Reducing energy use and emissions is good business - Talking Points

By Ron Shinn

Companies making the plastic resin you buy — and, to a certain extent, the processing machinery — are talking about their Scope 1 and Scope 2 greenhouse gas (GHG) emission-reduction goals and are trying to figure out how to meet Scope 3 numbers.  

It might not be high on a processor’s list of concerns now, but many of your original equipment manufacturer (OEM) customers are becoming keenly interested in the plastics industry’s efforts to reduce GHG. So are consumers, stock market investors and organizations critical of the plastics supply chain’s impact on the environment. 

Scope 1 emissions are direct fossil-fuel emissions from activities controlled by or owned by a company, such as the equipment it operates. It also includes such things as a company’s vehicles, furnaces, boilers and refrigerants. 

Scope 2 emissions are indirect emissions from the electricity, steam or chilled water purchased by a company. 

Scope 3 emissions include both upstream and downstream emissions all along the value chain, from suppliers to customers. These emissions come from sources as wide-ranging as shipping and trucking, processing of solid products, end-of-life of solid products, business travel and employee commuting. Scope 3 emissions generally represent a majority of a company’s total GHG emissions. 

The U.S. Environmental Protection Agency (EPA) has established ways for companies to inventory and assess their GHG emissions, set reduction targets and track progress. Some of the procedures and calculations are complex, but the EPA has created simplified guides, checklists and workbooks to help.  

Unfortunately, emissions from plastics manufacturing continue to increase. The Vermont-based anti-plastics organization Beyond Plastics has said that plastics industry emissions will exceed those of the coal industry by 2030. The Plastics Industry Association has criticized the group for that prediction. 

It’s hard to find fault with anyone’s effort to reduce GHG emissions. Climate change has reached scary levels and manufacturers should be asking how to reduce emissions instead of why. According to the World Economic Forum, manufacturing operations release one-fifth of the world’s carbon emissions. 

Chemical companies that manufacture plastic resin are making their GHG reduction efforts a key component of their sales pitch.  They know that regulators as well as their customers are paying attention. 

At a recent K Preview event in Düsseldorf, Germany, Covestro AG said it plans to become carbon-neutral by meeting Scope 1 and Scope 2 goals by 2035. The cost to achieve that is expected to be between $250 million and $600 million, according to CEO Markus Steilemann. 

BASF plans to reach Scope 2 goals by 2050, according to Martin Jung, president of performance materials.  

Resin manufacturers are currently out front on setting their own goals and starting to reduce GHG emissions.  

Large-scale recycling investments, such as Dow’s three separate announcements in July for partnerships in new recycling operations, are part of efforts to reduce GHG. 

Resin manufacturers are generally public companies and, under rules proposed by the U.S. Securities and Exchange Commission (SEC) in March, public companies will have to include climate-related disclosures in periodic, audited reports. GHG emissions will be part of the disclosure.  

Management consulting firm McKinsey & Co. explained the reasoning behind the SEC proposal: “First, up to $5 trillion annually will be invested in sustainability by 2025 — the largest capital reallocation in history. At the same time, approximately $11 trillion worth of assets will have to be retired. Investor scrutiny of climate risk is rising, and consumers and employees are increasingly factoring sustainability into their decisions.” 

Currently, only large GHG emitters are required by the EPA to report their GHG reduction progress. That amounts to about 8,000 companies in the U.S., including power plants, refineries, chemical plants, waste processing, and pulp and paper operations. 

At this point, there is not much heat on plastics processors in the U.S. to reduce their GHG emissions. But don’t expect the free pass to last forever. 

Prudent processors are becoming familiar with the EPA guidelines and looking at ways to become more energy-efficient, switching fuel where necessary, combining heat and power, using renewable energy and more efficiently using and recycling materials. 

There is a strong business case to be made for reducing energy consumption and GHG emissions. Many small changes in a plant’s operation can add up to efficiency improvements and energy savings.  Because they have always faced higher energy costs, European manufacturers are generally more forward-thinking about reducing the amount of energy they use and the emissions it causes. 

There will likely be up-front costs to reducing GHG emissions, but in most cases the investment will be recouped in operational savings. 

Starting now is a way to future-proof your manufacturing operation. It is also a good business practice. 

Ron Shinn, editor 

[email protected] 

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