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Benefits Of Sustainability Initiatives SABIC

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Question:

Discuss about the Benefits of Sustainability Initiatives SABIC.
 
 

Answer:

Introduction

In the recent past, Saudi Arabia experienced economic success. These developments have offered numerous opportunities for the government and investors to establish a healthy and strong ground for incorporating investments and relevant policies thus helps in achieving a sustainable economic growth. Robertson (2014) affirms that sustainable development and strategies have boosted Saudi Arabian economic expansion. Undeniably, the Saudi government has recently established healthy and stiff competitive environment thus making it a global destination for planning and investment. Besides, the Kingdom of Saudi Arabia has benefited from the international foundation to achieve its output gains through efficient planning (Hertog & Luciani, 2012). To show the significance of the regulatory requirements on various sustainability initiatives, the article has opted to focus on SABIC Company that has become a leading organization in the world. In fact, the study surveys the company’s sustainability initiatives and explains some of the achievements this organization has realized through the sustainable initiatives and how it has benefited based on the overall success as determined by Traversa and Idriss (2012).

In the modern world, multinational bodies, governments, and other enterprises have used business regulations in drafting their laws and demands regarding people and enterprise as part of their legal enactments. Without a doubt, the source of regulation can be private regulatory bodies or non-governmental organizations granted such powers by the government of the day as highlighted by Jacob (2013). In fact, sustainability has emerged as the best innovations, techniques, and strategies that companies and governments have used to develop their operational performances and how such activities affect the economy. Many people are aware of the various sustainable regulations including ISO Standards that have encouraged stakeholders to recognize their corporate obligations in implementing sustainable schemes.

In Saudi Arabia, the government has established the Presidency of Meteorological and Environment (PME) body that is mandated to outline the relevant environmental standards that companies and other organizations must meet to avoid cessation (Alyami, Regzgui, & Kwan, 2015). To this effect, many companies and businesses have been compelled to adopt the sustainable policies thus meet the set standards and improve their competitiveness. It has also emerged that many companies that have adopted the sustainable requirements have become more appealing and persuasive thus benefit from acceptations in the society.

 

Company Background

Saudi Arabia Industries Cooperation (SABIC) is an organization that was founded in 1976 with a vision to transform the natural gas into a valuable petrochemical commodity. Previously, many people damaged the environment and underutilized the natural gas. But with SABIC, this perception was changed as it turned the natural resource into a beneficial petrochemical product that has enhanced the supply of energy thus meeting the needs of the society.

Since its inception, SABIC has achieved significant contributions in carbon storage and capture through initiatives (Arab News, 2015). For example, the corporation has used the largest carbon dioxide purification plant because it recognizes the continued concerns regarding climate change. The company has confirmed through its efforts that it is a part of the solution as its products and services reduce CO2 emissions thus meets the customers’ sustainable goals. The company has also recognized that these effects would never bear fruits without engaging other stakeholders (Hertog & Luciani, 2012). To this effect, SABIC has collaborated with the Ministry of Petroleum and Mineral Resources and Saudi Aramco in hosting several forums such as the Carbon Sequestration Leadership Forum where various stakeholders engage on how they can make business sense by adopting operational resource and energy efficiency approach to minimize the operating costs (Arab News, 2015).

SABIC has continuously encouraged governmental policies and support that have accelerated technology innovation and development thus allowing stakeholders to share the best practices. In fact, the organization engages the international players to justify its leadership position in the Middle East. It continuously participates in the forums that advocate for sustainability and encourage collaboration (McCullough, 2014). It has also supported efforts and mechanisms that reduce CO2 emission and fits its business model. Given these efforts, it is important to study how the organization has benefited from the sustainable initiatives.

Recognition and Awards

The American Chemistry Council recently recognized the efforts of SABIC in its innovative plastic business. The company has established extensive world-class programs that have improved energy efficiency. To this effect, the Saudi company earned responsible care energy efficiency (Staff, 2015). The accomplishment confirmed the company’s sustainability initiatives thus attracting the honor from the American Chemistry Council. The company has also used a holistic approach to achieving a sustainable performance and help it to reduce environmental impact using transportation network, manufacturing process and infrastructure. SABIC has strengthened its operational excellence thus benefiting its customers nationwide (Staff, 2015). SABIC engages in the manufacture of plastics for different industries including medical services, consumer electronics, and automotive. These products confirmed the company striving to improve the manufacturing process and managing resources efficiently.

 

Benefits of Sustainability Initiative

The company was founded on the promise to create value that would allow the country to flourish and grow. SABIC pledged to extend the sustainability initiatives beyond Saudi Arabia. According to Brebbia (2016), the company’s financial goal was to generate an economic value for its shareholders. The organization was linked to socio-economic and environmental success. For an organization to meet the economic needs and expectations of stakeholders, it needed to invest in customers, people, and communities. SABIC devoted its resources to environmental and energy improvements for various manufacturing facilities. It focused on helping these companies to build advanced technology center (Wyman, 2014). The investments have made the company more efficient thus reducing the overhead costs. SABIC continue to focus on value creation through innovation as it forms the basis of economic values. The company also believes that developing an efficient manufacturing process to establish sustainable market solutions.

SABIC believes that integrating a sustainable criterion is necessary for improving innovation processes at all levels of development. SABIC works closely with stakeholders to align its sustainability strategy with its goals (SABIC, 2014). This has ensured the company has benefited from sustainability initiatives to provide the solutions to facilitate success. The company has embedded sustainability into SABIC’s strategy to maximize economic benefits thus maximize value in its value chain (Traversa & Idriss, 2012). Delivering financial value confirms the company’s long-term health of its business beyond the economic capital. The firm believes that the management of social, human, and natural capital. To meet its long-term goal, SABIC has created 2025 strategy that has recognized the interconnectivity between the value it creates for customers and other stakeholders in the society. With these connections, the company has managed to be accountable for its performance by creating a strategy addresses sustainable value for its future. SABIC has expanded its patent portfolio by about 8.7 percent as reported by the company (SABIC, 2014). In fact, it increased its expenditure on research and development by 16 percent as reported by SABIC (2012).

Creating value

SABIC has incorporated sustainability initiatives into its product development and processes by taking a robust approach thus create economic value. ICSPD and Brebbia (2009) maintain that it invested in the emerging technologies to benefit the economy, society, and the environment. SABIC has managed to deliver operational efficiency and productivity gains. For example, in all the manufacturing assets of SABIC, the firm continues to design and operate for maximum efficiency and minimize environmental impacts. According to Brebbia (2016), operational efficiency projects show it expected a significant impact on its operating costs and revenues. Besides, the sustainability initiatives had helped it reduce CO2 emissions such as introducing flaring mechanism has enabled SABIC to reduce the emissions by over 48 percent and cut energy intensity by over 7 percent. It anticipated that the economic benefits of this project stand at $100 million annually.

The new initiatives have further ensured the company reduces differentiated technologies (Tietenberg & Lewis, 2010). For example, it had to respond to the gas feedstock constraints by exploring the development of differentiated and new technologies including Oil to Chemicals (OIC) project (SABIC, 2014). Without a doubt, the project will encompass unique configuration of operational units so that it can generate the highest yield conversion of chemicals from oil. According to Abubakar and Aina (2016), the sustainability initiatives have brought improved material and chemical solutions to its customer segments. Based on 2025 strategy, SABIC has identified priority customer market segments to improve its performance. Hence, the company is striving to improve its sustainability impacts thus create cost savings through the material, resource, and energy efficiency gains (Hasmi, Abdulghaffar, & Edinat, 2015).

SABIC has improved transportation following the adoption of robust sustainability initiatives by offering different innovative materials that have ensured it meets the safety standards and offers low weight in the transportation sector. Through these processes, SABIC has improved fuel efficiency. For instance, in 2014, the Saudi-based company introduced new and high performing polypropylene copolymer with superior processing qualities. At the same time, the company maintained the best resistance to its mechanical impacts (SABIC, 2012). These inventions have allowed the company to design new vehicle components and help the auto manufacturers to reduce the weight thus maximize resources. For instance, the company’s materials have been used to make car seats to accommodate children. The company also has conducted the life-cycle assessment that has justified the reduction in energy consumption and emission of CO2.

 

Supply chain optimization

The supply chain team has acknowledged the significance of SABIC in the society as it helps in creating environmental value through the optimization of logistics and networks (SABIC, 2014). This organization has health the global supply chain team to cut the lead time thus boosting its competitiveness in the market. Consequently, these initiatives have made SABIC strengthen its customer services and stakeholder relationship using collaborative operations to achieve shipping, packaging, and delivery of solutions. According to SABIC (2012), SABIC can maximize its supply chain through the Portal Logistics Facility that has facilitated the establishment of considerable value to the firm. The move ensured the company reduced the lead time to the country’s ports. In fact, the organization cut the overflow warehouse requirements at different levels including manufacturing point (Wyman, 2014). The completion of the PLF, the company’s Polymers business made successful tests in configuring its logistics leading to a cost saving goal that it predicted at 15 percent (SABIC, 2012). To this effect, the customers of SABIC in Asia accessed competitive services. Given the success of its products in Asia, the company intends to extend to Africa that will lead to an annual saving of about $7.3 million.

Cost minimization

Sustainability initiatives have become one of the most valued strategies to achieve a cost-effective objective. According to ICSPD and Brebbia (2009), companies that have implemented these initiatives have reduced their production costs beyond reproach. Although setting a company or sustainable initiatives are expensive in the short-term, the long-run effects confirm the cost effectiveness. Innovative plastics, polymers, and metals have registered a twelve percent reduction in cost because SABIC has invested in improving sustainability products as reported by SABIC (2014). With reduced production costs, the company gets in the pole position to overcome its competitors that have for several years given it a run for its money. This investment has benefited SABIC by helping it attain the world leader status.

 

Conclusion

Sustainability remains an essential and a necessity for the future of human and it further offers numerous benefits for different companies. Based on this article, the sustainability initiatives focus on sustainable product improvements thus defines the company’s service, products, and success. The case study that is a leading Saudi Arabia’s company forms an example of a company that has reported substantial growth and profits by implementing the sustainability initiatives as listed in this article. SABIC is not only a leader in Saudi Arabia but a global player that has made sustainability the core of its business strategy. With this central focus, the company has ensured its customers benefits from innovative products and services and further meets the company’s long-term objectives. The sustainability initiatives of SABIC have given it a competitive advantage beyond its competitors because it uses them to provide value for its stakeholders.

 

References

Abubakar, I. R. & Aina, Y. A. (2016). Achieving sustainable cities in Saudi Arabia: Juggling the competing urbanization challenges. In U.G. Benna & S.B. Garba (Eds), “Population Growth and Rapid Urbanization in the Developing World” (pp. 42-63). Hershey, PA: IGI Global.

Alyami, S.H., Regzgui, Y., & Kwan, A. (2015). The development of sustainable assessment method for Saudi Arabia built environment: Weighing systems: Sustainability Science, 10(1), 167-178.

Arab News. (2015, Nov 5). SABIC initiatives promote sustainability. Corporate News. Retrieved from https://www.arabnews.com/corporate-news/news/830646

Brebbia, C.A. (2016). Sustainability development. Southampton: WIT Press.

Hasmi, M. A., Abdulghaffar, N., & Edinat, I. (2015). Sustainability commitment in Saudi Arabia and need for educational reforms for the jobs of the future. International Business & Economics Research Journal, 14(1), 47-54. Retrieved from https://www.cluteinstitute.com/ojs/index.php/IBER/article/download/9031/9024

Hertog, S. & Luciani, G. (2012). Energy and sustainability policies in the Gulf States. The Transformation of the Gulf: Politics, Economics, and the Global Order, 236-257.

International Conference on Sustainable Planning and Development (ICSPD), & Brebbia, C. A. (2009). Sustainable development and planning IV. Southampton: WIT Press.

Jacob, A. (2013). Sustainability drives innovation at DSM composite resins. Reinforced Plastics, 57(4), 44-46.

McCullough, D.G. (2014, May 12). Saudi Arabia’s green decree brings hopes of sustainability. Guardian. Retrieved from https://www.theguardian.com/sustainable-business/saudi-arabia-green-construction-oil-sustainability-environment

Robertson, M. (2014). Sustainability principles and practice. Hoboken, NJ: Taylor & Francis.

SABIC. (2012). Sustainability report 2012. Retrieved from https://www.sabic.com/corporate/en/images/2012%20%20SABIC%20Sustainability%20Report%20-%20English_tcm12-5846.pdf

SABIC. (2014). Foundation for the future. Sustainability Report 2014. Retrieved from https://www.sabic.com/me/en/images/sabic_sustainability-report_2014_tcm14-15473.pdf

Staff, E. (2015, May 19). SABIC wins five ACC responsible care awards. Retrieved from https://www.seacoastecho.com/article_8822.shtml#.WF3-9X2Qp_k

Tietenberg, T., & Lewis, L. (2010). Environmental economics & policy, (6th Ed.). Upper Saddle, NJ: Pearson Education, Inc.

Traversa, E. & Idriss, H. (2012). Materials for renewable and sustainable energy provide the connection between materials, energy, and sustainability. Materials for Renewable and Sustainable Energy, 1(1), 1-2.

Wyman, O. (2014). Energy sustainability index. World Energy Council. Retrieved from https://www.worldenergy.org/data/sustainability-index
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