Monday, April 16, 2007

A New Age of Substitution?

By JOHN PEARSON (President and CEO, Chemical Business Group; Access Intelligence)
The fact that our industry faces new challenges caused by persistently high feedstock prices has electrified many a conference for the past year or more. But there is another much smaller, but potentially potent challenge to achieving the forecast growth rates for some chemicals.
It comes from the demand side. Consumers, and local governments, are starting to stir environmental concerns into their buying choices. There are many examples of this phenomenon. Individually they are small, but they could add up into a phenomenon that would be significant in the industry’s image and prospects.
Whether you believe they are based on sound science, there are many examples of this burgeoning consumer awareness. European airline passengers are leading the way in buying offsets (translation: are arranging for trees to be planted) to counter the greenhouse gases their travel produces. Several cities and even some countries (Ireland, Australia) are cracking down on the use of the plastic grocery bag and either taxing its use or encouraging/requiring its replacement with cloth or paper bags. In the thought-leading San Francisco Bay Area, one of the best restaurants, Chez Panisse, has taken still bottled waters off its menu, citing as its reasons the transportation costs and greenhouse gas effects of moving a commodity like water from the source to the consumer, and the business of disposing of plastic bottles in landfills.
Are these the first heralds of an age of demand-driven substitution of plastics by paper, maybe to be accompanied by a replacement of man-made fibers by cotton and wool? The answer may lie in our own hands. It is noticeable that the pending San Francisco plastic grocery bag ban gives the retailers the option of switching to paper or corn-based plastics that degrade quickly. Substitution need not be plastics for other materials, but plastics for other plastics. The public’s love affair with the convenience of plastics is not at an end, but it may require much more communication with consumers and a concentration on the virtues and sustainability of the industry to keep that love alive.
Can an industry that is driven by production concerns and the drive to be the lowest cost producer respond to a concerted change in consumer behavior? That is a key question in the years ahead. It’s time for marketing to become as important as production in our large chemical companies.

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