By-Product Synergy

Sustainability Engineering

March 1, 1999 Volume 29 Issue 1

By-Product Synergy

Wednesday, December 3, 2008

By taking "wastes" from one company and using them as raw materials for another, industry can turn a negative into a positive - for the environment and shareholders.

At first glance, it's hard to imagine how anyone could get excited about slag, a by-product of the steel-making process. But when managers of Chaparral Steel got together with their counterparts at a Texas Industries Inc. (TXI) cement plant, they came up with a surprising discovery: Steel slag could be converted into a valuable raw material for cement production.

Together, they developed a patented process, now being marketed worldwide, that uses steel slag in a cement kiln to create high-quality Portland cement. The partnership has increased profits for both companies, cut energy usage, and reduced greenhouse-gas emissions.

The collaborative venture is a successful example of "by-product synergy," a growing practice that is changing the way business looks at so-called wastes. By taking the by-products of one company and using them as valuable raw materials for another, businesses can turn a negative into a positive. Like fallen leaves that break down in the soil and nourish the plants around them, these by-products can be recycled and reused.

The Chaparral-TXI partnership also spurred the creation of a new company, Applied Sustainability LLC, which is helping businesses around the world identify ways that their wastes can become someone else's treasures. The company recruits clusters of businesses in regions around the world and helps them establish synergy projects. This partnership provides a model of how industry leaders can overcome initial corporate skepticism and make by-product synergy work.

What makes the Chaparral-TXI case unusual is that the companies were willing to consider how they could improve their operations by collaborating with another industry. In this case, the collaboration came naturally, since Chaparral is a subsidiary of TXI, the company that runs the cement plant in Midlothian, Tex. Chaparral was also already an experienced recycler. Much of the scrap steel that the company recycles into steel products comes from its adjacent automobile shredding facility, which transforms more than 750,000 old cars annually into raw material for steel production.

Steel, Cement Reps Get Together

However, the first time representatives of the steel and cement companies got together to consider possible synergies, the gathering was awkward. They weren't accustomed to thinking about -- much less working with -- managers from another industry. But as the talks continued, the awkwardness ceased and a palpable excitement filled the air. The participants, who ranged from executives, supervisors, and academics to government regulators, began to consider several interesting questions:

Is by-product synergy a true business opportunity, not just cost-reduction strategy?
Can industrial thinking shift from producing zero waste to producing 100 percent product?
Can every gram of raw material become product?
What if wastes are not really wastes at all but raw materials for other industries?

Looked at this way, the glass that was half empty suddenly seemed half full. The challenge became finding a way to fill it to the top. With this goal in mind, TXI and Chaparral launched the Systems and Technology for Advanced Recycling (STAR) program. Its main feature was a new patented process, dubbed "CemStar," that uses steel slag to create Portland cement. The goal of the STAR program is to eliminate waste by developing links between the cement, steel, and automobile recycling operations. Eventually, everything the steel mill produces will, in synergy with adjacent enterprises, be a useful product.

That same philosophy prompted Chaparral to develop the technology to separate another by-product stream -- residue from its automobile shredding operation -- into essentially pure components that can be reused (e.g., as a clean fuel source). The business potential is enormous. The average cost of landfilling waste has tripled over the last decade, from $10 per ton in 1986 to $31 per ton in 1996, according to the United States Environmental Protection Agency. At the same time, the public is dead set against building more landfills. A company that finds ways to shrink or even eliminate landfills has hit upon a potential gold mine.

In these and other projects, a key consideration is profit. Companies cannot be expected to pursue by-product synergy for altruistic reasons. Unless the strategy positively affects the bottom line, it is likely to go the way of other feel-good efforts that fizzle when they end up costing the company money.

That is not the case with the STAR project, where the bottom-line results have been impressive. By adding slag to the cement manufacturing processing, cement production has jumped 10 percent and energy consumption has dropped more than 10 percent. All of this has been accompanied by a comparable reduction in greenhouse-gas emissions.

CemStar allows cement manufacturers to skip two energy-intensive steps. The CemStar process uses steel slag that has already been subjected to the high temperatures of the steel furnace, which supplied the heat of formation of its principal compound, dicalcium silicate, the building block for Portland cement. This saves energy in the cement process, since the step doesn't have to be repeated. In addition, by using lime that has already been calcined, cement manufacturers are able to skip a step that would have expended considerable energy and generated CO₂. The use of CemStar may also eliminate the need for certain raw materials such as clay and shale, which are major sources of hydrocarbon and sulfur emissions.

The implications of this partnership are far reaching. If applied to the entire U.S. cement industry, CemStar could potentially reduce the nation's CO₂ emissions by 8.8 million tons per year, thus offering an economically beneficial way for the industry to help the nation reduce greenhouse-gas emissions. In addition, companies may one day receive carbon-trading credits for their by-product synergy efforts.

The benefits of the synergy approach go far beyond the steelmaking industry, as TXI leaders learned when they teamed up with the Business Council for Sustainable Development for the Gulf of Mexico (BCSD-GM) to promote the idea worldwide. Rather than waiting for companies to discover each other, the Gulf council decided to step in and play matchmaker. One of its most successful "marriages" involves 21 major companies in the Mexican seaport of Tampico.

The participants, who include numerous chemical and petrochemical companies as well as the local Coca-Cola bottling company and an electricity producer, met several times over the course of a year. They collected data on each company's materials and energy flows and identified 68 potential synergies, of which 29 had immediate commercial possibilities. They decided initially to pursue 13 demonstration projects. One of the most promising of these involves an industrial-gas company that wants to manufacture carbon dioxide using waste CO₂ generated by several nearby businesses. The carbon dioxide could then be marketed in areas as diverse as carbonated beverages and agricultural and medical applications.

In another project, one company's 51,000 tons of unusable butadiene (a hydrocarbon used in making synthetic rubber) became a source of cheaper combustion gas for another industry. Another company converted its polyvinylchloride residuals into shoe soles. Other synergies involve sets of companies that generate the same by-product. Individually, the companies can't afford to recover and resell the wastes; together, they can. For example, six companies that together produce 134 tons per year of polyethylene/polypropylene wastes will sell the waste to a seventh company that hopes to build plastic platforms for ship-loading operations.

A less tangible but equally important outcome of the demonstration projects is the ongoing communication and collaboration among the companies. Instead of operating in isolation, they are now working together toward common goals.

Why Isn't Everybody Doing It?

Projects such as the one in Tampico have gotten the attention not only of the companies within the Gulf council, but also of those in the worldwide organization. The World Business Council for Sustainable Development, based in Geneva, consists of business leaders from 125 companies in 30 countries who are working to implement sustainable-development projects. Simply put, sustainable development is a way to meet present-day needs without compromising the ability of future generations to meet their own needs. The Gulf council is one of its 17 regional councils promoting this idea around the world.

Sustainable development makes good business sense because it can create competitive advantages and new opportunities. By-product synergy is a clear example of this concept. So why isn't everybody doing it? For one thing, most businesses are so narrowly focused that they rarely -- if ever -- consider cross-industry synergies. They're expending so much energy keeping up with the competition within their own industries that they don't have the time to devote to such efforts.

A second barrier is government regulations that dictate how businesses must dispose of waste. Such rules can discourage companies from seeking creative alternatives and inhibit technological breakthroughs.

By the middle of the next century, world population is expected to reach nearly 10 billion -- 4 times what it was in 1950 (United Nations Population Division, 1998). The challenge will be to meet the needs of this growing population without depleting the world's natural resources and worsening pollution.

In order to be successful in the next century, business leaders will have to find ways to balance the seemingly contradictory pulls of economic development and environmental protection. It is not a matter of choosing between growth and environmental protection; companies must pursue both simultaneously. No matter how compelling the societal benefits, companies will pursue by-product synergy primarily because it's in their self-interest. As an industry-driven initiative, it will succeed in a way that government regulations could never achieve.

Many environmental regulations are designed to catch the cheater and are predicated upon the assumption that business cannot be trusted. They offer little incentive for companies to come up with their own creative solutions. By-product synergy offers a cooperative, rather than confrontational, approach in which business can take the lead. In doing so, corporate leaders discover that environmental protection offers benefits beyond the cost savings associated with waste reduction. Companies can actually make money by coming up with innovative ways to convert their waste into useful products for others.

Seeing Regulators As Partners

Many government regulators welcome such initiatives from business and can even be viewed as partners, rather than adversaries. The Texas Natural Resource Conservation Commission, for instance, offered to streamline the permitting process and to help TXI identify potential applications for its recycling efforts. The BCSD-GM also found a valuable partner in the Commission for Environmental Cooperation (CEC), an international organization led by the environment ministers of Canada, Mexico, and the United States. The CEC, which was created in conjunction with the North American Agreement for Environmental Cooperation, is helping remove regulatory barriers and promote by-product synergy projects in Calgary and Tampico, among other locations. Canadian companies actively pursuing by-product synergy include Suncor Energy, whose projects include efforts to generate electricity from waste flare gas.

Another example is a collaborative project called "MultiEnergi" on the coast of Norway. Participants, including Conoco and Norwegian oil producer Statoil, are using by-product heat from a large methanol plant to raise the temperature of the seawater a few degrees. That allows them to farm premium fish species like halibut, turbot, and sea bass, which they can sell both in Norway and internationally. Despite the site's proximity to the Arctic Circle, they are also planning to grow fruit, vegetables, and herbs with the help of by-product heat, CO₂, and solar power.

By-product synergy breaks down the traditional boundaries between industry sectors, individual companies, and countries. It also provides boundless opportunities for the future. The day is not far away when companies will mine landfills to extract metals, plastics, and other materials. As businesses join forces to reuse and recycle their wastes, those landfills will shrink and even disappear from our landscape.

Ecoindustrial parks will spring up around the world, making it easy for companies to pursue profitable synergies. Some of the best opportunities will be in developing countries, where industrial parks can be built with by-product synergy in mind from the beginning. Instead of erecting walls, companies will build bridges that encourage interaction and cooperation among industry, government agencies, and environmental groups.

In his 1993 book, The Ecology of Commerce: A Declaration of Sustainability (Harper Business), author Paul Hawken eloquently describes how nature depends on such synergies:

Nature is by definition cyclical; there is virtually no waste in the natural world that does not provide food for other living systems. . . . The lodgepole pine, when it becomes aged and unproductive in its growth, puts out an audible noise, a call, one might even consider it a song. This signal can be heard by the mountain pine beetle, which then begins to eat and break down the tree, creating humus for the next generation of trees. (p. 38)

It is time for business to take an approach toward resource management that reflects the principles of nature. By-product synergy holds great promise as a way to ensure that, like the lodgepole pine and the mountain pine beetle, companies work together to ensure a sustainable future.

References

Hawken, P. 1993. The Ecology of Commerce: A Declaration of Sustainability. New York: Harper Business.
United Nations Population Division (UNPD). 1998. World Demographic Trends. New York: UNPD.
United States Environmental Protection Agency. 19__. Washington, D.C.: U.S. Government Printing Office.

About the Author:Gordon Forward, a member of the National Academy of Engineering, is vice-chairman of Texas Industries Inc. and chairman of Applied Sustainability LLC. Andrew Mangan is executive director of the Business Council for Sustainable Development for the Gulf of Mexico and president of Applied Sustainability LLC.