TBP01x 6.1 Designing a sustainable business case
Welcome.
This week we are going to focus on economic, environmental and social sustainability.
In this first unit we will give an overview of the factors that companies consider before they
decide on a business investment.
Let us remind ourselves of the many reasons why we would like to replace fossil feedstocks.
In addition to economic reasons, the political consideration of energy security is of
increasing importance.
Mitigation climate change is another important goal. Creating biobased products can also be
a positive driver for rural development, providing alternative markets and increasing
infrastructure will help local economic development and indeed, if done well increase local
food security.
Here we see the petrochemical carbon cycle. Through photosynthesis, sunlight and CO2 are
captured in plants, which by geological processes over many years have formed reservoirs of
oil. When these are recovered, and used for fuels and chemicals, the CO2 is released. In fact
the enormous amounts of CO2 which was captured so many years ago, is now released in a
relatively short period of 100 years.
If we replace oils by currently grown plants, and we convert this material in biorefineries
using micro organisms, the CO2 that is captured is released in the same timeframe, keeping
a much better balance of carbon emissions.
Renewables are already used as a feedstock for many products, besides food and feed. The
CO2 released by the products is used again by the growing crops. Presently most products
are made from the sugars in the crops.
And while it is important to keep the soil fertile and look at recycling of nutrients, full
utilization of plant materials is also a good idea and make second generation products.
One important factor is the yield of products in kilograms per kg biobased feedstock.
Because the mass composition of biobased feedstocks and its derivates such as sugar and
ethanol is richer in oxygen than crude oil, the yield of high energy products such as biofuels
is less. That means that (reduced, so oxygen less) drop in replacers need more kilograms of
biobased feedstock compared to their crude oil equivalent. Therefore it is interesting to
think of so called  drop outs that are more rich in oxygen, for instance cement like
construction materials or specific chemicals. As you can see in this table the global volumes
of fuels and construction materials compares. Therefore it is very interesting to link these
categories in an integrated biorefinery.
So yield is also important if we want to know what a product is going to cost. How many
kilograms of feedstock is needed for one kilogram of product?
This picture shows the maximum yield of the conversion of sugars to a series of products
and the cost effects. The bar at the right indicates what the overall feedstock price would be
for a ton of the products illustrated. Red means  too expansive compared to present market
prices. For example from 1 ton sugar you can only get a maximum of a quarter of a ton
methane, since the conversion yield is only 0.25. You can see that with an assumed sugar
price of 400 $ per ton the biobased feedstock will then be 1600 $ and is thus more costly
than the fossil alternative, which need to be compensated by the process. If we would use
cheaper agricultural residues, we also loose in the conversion from these lignocellulosics to
sugars.
Presently there are no established markets for agricultural residues, except for wood pellets,
which sell at circa 130 $ per ton
Not only for economic but also for environmental reasons it is good to think of the full
utilisation of biomass.
This picture shows the  cascade model . It indicates that it is worthwhile to first use biomass
feedstocks for high value products with a small market and then use the residues for low
value bulk materials, with big market demands. In this context it is interesting to think of
combining production in integrated process designs.
Of course such designs also require new business models.
When designing for a specific product, there are often a number of different production
methods. Each option gives different side products, has different energy consumptions, etc.
Here too, we need to examine the best option in terms of costs and environmental and
social impact. Overall a company has to take all these factors into consideration.
The (new) biobased product and process have to fit the business strategy, it requires a fitting
economic model and it has to be competitive, which requires a competitor analysis. For the
economic model several issues are evaluated in perspective of market inputs and technology
inputs. Market inputs include volume size, market segments and customer profiles but also
regulatory matters. Technology inputs relate to Intellectual Property protection, CAPEX and
OPEX estimates and scalability. But is also needs to be environmentally efficient.
To evaluate the overall process on its full sustainability many aspects have to be taken into
account. For feedstock growth and harvesting the impact of for example logistics and water
usage has to be established as well as maintenance of soil quality. Waste management,
utilization of by products, energy and water usage and nutrient recycling are all aspects of
the processing that should be included in a full impact evaluation.
And in addition to health impacts, we should also look at the overall social impacts on
employment, food security and community development.
Nowadays, companies are eager to perform well on all aspects of the people, planet and
profit principle, if any weakness is found this is a business risk and may lead to a no go!
So when traditionally there was just a calculation of the economics, now a quantification of
the overall impact is part of the business decision. And of course a risk assessment is
included.
Economic and environmental impacts are reasonably standardised and can be quantified.
Social (or people) impacts are more difficult to establish, but guidelines have been set to
also approach this in a standardized way as best as possible.
Every year different scientists from both industry and academia come with new creative
business ideas. This example from Corbion, a performance material and food ingredients
company, shows that they collect about 300 ideas per year. After a first screening, roughly
20% will be further examined.
Half of these remain interesting and a quick full scan is than done to get a better idea of the
value of the opportunity. Again some do not survive, and about one third is selected for a
full comprehensive due diligence evaluation. After all about 4 survive& to possibly be
implemented in the business. So before an idea gets implemented quite some time is past!
To make this time as short as possible we need to pay very good attention to the process
design. In summary for proper design we have to first identify the task and constraints; than
collect all the necessary knowledge to come to a generation of alternatives (also called
synthesis). After analyzing these alternatives we select some for a deeper analysis. These
last three steps may be repeated after some results are known. The final results are
reported for decision making.
Join us in the next unit!