Portfolio Sustainability Assessment · Portfolio Sustainability Assessment thinkstepAG Hauptstr. 111-113 D-70771 Leinfelden-Echterdingen T: +49 711 341 817 0

Portfolio

Sustainability

Assessment

thinkstep AG

Hauptstr. 111-113

D-70771 Leinfelden-Echterdingen

T: +49 711 341 817 0

www.thinkstep.com

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Why Portfolio Sustainability Assessment?

Companies want to gain a systematic overview on the

risks and benefits from sustainability issues in their

portfolio.

Existing methodologies such as LCA can be effort- and

cost-intensive to assess complex portfolios, and cover

mainly environmental aspects.

There is a need for a robust, scalable and workable

approach that uses lifecycle thinking and covers the 3

pillars of sustainability, and addresses (developing)

market and regulatory requirements.

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Source: Driving Revenue Growth Through Sustainable Products and Services, IRRC Institute, Research Report R-1583-KBI, 2015

0% 50% 100% 150% 200% 250% 300% 350%

GE (Energy / Industrial)

Philips (Electronics / Health Care)

Siemens (Health Care / Industrial)

Dow Chemical (Chemicals)

DuPont (Chemicals)

Kimberly Clark (Consumer Goods)

Change in Revenue from Sustainable Products and Services vs. Change in Total Company Revenue in % (2010 vs. 2013)

Change in Total Company Revenue Change in Revenue from Sustainable Products and Services

Revenue growth from sustainable products

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What is the value for companies?

Increased sustainability performance of portfolio translates into

tangible business benefits:

3

Reduced risks

2

Faster growth with more sustainable solutions

4

Stronger focus on customer needs and better market communication

5 Improved corporate image and stakeholder relationship

6 Improved transparency towards investors

Clearer strategy, better decisions

1

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The BASF Experience

"We systematically steer our entire portfolio towards more

sustainable solutions to derive new business opportunities

for BASF meeting customer and industry needs."Dirk Voeste, Vice President Sustainability Strategy at BASF

Sustainable Solution

SteeringTM

Accelerator

Substantial sustainability contribution in the

value chain

Performer

Meets basic sustainability standards in the

market

Transitioner

Specific sustainability issues which is actively

addressed

Challenged

Significant sustainability concern identified

and action plan in development

23,0%

74,1%

2,6%

0,3%

BASF and thinkstep are in a strategic partnership on Sustainable Solution SteeringTM since 2015

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Portfolio Sustainability Assessment at a glance

Step 1

Definition of

sustainability

needs and trends

in the value chains

Step 2

Evaluation and

categorization of

product sustainability

performance in the

market application

Step 3

Development of

action plans to

manage risk and to

develop market

opportunities

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Developing a Portfolio Steering approach –

Building Blocks

The method will be based on BASF Sustainability Solution SteeringTM method and adapted to

customer‘s needs and requirements. The method consists of three building blocks: Qualifier Check,

Benefit Assessment and Concern Intensity Assessment

Qualifier Check

Benefit Assessment

Concern Intensity

Assessment

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Check for basic sustainability

requirements

Corporate minimum requirements

Stakeholder requirements

Economy Society Ecology

Check for basic sustainability requirements

Basic sustainability requirements are defined together with

customer and can include

– legal and regulatory standards

– code of conducts and company policies

– value chain or eco-label requirements and stakeholder signals

– developing sustainability requirements (e.g. Circular Economy

package of European Commission)

view on full life-cycle and covering the 3 pillars of sustainability

Qualifier Check

Reasoning

A solution that is today legally compliant in its respective application and region and in demand from

external customers might face stricter legal requirements, a negative customer perception or public

pressure in the future.

To remain competitive and reduce liability risks, solutions that are likely to be affected by a sustainability

concern immediately or in the foreseeable future are systematically and proactively identified with the

Qualifier Check.

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Concern Intensity Assessment

9

+

ChallengeUrgency

• Low - medium pressure to solve the concern as the

risk is likely to materialize in the distant future or will

shortly be remedied

• Medium - high pressure to solve the concern as the

risk is likely to materialize in the immediate future or

action plan is not developed yet

• Low: mitigation measures internally practicable with

reasonable effort (e.g. adoption of sourcing policy)

• Medium: mitigation measures demanding (e.g.

substitution, phase-out), moderate effort required to

succeed (e.g. advocacy)

• High: mitigation measures critical (e.g. no substitutes

available), high effort needed to succeed (e.g. R&D,

investments)

Gaps

identified

Transitioner

Challenged

Low Medium High

Low - medium

Medium - high

Urgency

Challenge

In case a product in its respective application cannot pass the Qualifier Check, it is subsequently subjected

to a Concern Intensity Assessment. Here, the improvement status of the product is critically evaluated:

The product’s concern intensity is judged by an urgency and a challenge assessment.

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Products that have successfully passed the Qualifier Check are subjected to a Sustainable Development

Benefit Assessment.

Benefit Assessment

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Check for sustainability value contribution

5-10 relevant sustainability criteria are defined

together with the customer and can include:

– mix of environmental, economic and social criteria

– contribution to UN Sustainable Development Goals

– examples: cost savings downstream, reduction in

carbon emissions, energy savings, resource

efficiency, health and safety, biodiversity, water,

circularity, etc.

+

Performance

Contribution

• Substantial contribution to at least one

sustainability criterion (and no negative impacts)

• Performance better than alternative solutions

(benchmark)

Accelerator

Performer

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Input across function and regions needed

Final assessment considers the sustainability performance in the

regional product application. Therefor input is needed across functions

and regions.

SustainabilityProcess owner; cross-BU consistency

ControllingProduct lists; economic information

MarketingMarket performance of product;

New opportunities, marketing strategy

RegulatoryMinimal legal requirements;

upcoming regulatory standards

R&DAction plans for products at risk,

new product concepts

Product SafetyProduct (eco-)toxicology issues;

stewardship programmes

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Web-based application supports data collection

across business units, regions and functions

Progress on data collection;

automatic notifications upon completion

Integration of

economic data

from e.g. SAP

Data series

over time

Questionnaire can include single

choice, multiple choice, values,

input for calculations, free text.

„Released“ function to

garantee 4-eye principle

e.g. for auditing.

Definition of roles and sub-sets of information

input required from different functions and regions.

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Web-based application supports data evaluation

and reporting

Automatic classification

based on questionnaire input

Results of

individual

regional

product

applications

Customizable analytic and

reporting functionalities

Cumulative results of

sales by classification

Possibility to include analytics in relation to

time series, regions, product categories.

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Application in several sectors for different goals

Electronics

& High-tech

Chemicals &

Pharma

Agriculture

& Food

Construction

& Building

Packaging

Metals &

Mining

Consumer

goods

The tripleS approach is applicable to

different settings.

Classification of raw materials,

precursors or intermediate products

Classification / risk assessment of

individual suppliers

Score-cards of consumer products

Systematic assessment – across life-cycle – applying economic, ecological and social

criteria to address relevant corporate, legislative and stakeholder requirements.

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Portfolio Sustainability Assessment is implemented in a

three step approach

DEVELOPPILOT

Covestro´s Sustainable

Portfolio Steering methodology

IMPLEMENT

Adapt Sustainable Solution

SteeringTM approach tailored to

the specific needs of company

• Screening of value chain hot-spots

(materiality analysis)

• Focus interviews

• Workshops

Definition of basic sustainability

requirements, definition of value

chain-specific SD benefits and

criteria

• Responsibility Assignment Matrices

(RACI)

• Implementation plan

PILOT

Apply method and tool in a pilot

to verify decision tree structure

and processes, data collection,

criteria applicability and

assessment consistency and

quality.

Roll out Sustainable Solution

SteeringTM method across the

entire portfolio (product groups,

sales regions, applications):

• Workshops & webinars to create

understanding and momentum for full

implementation

• Coaching of project team /

sustainability team

• Consultancy to integrate portfolio

assessment results into superior

management tools and sustainability

strategy

Company drives implementation;

thinkstep supports and consults

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Portfolio Sustainability Assessment in a nutshell

Systematic and cross-functional assessment of portfolio in regards to

actual, developing and perceived sustainability requirements

Identification of products that are likely to be affected by regulations and/or

a negative market perception in the future - and pro-active mitigation of

(reputational) risks

Identification of value drivers i.e. products or new product concepts that

outcompete the benchmark with regards to sustainability

Definition of strategies and plans that shape company portfolio in order

meet future demands of customers and keep/expand a leading market

position

Systematically steer entire portfolio towards more sustainable solutions

to achieve new business growth.

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Hauptstraße 111-113

70771 Leinfelden-Echterdingen

Germany

Phone: +49 711 341817-0

Fax: +49 711 341817-25

www.thinkstep.com

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Dr. Martijn Gipmans

Principal Consultant

Chemicals & Life science

Hauptstraße 111-113

70771 Leinfelden-Echterdingen

Germany

Mobile: +49 152 22561164

[email protected]

www.thinkstep.com