View from the C-Suite: DSM CEO Feike Sijbesma

View from the C-Suite

View from the C-Suite: DSM CEO Feike Sijbesma

Underlying image CC licensed by Flickr user C. G. P. Grey

DSM is a $12 billion life sciences and materials sciences company headquartered in the Netherlands. The company has intentionally transitioned out of chemicals and is striving to make 80 percent of its pipeline eco-friendly.

DSM's diverse markets include food ingredients, personal care, livestock feed additives, pharmaceuticals, automotive materials, paints and electronics, as well as alternative energy and bio-based materials. The company supplies many of the Fortune 500, including Unilever, PepsiCo and General Motors.

Heather King talks with CEO Feike Sijbesma about the importance of biotech to sustainability, second-generation bio fuels, and the 'green legacy' of Dutch companies.

Feike SijbesmaOver the past decade, DSM has transformed itself from a leading international chemical company to a 'life sciences and material sciences' company. What is the business case for moving a chemical industry giant out of chemicals?

DSM is 109 years old. We started as a coal mining company -- Dutch State Mines. After World War II, we saw that coal mining's future was not promising. Gas had been discovered locally and the government threatened to close mines. In response, we diversified into chemicals.

From 1960 through the 1980s, we were one of the leading international chemical and petrochemical companies, together with Dow, BASF and Borealis. Over the years we learned that the chemical industry is highly cyclical. Competitors who were backwardly integrated into oil and gas had the advantage. So, in the 1990s, we decided to shift into biotech and renewable resources. We ultimately divested ourselves of chemicals.

We are now fully focused on life sciences and materials sciences. Our most significant market is food and nutrition; we are the largest food ingredient supplier in the world. We supply giants such as Nestle and PepsiCo. We are the second largest pharmaceutical supplier in the world. We also produce high technology materials, such as Dyneema, the world's strongest fiber, as a substitute for Kevlar. Such specialty-engineered materials replace metal applications in products like cars, making them lighter and more fuel-efficient. We offer new materials for solar energy, such as coatings for the solar cells that reduce reflection and increase transmission. These are all growth businesses.

Our financials are more robust since our shift away from chemicals and into these fields. Increasingly, our business is all about providing customers sustainability.

Can you provide examples of how you 'supply sustainability?'

Unilever is one of our customers. They want to be a much more sustainable company. We provide Unilever sustainability by supplying products that are made of renewable green raw materials.

We also provide sustainability to electronics and automotive companies. For example, we have materials that go under the hood of a car that are heat resistant and replace steel. The car is lighter, uses less fuel and is easier to recycle at end of life. We provide water based paints as opposed to traditional solvent-based products. They are health and environment friendly.

We are mandating that 80 percent of our product pipeline be 'Eco Plus.' 'Eco Plus' means that our products are better than the mainstream. We calculate the environmental footprint -- including CO2, water, waste -- of our products and the total supply chain. We want our solution to be 5-50 percent better in terms of environmental impact than alternatives.

Are there certain segments where achieving 'Eco Plus' is easier?

Sustainable products play a role in all our end markets. It's a global trend. I see it with our automotive customers, our electronic customers, and our food customers.

It's not that all our offerings need to be 'Eco Plus' tomorrow. But, we want 80 percent of new DSM products to raise the bar. On the converse, we would have difficulties developing an 'Eco Minus' product, a product that might be profitable, but environmentally worse than mainstream solutions.

We are a great promoter of global 'eco' standards. In the U.S. you have 800 green labels; in Europe we have 600. We are working with the United Nations and industry peers like BASF on developing global standards. We absolutely believe in harmonizing industry metrics.

Has DSM ever abandoned a profitable product line in your move out of chemicals?

We have faced dilemmas with our own operations. In China, we build factories with wastewater treatment systems, instead of emptying waste streams into rivers, like some our (local) neighboring competitors do. The costs are higher and so could potentially impact our competitive position. Even so, we would not dump in Europe, so don't do it in China either.

DSM has made significant forays into the biofuels industry. What do you see as the biggest opportunities in biofuels?

We are living in the fossil age and we will switch towards the bio age. We have been digging coal, oil, and gas out of the ground for 150 years or so, and we will do that for another 100 to 150 years. Then the fossil age will be over. We'll switch to 'bio.' Five hundred years from now we will be described as "those guys who ran our entire economy based on fossil resources, for heating, transportation, materials, housing, electricity, etc. ... everything."

The question is when this shift will happen. I think the switch to a bio-based economy is happening now. I believe we are at the peak of the fossil age and that's the moment a switch starts. In terms of materials and everything we use everyday -- building, cars, electronics, carpets -- the 'bio' element will be extremely important. Similar products will still be needed, but the technology and the input materials will be completely different. The opportunity is tremendous.

We are also starting to see second-generation biofuels that use waste instead of food staples. The key challenge is that waste streams start with cellulose as opposed to glucose. Glucose is easy to convert to ethanol. Cellulose is more challenging; you need enzymes and new technologies. A few companies including Dupont, Novozymes and us are working to enable enzyme conversion for second-generation biofuels. To date, we are the only company with access to the necessary microorganisms. In fact, we just acquired C5 Yeast Company. This acquisition furthers our capabilities in second-generation biofuels conversion.

Is it challenging to get access to waste streams?

No, the waste streams are there. Look to Brazil. When you harvest the sugar beet, the leaves, roots and all the waste are piled and burned. The waste streams are available next to factories. What we need is a logistical system to collect, pre-treat and to convert it. So far nobody's doing a lot with these waste streams. But in the future, as we tap those resources, it will be more interesting.

The Netherlands has historically been a pioneer of sustainability. Has being headquartered there influenced your sustainability commitment?

It is interesting that many Dutch companies lead their industry sectors on the Dow Jones Sustainability Index. We have led the chemicals sector for years. Unilever leads the food industry. TNT Express, a post and express company leads transport. KLM Airlines leads the airlines. It's not because of government policy or mandate. It might just be that we are a tiny little country that is densely populated, and we more easily see that we need to manage our resources better if we want to continue life on this planet. Or maybe it's just in the drinking water …

Looking ahead, what is your vision for DSM?

Sustainability is not a passing fad. We live with 7 billion people. It will soon be 10 billion people. We need to guarantee a good life for next generations.   Current approaches are unsustainable so we need to do something. I'm 100 percent convinced this whole sustainability trend is here to stay.

The resources in the world are unevenly distributed. This will change, especially as 'the East' claims its share. In the West, we need to learn to do more with less. How? Through innovations, breakthroughs, new raw materials. Biotech will play a huge role in the multiple industries to make products more sustainable and enable us to do more with less. 

As for DSM, we want to lead by example and demonstrate that sustainability and profitability go hand in hand.

Underlying image CC licensed by Flickr user C. G. P. Grey.