9 Mai 2006

NatureWorks LLC: Learning to Trust While in “Enemy Territory”

Many companies and NGO’s ignore stakeholders until after a major dispute. Then, they only engage with the loudest stakeholders, or with the friendliest, or a random set with little or no strategic significance. But if companies and NGO’s enter into a strategic trust-building partnership to address barriers to bona-fide markets for green products, costly litigation and regulatory delays can be reduced or eliminated. Trust-building partnerships, such as the ones undertaken by corporate-backed bioplastics producer NatureWorks LLC, may be a harbinger of things to come.

U.S. oil reserves have peaked and are in decline. Lingering tensions in the Middle East translate into continuing price shocks for this precious, yet dwindling, fossil fuel in the foreseeable future. And our throwaway society is running out of room to hide burgeoning waste streams littered with petrochemical products that carry large long-term environmental liabilities.

These simple facts have compelled corporations such as NatureWorks LLC – a joint venture of Cargill and Dow Chemical – to launch new ventures to create plastics from “biomass,” a term that typically refers to vegetative matter such as crops, waste wood and agricultural wastes. No doubt, these companies see green (as in cash) in these “green” products and a future “bio-economy.” Yet many NGO’s remain suspicious of these brand names dominating our future purchase decisions.

NatureWorks LLC is way out in front of the pack when it comes to building this new bio-economy. Investors in NatureWorks spent substantial sums to build a 300 million pound polylactic acid (PLA) polymer facility in Blair, Nebraska in 2002 that buys dextrose from farmers located within 30 miles of the facility. In 2003, NatureWorks also built a 400 million pound lactate facility. Using a process similar to that used to make beer or wine, Cargill converts corn-based sugars to lactic acid, which is then used to make PLA.

Even bio-based products can come with environmental baggage. For example, as much as half of the corn grown in the U.S., the current feedstock for PLA, is Genetically Modified Organisms (GMO), according to the most recent U.S. Dept. of Agriculture estimates.

NatureWorks represents a $1 billion private investment to drive down the cost of bio-plastics from $200 per pound to less than a $1 per pound in little over a year. Cargill and Dow invested this sum in the belief that the market would actually support “green chemistry” products. At first, the economic success of their investment looked questionable, in part because of the GMO controversy. At the end of in 2004, the facility was still only operating at 12% capacity and Dow Chemical ultimately sold its stake to Cargill. It looked like NatureWorks faced an uphill battle.

But in the past two years, NatureWorks has been growing at close to 100% per year. Their bet in a post-petroleum future for plastics may yet pay off.

Reaching Out

Sensing the need to find out why environmental activists, as well as large potential corporate brand names, were leery of their PLA products, NatureWorks partnered with San Francisco-based Future 500 — a non-profit specializing in sophisticated stakeholder engagement techniques and processes — to facilitate a multi-stakeholder process to help them figure out how to make their products more attractive in the marketplace.

A meeting then took place between Future 500 and NatureWorks staff. This meeting was, in essence, an internal alignment session, making sure that all parts of the company were on the same page as it tried to move forward in addressing the concerns of stakeholders that were frustrating upper management in meeting their aggressive sales targets.

Then, cautiously supportive stakeholders, such as The Natural Step, an organization committed to sustainability relying upon a science-based European model, were brought into the room to collectively develop a long-term strategic plan that encompassed and advanced a larger set of issues, like zero waste, composting, recycling, and sustainable agriculture.

During this meeting, frank discussions between company officials, stakeholders, and media and grassroots organizing organizations, raised the level of understanding of all those involved on the complexity of PLA issues, laying the groundwork for a clearer path forward for all those involved in the discussions.

What sprang up from just those first two meetings and prior Future 500 work was SEED: an initiative to advance the bio-economy, including bio-plastics and bio-fuels, and to drive it in way that would advance the stakeholder issues, including GMO and recycling/composting concerns. Vetted by the stakeholders, a SEED consensus statement was then drafted.

To broaden the base of support and ideas, as well as to guard against concerns that the SEED Initiative would just advance a single company’s agenda, additional funding and sponsorship was secured from Coca-Cola, Castle Rock Foundation, and other sources without a financial stake in the outcome.

By March 2005, 70 influential NGO leaders had endorsed SEED, including NGOs known for anti-corporate activities, like Global Exchange, U.S. Public Interest Resource Group, Rainforest Action Network and GRRN.

More focused talks and meetings followed. “We have been — figuratively if not literally at times — locking the various corporate and NGO groups in a room together to pound out a common vision and roadmap,” acknowledged Bill Shireman, Future 500 founder and president. “The SEED endorsers certainly do not agree on everything,” he continued. “But they know breaking the petroleum habit requires going down a long and winding road. The first steps won’t get you to your final destination, but to reach a common goal, all of the stakeholders have to take some of these first steps together.”

The result of the negotiations was a SEED vision for a post-petroleum plastics industry, a roadmap to get there, and guidelines that companies can take to maintain the support of activists and social investor groups. That way, companies can switch to bio-plastics, with less worry that critics will take them to task over issues like composting, recycling, and GMOs.

Among the SEED signatories was Randy Hayes, the founder and board president of the Rainforest Action Network, and currently executive director of the International Forum on Globalization. “The shift from petroleum-based fuels, fibers and plastics to renewable and plant-based products is fundamental to our survival,” commented Hayes. “It must be accompanied with other systems shifts such as city design, mass transit, local orientation and appropriate scale. Together, these system shifts are the bright light on the horizon that we so desperately need to get through these dark times.” By replacing petroleum with a renewable plant-based feedstock, NatureWorks uses 20% to 50% less fossil fuels to produce biopolymers and generates 68% fewer greenhouse gas emissions than conventional plastics.

Why would any NGO want to sign on to an initiative that might support the corporate agenda of companies such as Cargill?

First, PLA is clearly better than petro-based plastics.

Second, by being part of process, they encouraged NatureWorks to boost its commitment to recycling, composting, sustainability, and non-GMO options.

Third, they could win fresh recycling commitments, working toward the establishment of new take-back program to give recyclers a market or commitments for PLA-to-PLA recycling.

Fourth, labeling PLA as “compostable” could raise awareness and consumer pressure for zero waste policies and composting programs.

A final reason for activists to become involved was the GMO issue itself. Working with – rather than against – NatureWorks enabled these NGO’s to help the company craft GMO free bio-plastics certification programs, GMO offset procedures, and, hopefully, the identification of GMO-free feedstock for bio-plastics.

The activists hope that in the future, they can win commitments from NatureWorks – or its future competitors – to build PLA manufacturing facilities that rely upon a different and completely sustainable feedstock. Signatories of SEED were then encouraged to prompt their members to write companies like WalMart to encourage them to adopt the SEED agenda and use bio-plastics and bio-fuels.

Cashing In?

“Green” brands are signing on to PLA, including Paul Newman’s food label products – Newman’s Own Organics – as has Wild Oats Market. Earth Fare, the nation’s third largest natural food retailer, is using PLA in its fresh food aisles, too.

All told, 7,300 grocery stores throughout the U.S. are now selling products packaged in NatureWorks PLA. And more than 14,000 retail stores in the U.S. and Europe have started selling bedding products that include fibers made by NatureWorks.

Large national brands are also coming aboard. Coca Cola, Starbucks, and Disney are in current negotiations. And WalMart is the latest major company to adopt PLA, a sales breakthrough for NatureWorks, but one watched carefully by activists who criticize WalMart on other issues. (Cf. news of Oct. 25, 2005.)

NatureWorks efforts, both in the marketplace and among stakeholders, are beginning to pay off. Sales grew 200% in the first half of 2005, compared to 2004, primarily because PLA products are now cost competitive with petro-plastics.

It is too early to tell the long-term impacts of the SEED initiative. But the initiative has helped give confidence to companies that want to do the right thing, without risking charges of “greenwashing” by critics. It has also given activists and social investors new tools to drive companies step-by-step along the path to sustainability.

Author Peter Asmus is President of Pathfinder Communications, which specializes in CSR, sustainability and renewable energy advocacy.

(Cf. news of May 04, 2006.)

Source: GreenBiz.com May 07, 2006.

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