Green Chemistry Proves It Pays Companies find new ways to show that preventing pollution makes more sense than cleaning up afterward.
By Ivan Amato

(FORTUNE Magazine) – In recent years, one of the most powerful forces outside of nature--the profit motive--has impelled companies to clean up their manufacturing processes and products. It pays to be green. To be sure, the original "command and control" mentality of environmentalism remains deeply entrenched. Activists and government regulators still arouse public opinion and support laws to shame or force companies into managing their nastier emissions and wastes. But an alternative model for corporate behavior, based on enlightened self-interest, appears ascendant. Business sees that preventing pollution in the first place--environmentalists call it source reduction or green chemistry, among other terms--makes as much business sense as, for example, spending less on raw materials and capturing more market share.

Not that U.S. industry is even close to its own often-advertised goal of zero or near-zero emissions of toxic substances. In 1998 the chemical and manufacturing sectors alone belched into the air, spewed into the water, or released into the ground at least 1.9 billion pounds of the most villainous toxic substances, according to statistics from the U.S. Environmental Protection Agency's Toxic Release Inventory (TRI). That number does not include wastes released illegally. Nor does the inventory include industry's far larger releases of pedestrian pollutants such as sulfur dioxide, nitrous oxides, and the primary greenhouse gas, carbon dioxide.

Those awful annual TRI numbers have since 1988 provided an indicator of how much pollution U.S. industry creates. Still, even hard-nosed environmentalists see signs they admit are hopeful. After all, in 1988 the two sectors of the economy originally required to supply TRI reports admitted releasing more than 3.4 billion pounds of the original set of TRI-specified chemicals into the environment. So in 11 years those emissions were cut by 45%. (However, the EPA has added new chemicals and industries whose wastes must be reported, so the total volume of TRI-listed toxics has grown, reaching 7.3 billion tons in 1998.)

Reducing pollution always used to cost companies money. It takes smokestack scrubbers to prevent acid rain, wastewater treatment facilities to keep organic chemicals and heavy metals out of waterways, and thermal oxidizers to convert volatile hydrocarbon solvents into more benign molecules. That it is possible to turn the environment into a business opportunity, rather than a cost, has always been a hypothesis of forward-looking environmentalists and industrialists. Favorable anecdotal evidence has been pouring in for years; now the kind of evidence that turns accountants into believers is also accumulating.

Testimony that it pays to go green comes from across the corporate spectrum:

--Minnesota Mining & Manufacturing of St. Paul has over the past 25 years reduced emissions of hazardous wastes by a total of 800,000 tons, largely by finding benign alternatives to the use of solvents, and in doing so has achieved $827 million in savings, counting only the first-year savings for each improvement.

--The Dow Chemical plant at Midland, Mich., saves $5.4 million a year on a one-time expenditure of $3.1 million to cut the volume of 26 toxic emissions by 43%.

--Biofine, a startup in South Glens Falls, N.Y., has begun to earn a profit selling levulinic acid, a chemical made from abundant cellulose wastes such as newspapers, as a substitute feedstock for potentially hundreds of chemicals now derived from petroleum.

--Catalytica Combustion Systems of Mountain View, Calif., has started to ship to power companies catalytic converters for ultralow-emission gas turbines that offer several kinds of savings. For example, the turbines can be sited in built-up areas where ordinary turbines would not be allowed.

"The reason so many companies are doing green chemistry now is because they are seeing it as beneficial and profitable," says Paul Anastas, a onetime medicinal chemist turned government bureaucrat who helped originate the idea of green chemistry ten years ago, when he was working in the EPA Office of Pollution Prevention and Toxics. Says Anastas: "In terms of efficiency, operating costs, reduced regulatory burden, and reduced liabilities...all of these together are making a convincing case that green chemistry really is doing this."

He traces his passion for green chemistry, and the pollution prevention it achieves, at least partly to the loss of his grandmother and then his mother to the same form of cancer, which may have been caused by chemical exposure, and to the environmental devastation wrought by the polluting factories that robbed him of his favorite boyhood romping grounds near Boston.

"In the same way that we can manipulate molecules to treat diseases, to be the color red, or to be brittle or flexible, hazard is just another chemical property," explains Anastas, who now pushes green chemistry as a senior policy analyst in the White House Office of Science and Technology Policy. "We now understand more about the molecular basis of physical hazards, so we can design these hazards out."

Industry champions say the case for an across-the-board greening couldn't be more compelling. "This is not an option," argues David Constable, SmithKline Beecham's manager of environmental product stewardship, "not if we want to be in business in 15 years."

POLLUTION PREVENTION PAYS

Minnesota Mining, the iconic American company whose many thousands of products include Scotch tape, Post-its, and sandpaper, saw the virtues of pollution prevention earlier than just about any of its corporate brethren. The company began inculcating the notion of pollution prevention up and down its ranks soon after the environmental regulatory machinery began turning in the early 1970s. In 1975 the company formulated its Pollution Prevention Pays (PPP) charter. "We review it every five years, and it is still a robust document that guides our work," says Katherine Reed, executive director of the company's Environmental Technology and Safety Services. "The company has a philosophy of being way ahead of the curve on any regulatory issue."

Evidence of that philosophy appeared in headlines this May when 3M announced it would phase out by the end of the year its use of perfluorooctanyl sulfonate (PFOS), which it has used for years in making many products, including Scotchgard stain-repellants, which account for $300 million in annual sales. The reason for the decision: 3M found that PFOS accumulates and persists in human tissues. The decision was based largely on these facts; no adverse health effects have yet been associated with PFOS.

For the past 25 years, 3M has been taking less draconian measures to reduce its use and generation of hazardous substances. As of last March, 3M's own tally of 4,722 individual PPP projects in 23 countries has added up to 807,251 tons of prevented pollution for a cumulative first-year-only savings of $827 million. (These are conservative figures, since many of these projects have accrued annual savings.)

The company made the relentless reduction of organic solvents, such as heptane and toluene, central to its strategy. The incentives are both economic and environmental. "Back in the '70s, when the oil embargo started to create price increases in raw materials, like solvents, we started looking into solventless processes," says Reed. As environmental pressures grew, 3M built thermal oxidizers to burn the solvents mostly into carbon dioxide and water. Those oxidizers remain on line, but they're becoming obsolete as the newer solventless processes avert the pollution that the oxidizers were designed to manage.

Asking chemical engineers to get rid of solvents they have relied on for decades is like asking a baker to stop using yeast. Says Reed: "How to make the same product in a different way is a tough challenge." But the company persisted. "From the day I walked in the door, I knew there would be no solvents," recalls 20-year veteran Olester Bensen Jr., a senior research specialist in 3M's Corporate Research Process Technology Center (CRPTC). He develops curing techniques using ultraviolet light for making microtextured products ranging from reflective road signs to next-generation sandpaper. About five years ago, CEO Livio D. DeSimone sealed the long-standing commitment to getting rid of solvents by saying he would veto any new process based on them.

Says Reed: "We estimate, conservatively, that we have invested over $1 billion in R&D on solventless processes." According to a spokesman, 3M has reduced air emissions, due largely to solvents, by 85% since 1990--from 200 million pounds worldwide down to 36 million pounds.

In many plants, engineers have replaced solvent-based processes with electron beams that chemically link small molecules into large polymer sheets. They also use flame-based processes instead of an electricity-based polymerization process known as corona discharge, which generates hazardous ozone molecules that have to be catalytically converted into oxygen. "With the flame, you get higher performance, higher speeds, cheaper operation, and no pollution," says CRPTC staff scientist Mark Strobel. "You can't beat that."

Preventing pollution does more than just clean up manufacturing lines. "We found that many of the solventless processes that we were working on were able to make things with unique properties we hadn't seen before, and these were leading to new products," says Reed. Exciting and potentially profitable innovations came from new takes on "thermal melt" processes that use heat and pressure to transform plastic resin into films and tapes.

Consider a new family of products made this way coming out of 3M's Film/Light Management Technology Center in St. Paul. Corporate scientist Andrew Ouderkirk is a star in this group. The iridescent butterflies, beetles, and other miraculous-looking objects in his office hint at what he and his colleagues have been designing.

Ouderkirk and his co-workers end up with materials that do the darnedest things with light when they use heat and pressure in a technology covered by some 140 patents. They can "co-extrude" anywhere from 100 to 1,000 layers of ordinary polymers, such as polymethylmethacrylate (PMMA) and polyethylene terephthalate (PET), into paper-thin sheets. Dial in one set of layer specifications, and you end up with a clear sheet that transmits visible light but completely reflects infrared light. Dial in another set, and you get what appears to be a shiny sheet of metal more reflective than polished silver. Still other arrangements of layers yield transparent films whose colors change depending on the viewing angle, like soap bubbles; 3Mers call these films "color mirrors." The films even reveal new principles of optics, which Ouderkirk and colleagues published in a paper in Science magazine in March.

The color mirror films already are more than scientific curios. When formed into bags, or into fake roses, opposing reflective surfaces toss around incoming light so well that they seem to emit their own strange light. Here already or coming soon are many applications: Barbie clothes, glitter, perfume displays, solar energy collectors, and optical filters that reflect or transmit specified wavelengths, to name a few.

Ouderkirk calls the corporate ban on solvents a key to these new materials. "If you start with a solvent-based system, that creates a whole lot of waste and you have just added a barrier that will slow down your product introduction," he says. "If your process doesn't involve solvents, you have made life easier in terms of getting products out quicker." That is a great way to gain market share while enjoying patent protection for a longer time.

DOW SCRUBS UP

Linda Greer, a toxicologist formerly with the EPA and now with the Natural Resources Defense Council, likes to talk about one of the most extensive, successful, and thoroughly documented cases of how pollution prevention pays. The site is Dow Chemical Company's plant in Midland, Mich. On its 1,900 acres, 4,200 employees manufacture more than 500 products, among them pharmaceuticals, plastics, and pesticides. By the mid-1990s, the plant was also generating at least 30 million pounds of toxic waste annually, making it one of Michigan's worst polluters. That's a sure-fire way to get on the radar screen of local and national environmental groups.

Like many career environmentalists, Greer often found herself sitting at conference tables with negotiators from chemical companies and government agencies. Her goal usually was to get the government to pass more stringent regulations. Frustrated with the sluggishness of that tactic, she and her colleagues decided during a barroom commiseration in 1993 that they would try something off the wall--collaborating with Dow to find pollution prevention solutions that the company would want to take on for business reasons alone.

The first attempt was a downer. Dow allowed Greer, NRDC colleagues, and a chemical engineer consultant working for NRDC into the La Porte, Texas, plant where the company makes polyurethane foam. They found several pollution prevention opportunities. But nothing happened. "The Dow people had a big yawn," Greer recalls. Jeff Feerer, director of environmental health and safety for Michigan operations at Dow, concurs. "There were good ideas there, but the project wasn't designed properly," he says.

After reaching this low point, the parties agreed to give it another go using lessons learned from the La Porte experience. Dow offered the company's Midland facility as the new test bed. The project, which included extensive public oversight and input by local activists and activist groups, became known as the Michigan Source Reduction Initiative (MSRI).

"It was designed to take a real place, a real factory, look at its waste and emissions, and test the hypothesis that there were opportunities for the environment that were also good for business," says Greer. The primary goal was to sharply reduce waste and emissions of 26 mutually agreed-upon toxic and environmentally damaging chemicals (25 of which are TRI chemicals) by April 30, 1999. These chemicals, chosen on the basis of their toxicity, persistence, and volume, amounted to 17.5 million pounds of waste and one million pounds of emissions. The target, set in 1996, was to reduce these wastes and emissions by 35% within two years.

The MSRI team scoured the facility for ways to modify processes, substitute more benign materials for toxic ones, and implement more recycling. They found dozens of opportunities and began implementing many. By April 30, 1999, they had spectacular success. "The MSRI reduced its targeted emissions by 43%, from one million to 593,000 pounds, and targeted wastes by 37%, from 17.5 million to 11 million pounds," according to the official MSRI report, which the participants published jointly.

The biggest win was an assault on waste and emissions generated in the production of Dow's Dowex resins, which are used for softening water. The resin-making process had been generating each year about 820,000 pounds of chloromethane gas, which went into an incinerator. Meanwhile, 1.3 million pounds of formaldehyde, which should have been recovered, was joining the waste stream because tar kept forming and gumming up the recovery plumbing.

By reducing the amount of residual solvent in a polymeric starting ingredient, changing the way a catalyst is used, and altering reaction conditions, engineers were able to reduce tar formation, which solved the formaldehyde waste problem. The changes also reduced chloromethane waste by nearly 97%. The fixes cost $330,000, but they save $3.3 million annually in raw materials and waste treatment, for a return of 1,000%.

The more typical MSRI projects take one year or more to recoup capital costs. Consider Dow's Styron resins, which are used to manufacture toys, packaging, appliance parts, furniture, and other products. The process requires a liquid agent to initiate the polymerization process. Analysis during the MSRI revealed that a more concentrated solution of the initiator would work. As a result, the annual heap of styrene monomer waste, which is the main ingredient of polystyrene, shrank by about 456,000 pounds. The modified process also reduced waste of ethylbenzene (the organic diluent for the initiator) by 365,000 pounds. Equipment changes cost about $300,000, or just over the $270,000 saved in raw material costs in the first year.

One of the 17 pollution prevention proj-ects appears at first to be a business loser. Dow spent $1.8 million, or 60% of its investment in the MSRI project, on pollution-prevention changes in the process for making Ethocel, a polymer used for film-forming applications in the pharmaceuticals and printing industries and elsewhere. With a new "super steamer" solvent-recovery unit, engineers began recovering organic pollutants from the reaction stream, and with an additional refrigerated condenser they also recovered the solvents toluene and chloroethane. These are not expensive chemicals--the collective waste reduction of 357,000 pounds of these two chemicals amounts to a savings of about $54,000 a year. But toluene and chlorethane are highly toxic TRI chemicals. Dow opted to take preemptive steps, albeit at a cost, to further its overall corporate environmental goals, which include reducing air and water emissions of the most hazardous compounds by 75% (compared with 1996 levels) by 2005.

Even with that $1.8 million expense on Ethocel, the MSRI ledger shows a 174% annual return on the initial investment. For its one-time investments of $3.1 million, Dow reaped annual savings of $5.4 million. In its Public Report 1999, Dow states that "we plan to take the lesson learned from this project and apply the model to other Dow sites globally." Feerer says the company gives bonuses to encourage employees to duplicate the MSRI feats.

A LITTLE COMPANY THAT MIGHT

Stephen Fitzpatrick, a chemical engineer, has a day job running Biometics, a company in Waltham, Mass., that designs the complex plumbing of biotech companies. But his passion is to use renewable resources in manufacturing. He is mightily confident that his startup, Biofine, whose name derives from "biomass refinery," will turn his passion into billions.

It has taken more than ten years to develop the process, but in April, Biofine's pilot plant in South Glens Falls, N.Y., began converting fluffy gray clumps of cellulose-rich waste fibers from paper plants into a trickle of sweet, smoky-smelling amber fluid. Every generation of chemists for more than a century has been intrigued by the industrial potential of this substance, levulinic acid (LA), but all abandoned it because it was too expensive to make. "The conclusion of each was that levulinic acid is a wonderful chemical, a wonderful feedstock for making 500 chemicals," says Fitzpatrick, who operates the South Glens Falls plant in partnership with the venture-capital firm Pencor Environmental Ventures.

Fuel, fuel additives, specialty chemicals, commodity chemicals, solvents, pesticides, paving materials--you name the petrochemical product, and Fitzpatrick can tell you how LA can help make it, or a worthy substitute, or something even better, cleaner, or safer. LA is not a chemical workhorse now because it costs about $5 per pound. "If only you could make it for a buck," says Fitzpatrick, "you would be in big business."

And he means big. He says his process for making LA is so cheap and simple that he could produce the stuff by the tankerful and ultimately sell it for pennies per pound as economies of scale kicked in. At which point, he says, "it could replace the whole petrochemical business."

What goes into the Biofine process is sulfuric acid, steam, and the natural polymer cellulose, which is the most abundant renewable chemical in the world. Cellulose is free or cheap. It comes from stuff that grows or that people want to get rid of: trees and plants, paper-factory waste, agricultural detritus, and about 60% of municipal solid waste. Most, if not all, of what comes out of Biofine's process is usable as is, recyclable, or convertible into salable products. Besides levulinic acid, what comes out are formic acid (used for tanning leather) and furfural (used to make polymers and steel ingots), among other things.

Fitzpatrick calls his LA vision "green chemistry" because LA replaces petroleum, a nonrenewable resource whose carbon atoms often end up in molecules of carbon dioxide, the greenhouse gas. By contrast, says Fitzpatrick, "if you base a chemical business or fuel business on cellulose, what you've really got is the ability to turn sunlight and carbon dioxide from the air into chemicals."

It's a good thing Fitzpatrick has faith. His pilot plant is producing LA at a rate of about 1,000 pounds per day, roughly equivalent to three measly barrels of oil. Even at a cost of about $2 per pound to produce, Biofine's price of $3 per pound (about $2 below the average market price for levulinic acid) remains about 20 times too expensive to compete seriously in major petrochemical markets, such as fuel additives and polymer precursors. In the first year, he expects to make a mere $400,000 in profit.

Several things give Fitzpatrick confidence that he won't follow his predecessors down the path of failed LA dreams. That the little New York plant makes a profit at all is one of them. Plants that are many times larger, and perhaps built near clusters of paper companies or on barges that could float to sources of cellulose waste, could produce LA cheaply enough to compete in larger markets. Fitzpatrick has been negotiating with industrialists in Caserta, near Naples, Italy, who want him to design an LA plant 25 times larger than his pilot plant. They plan to convert 50 tons of cellulose-rich feedstock (mostly waste bran and municipal waste) each day into roughly 12.5 tons of LA. That LA, in turn, will be converted into MTHF, which will be used to make gasoline-alcohol fuels less volatile and to formulate diesel fuel that pollutes less.

Fitzpatrick's vision of a renewables-based chemical industry earned him and Biofine one of five 1999 Presidential Green Chemistry Challenge Awards, which were rolled out in 1995 to recognize the work of environmentally minded innovators. It was a vindication for Fitzpatrick, but he acknowledges his company cannot make a living by winning little-known awards.

CATALYZING GREEN CHEMISTRY

As Biofine tries to convert the world to renewable feedstocks, Catalytica Combustion Systems Inc. (CCSI) has begun selling technologies that can reduce the pollution from burning fossil fuel. Consider the company's flagship product, Xonon, a catalyst system whose name derives from "no NOx," a reference to the nitrous oxide compounds that contribute to smog. CCSI builds catalytic units for gas turbines to make ultralow-emission generators for power companies. In April, Catalytica and S&S Power (a General Electric Power Systems business) announced a preliminary agreement to sell six GE turbines modified with the Xonon Cool Combustion system to Alliance Power of Littleton, Colo.

CCSI is a subsidiary of Catalytica, a profitable 26-year-old company with sales of $375 million last year, mainly in its pharmaceuticals subsidiary. In essence, says Ricardo Levy, founder and CEO of the parent, tiny palladium oxide catalyst particles in the Xonon provide a template for hydrocarbon fuel molecules and oxygen molecules to find each other and combust, but at a temperature too low for NOx to form. "It's flameless, cool combustion," he says. The honeycomb-shaped Xonon unit generates 1% or less of the smog-forming nitrous oxides created by the flame-based combustion of conventional gas turbines. Such turbines produce about 200 parts per million of NOx; for the past year, Silicon Valley Power in Santa Clara, Calif., has been running a Xonon-equipped demonstration turbine whose NOx emissions generally measure less than two parts per million.

CCSI says Xonon-equipped turbines meet notoriously stringent California emissions specifications without relying on the exhaust cleanup systems needed by unmodified turbines. What's more, says Levy, those low emissions, as well as the reduced vibration and noise that come with the more controlled catalytic combustion, "permit you to site turbines anywhere in the world." For him and his company, green chemistry is opening up whole new markets.

KILL POLLUTION OR BE KILLED BY IT

Even though green chemistry can pay, sometimes handsomely, NRDC's Linda Greer has learned that the message is not always enough.

She expected the MSRI results to inspire imitators. To encourage that, she and co-workers sent letters to 35 of the biggest corporate polluters and invited them to do what Dow had done. To Greer it was a no-brainer. With the MSRI bottom-line message of a 174% return for implementing pollution-prevention, how could they not say yes?

"One hundred percent said no," sighs Greer. "The fact that all said no strongly suggests there is a lot of shallow rhetoric out there." The negative reaction hardly fits the chemical industry's declared goal of zero toxic emissions. Adds Dow's Jeff Feerer, who says Dow even held briefings on its success for its industrial brethren: "I am as perplexed as Linda is."

Both put part of the blame on the nickel-and-dime character of many pollution-prevention solutions. "It's hard to get a company excited about a $30,000 project," Greer says. A promising solution to this conundrum, and one implemented by Dow, is to offer bonuses to workers for ferreting out pollution-prevention opportunities no matter how small they might seem to the accounting department.

In time, those very accountants could give pollution prevention the boost that activists like Greer say it needs. Consider emerging accounting tools--often called life cycle analysis or life cycle inventory--which are being adopted widely. The goal, says David Constable of SmithKline Beecham, is to "come up with a set of metrics based on mass, energy, and pollutant or toxics dispersion" to help companies predict which measures can achieve environmental and business goals.

It's no easy process. Says Constable: "We are looking all the way back to the extraction of oil and minerals and up to the packaging and shipping of final products." The company is evaluating about 300 chemical procedures that go into making 35 products. The exercise will produce tools such as solvent-selection guides, which Constable says will help chemists develop more efficient, less polluting syntheses from the start. And that, he says, will reduce the time it takes to get a drug to market, which is critical, since sales of a single drug can amount to billions of dollars a year. SmithKline's approach has not yet provided bottom-line proof of its success, but Constable expects it to reveal just how profitable pollution prevention can get.

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