any new elements in the marketplace, regulations, etc. The evaluations are carefully prepared in close consultation with the Solvay Way Champion of the GBU and realized in workshops with GBU experts: strategy, industrial, product stewardship, marketing and technical services.
 
Implementation process:
The demand for an assessment tool  came from the Executive Committee, and was implemented by a team of senior managers from business, production, technology fields with the help of methodology experts.
 
It was a clear top‐down approach:
  • The Executive Committee has endorsed the methodology and its deployment process and has set the overall objective to cover 80% corporate revenue and each business entity to assess a significant part of its revenue;
  • Top level leadership and guidance on the project was guaranteed by chemicals, plastics and research and technology group directors with the support of the sustainable development VP. At the time, Solvay had an in‐house high level of technical expertise on ecoprofiles, without a methodology to globally assess their sustainable development profile to take into account the full product lifecycles and increasing societal focus on sustainability at a strategic level. No existing, manageable methodology that could simultaneously address the environmental footprint of manufacturing and the market threats and opportunities, at strategic level, was identified.
 
A robust, relatively simple, but effective methodology was developed in collaboration with two external partners: Arthur D. Little for the market metrics and TNO for the operational metrics. The SPM method is based on a questionnaire with closed questions and only external authoritative evidence is accepted to support the assertions.
 
The SPM tool was introduced to all senior managers in 2009 and deployed in 2010 by scrutinizing 80% of the corporate turnover and 70% of the R&D expenditure. Each business unit manager (13) had a personal objective to assess 80% of the revenue of its entity, with the help of internal experts. These experts remain the owner of the methodology and of the assessments. Results of this analysis were audited by the two consultants that helped to set up the metrics.
 
The deployment of the process was made as flexible as possible :
  • A small team of SPM experts was fully dedicated to deploying the methodology and the SPM assessment;
  • Business Unit managers were first informed and consulted to identify a coordinator/facilitator for the deployment in their entity;
  • For every “Product x application” assessment, SPM expert and entity coordinator fine tuned the deployment, identified people to be involved (technical, marketing, financial, etc.) and set up planning;
  • So far, assessment of about 275 product‐applications combinations took place in about 30 workshops;
  • Auto‐evaluation results were presented and explained to the management teams of the assessed entities;
  • Auto‐evaluations were submitted to the two consultants that helped to develop the metrics to get a second opinion, increasing the reliability of the data on which strategic decisions may be taken

All together, about 300 people have been involved in the deployment of the practice, at various levels in the organization.

Impact

Solvay has for the first time a reliable and robust visualization of the sustainability of its Business portfolio, using consistent metrics, so that priorities can be set and resources allocated to increase the robustness of its business portfolio.
 
In the first iteration (2010, January to June), the following were assessed:
  • 80% of the consolidated sales revenue (objective was 80%, 275 product‐application combinations);
  • 70% of the R&D 2010 budget (objective was 60%, 115 R&D projects).
2015 targets have been set by the Executive Committee for the second iteration of the Practice:
  • 80% revenue per product line (i.e. not only 80% consolidated anymore);
  • 80% R&D budget;
  • 60% budget of Capital Expenditures and any investment above the 5 MEUR thresholds.
 

Challenges/Lessons learned:

A positive side‐effect of the deployment of this practice has been to raise significantly awareness and visibility of Sustainable Development within the Solvay group.
 
Unexpected results have followed directly from the deployment of the SPM methodology: as no comparable methodology to assess what sustainability means for industrial companies at strategic level, Solvay was inundated with requests from consultancies, peers, academics and authorities (European Commission, among others) to present their internally developed methodology.
 
Awareness of Sustainability issues is firmly embedded and Sustainable Development is now among the leading criteria for decision taking. The strategic sustainability objectives related to business (product line) portfolio management are being implemented, KPIs have been selected and the precise targets are under discussion.
 
This closed loop of requirements and reporting, using a unique and reliable good practice, significantly contributes to the alignment of the Group’s decision makers on the sustainable development objectives, which are part of the Corporate Social Responsibility targets.
 

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