Angeli Mehta reports on how measuring financial, environmental, human and social dimensions led the chemicals firm to increase its use of renewable energy and make better use of raw materials
AkzoNobel has been trying to measure impacts in its value chain for some years. In the early 2000s it worked on lifecycle assessments, but this approach has limitations as it only includes the environmental aspect of sustainability, explains Emma Ringström, sustainability manager at its pulp and performance chemicals business,
In 2014, the company embarked on a pilot at its bleaching chemicals business in Brazil to investigate the entire impact of its business across financial, environmental, human and social dimensions. In collaboration with True Price and sustainability consultants GIST Advisory, it did full profit and loss accounting across these four capitals – what it calls 4D accounting. The exercise confirmed that its sustainability strategy did indeed cover the most important elements, says Ringström.
We got the possibility to identify the biggest impacts, and to scale up the positive and reduce the negative
It led AkzoNobel to increase its use of renewable energy, and put greater focus on better resource use of both energy and raw materials. Looking at impacts on human capital brought more emphasis on training and developing capabilities; while social capital led to work improvements in health and safety, and rights at work.
Later, it piloted the Natural Capital Protocol for the production of chlorate, used for bleaching paper. “Using the monetisation element of the protocol, we got the possibility to identify the biggest impacts, and to scale up the positive and reduce the negative impacts ... We can see the hot spots here and there, which are most important to work on.”
After the pilots, AkzoNobel applied the 4D approach across its entire pulp and performance chemicals business, followed in 2016 by environmental, social and economic profit and loss accounting across the entire business. It reported a monetary value for these three capitals, across its value chain.
Emma Ringström, sustainability manager at AkzoNobel's pulp and performance chemicals business.
Social impact assessment is in its infancy, but includes value related to the knowledge and skill development of employees and their future salary development.
The environmental assessment includes value through its products that help customers cut emissions. To put a monetary value on key impacts such as CO2 emissions and use of fossil resources, it uses a science-based approach that takes a long-term view. Prices are, says its report, based on what would happen in 50 to 100 years if we keep on using resources as we do today.
AkzoNobel has a wealth of data from its businesses, and more is becoming available in its supply chain, so the actual measuring is getting easier, says Ringström. Valuation, however, is more difficult.
It’s important that the methods are transparent
“We’d welcome more scientifically based methods that are transparent and publicly available,” Ringström adds. “It’s important that the methods are transparent, so we can judge if the values are representative for our case, as well as interpret the results in a correct way.”
As part of the Forest Solutions group at the World Business Council for Sustainable Development, AkzoNobel is piloting a forest sector guide, which will give the industry more specific guidance on measuring and valuing natural capital impacts. AkzoNobel is looking at the potential impact of changes in natural capital: for example, regional changes in water supply. The guide is expected later this year.
This article is part of the in-depth briefing Natural Capital: See also:
AkzoNobel natural capital accounting Natural Capital Protocol chemicals industry True Price. GIST Advisory EP&L accounting renewable energy WBCSD