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Critical Success Factors for Sustainable Growth Juan Aguiriano, Managing Director Sustainable Operations May 23, 2011 1
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Topics Sustainability Point of View Key Sustainability “Drivers” Regional & Industry Sustainability Challenges Effective Sustainability Methods & Approaches Results
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Corporate Approach to Strategic Issues Recognize strategic value & drive from the top Line accountability Appropriate support resources Integrated Management System Consistent implementation approach across entire operations portfolio Rigorous performance management Prioritize no-capital & low-capital improvement
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Sustainability Sustainability is a Strategic Issue Essential to viability & long term health When integrated into managing systems Improves competitiveness Releases capital Attracts investment All while increasing productivity
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External drivers Volatility, magnitude and escalation of energy costs are increasing the urgency to drive improvements in energy efficiency. Governments and global institutions are introducing new energy management regulations and policies, pressuring companies & societies to re-think energy consumption. Companies are expected to publish energy improvement goals and are being held accountable for delivering results. Energy efficiency is being used as a powerful strategy to lower the cost of goods and attract customers at every level. 1. Volatility of resource costs 2. Public policy 4. Public accountability 5. Competition The Investment community is increasing the weight of a company’s energy efficiency commitments and capabilities when making investment choices. Sources: 1 Generation IM (2007), 2 Freshfields Bruckhaus Deringer (2005). 3 EU Eurobarometer Survey (2008). 4 Salterbaxter (2007) 3. Access to capital External “Drivers” pressuring companies to be more sustainable
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Regional Conditions – Our Understanding GDP Growth in the booming Asian economy is estimated at 7% GDP on average Energy demand from Southeast Asian nations is growing faster than anywhere else in the world, estimated to expand by 79% by 2030 With only 1% of the world’s proven reserves of oil, energy efficiency is an essential strategy An IEA 2009 report says “more than 60% of greenhouse gas emissions could come from Southeast Asia if region adopts energy efficient programs. Underscoring the need for energy efficiency is the Region’s high exposure and sensitivity to climate change. Source: Global Fund Exchange, International Energy Agency (IEA) November 5, 2010,International Energy Agency (IEA)
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The DuPont Energy Challenge DuPont has addressed sustainability and energy reductions on a continuous basis since 1989 Our motivations: Recognized energy cost as a significant part of our total operating cost Experienced supply disruptions as costs were increasing rapidly Energy efficiency would provide the greatest cost savings among global warming initiatives, but emissions would gain ground A way to outperform competitors Overall, the health and welfare of the organization and its product lines would be at risk if we didn’t act.
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DuPont Sustainability Accomplishments Goal achieve 5% ($50 Million USD) annual decrease in energy use, consistent with sustainability goals Results 1990 - 2009 19% decrease in energy use 20% increase in production $5B in cost savings * TRI = Toxic Release Inventory Sources: DuPont Global Reporting Initiative (GRI) report, Yahoo Finance Reduction 1990 - 2009 Air Carcinogens92% U.S. TRI* “Releases”77% Air Toxics75% Energy Efficiency Initiatives Examples Integrated load controls Utilize Vented H2 in CB Boiler Improve Condensate Return Reduce Liquid Nitrogen Usage Steam Trap Maintenance Cooling Tower Water Temperatures Monitoring & Targeting Mindset and Behaviors… Share price ($) 100$ 1990 1995 2000 2005 2009
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Driving sustainable performance in operations requires the management of varied and multiple demands… …dealing with priority levels and resources availability Stakeholder engagement Doing More With Less: Sustainable Performance Emissions Resources Energy Reliability Safety Maintenance Quality Supply Chain People Management Culture
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“From Compliance to Performance” Integrated management systems that can accelerate the goals and transform organizations so that they can turn their environmental and sustainability efforts into cost and competitive advantages that last. Operational efficiencyProduct innovation Influence on Society and the competitive landscape Awareness and Compliance Risk Mitigation Cost ReductionRevenue Generation Competitive Advantage Move from discrete sustainability initiatives to integrated sustainability competence and business case
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3 Phase Approach: Assess & Envision, Design & Implement, Integrate Bottom-up business review 1 Top-down critical issues identification 2 Stakeholder engagement 3 Goals development & benchmark 4 Management System Design & Implementation CORPORATE BUSINESS UNITS OPERATIONS Detailed Targets Corporate Analysis & Prioritization, KPI Communicate & Cascade Leadership Process & Tools Organization Structure 3 4 5 2 Organizational Processes Cultural Transformation Capability Building Assess & Envision Integrate 1 Guidelines, Standards Business Units Plans Corporate Sustainability Planning Process
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Building an integrated sustainability management system that delivers tangible value to client shareholders & the environment Reduce environmental risk and improve corporate environmental reputation Improve returns on investments in Sustainability A transparent, goal-driven sustainability strategy that is demonstrating real progress. An integrated business and sustainability planning process that is identifying the best environmental projects for the company An enduring management process that ensures the organization can sustain and build upon its goals Client’s needs Benefits Corporate Sustainability Planning Leading Oil & Gas Co.
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Design & implement an Integrated Production System that enables client transformation towards world-class operational performance Company performance improvement Integrated approach to operations management: operations systems and procedures, management processes, people capabilities mindsets and culture. A sustainable roadmap with significant year-on-year payback that enables to deliver the business objectives Very significant contribution to the bottom line (up to 20% of operating costs) World-Class Operational Practices and Culture in 4-5 years Client’s needs Key questions & Approach Benefits Sustainable Assets Leading Petrochemical Company in Russia
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Design & implement an Asset Reliability Management System that delivers operational excellence to customer Minimize Asset downtime, production losses and associated costs Integrated management and capabilities improvement towards operational excellence in the facilities group Maximises uptime while minimising Risk to customer’s objectives Direct Impact on the bottom line Client’s needs Key questions & Approach Sustainable Assets Benefits Leading global displays producer
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Design & implement a Project Management and Contractor Management Solution that delivers significant value and less risks to client multiple capital projects delivery Company cement production capacity increase How can I build the new assets with limited in- house capabilities while minimising risks Better planning for lower capital projects costs, better cycle-time Less injuries through Contractor Safety Management implementation Asset protection through constructability Contractors with enhanced understanding of company requirements for safety & quality Competent team in project management Better Quality Assurance and Readiness To Operate Client’s needs Capital Effectiveness & Contractor Safety Expected Benefits Leading Cement Producer
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In Summary….Success depends on leaders’ ability to create and execute the business case for sustainability improvement Understanding key drivers for sustainability in sector and current performance Integrating sustainability into business vision, strategy and objectives Using sustainability to manage risks, reduce costs, create options and build stakeholder’s value Measuring and communicating performances Developing competencies and supporting behavioural, mindsets and cultural change
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Juan Aguiriano Managing Director, Sustainable Operations AGUIR2JG@eulnm2.email.dupont.com
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