Inaugural Speech by R. Gopalakrishnan, ED, Tata Sons Ltd at INDIACHEM 2008

Inaugural Speech at INDIACHEM 2008 by FICCI at Mumbai on 20th October 2008 by R. Gopalakrishnan, Executive Director, Tata Sons Ltd. The assistance of Tata Strategic Management Group in the preparation of this paper is acknowledged by the author.

In spite of the breakthrough changes the chemical industry has brought about in the past right from the food we eat and clothes we wear to the cars we drive, it continues to be straddled with an unfavourable image. The chemical industry has made immense contributions to human life backed by a rich heritage of innovation. It cannot afford to be indifferent and not set perceptions right as it gears up to meet the challenges of tomorrow.

I wish to reflect on the paradox that such a hugely life-enhancing industry as chemicals has acquired such a negative public image: it scores poorly in many image studies. I would also like to attempt an answer to two questions-should the chemicals industry be bothered about this paradox and what can it do about it?

Here is one example to illustrate why I have chosen to address these questions at such a seminar.

A recent report (Economist, 11-17th Oct 2008) reported that 500 million people need malaria treatment every year. That is astounding because it is one out of 12 people on this planet. The UN has run a Global Malaria Action Plan for several years but the magazine reports that \"history is littered with failed UN targets and the Plan is not realistic.\" How did we get ourselves into this situation?

As early as 1948, scientist Paul Hermann Muller received the Nobel Prize for medicine for recognizing and unleashing DDT\'s high efficiency in killing insects that spread malaria. Before that, huge numbers of death from malaria had been recorded. While DDT was a spectacular success in this insect killing role, its indiscriminate use in agriculture had unintended negative effects. Rachel Carson, a popular naturalist and author in the US, led a public campaign to ban DDT. She succeeded and DDT has been banned for 36 years since 1972. Of the 500 million who are affected each year, 1 million die; so we have had 36 million deaths since the ban on DDT.

As a citizen of the world, one must wonder whether a \'safe protocol\' would have been better for mankind rather than a ban. While the chemical industry had been innovative in solving the problem, could it have done better in public advocacy? It is a moot and complex question.

Chemical Industry - No clear image association (Fuzzy and vague imagery)

The word chemistry comes from the earlier study of alchemy, which is a pseudoscientific practice encompassing elements of chemistry, metallurgy, philosophy, astrology, astronomy, mysticism and medicine. Alchemy is commonly thought of as the quest to turn lead or another common starting material into gold. Alchemy, generally, derives from the old French alkemie, from the Arabic ?????? al-kimiya\' - \"the art of transformation\".

Society recognises and acknowledges many industries for the sheer scale and magnitude of their visible contribution to human development. For eg., the software industry, automobile industry, telecom industry. However it is surprising that the chemical industry, which is one of the largest manufacturing industries in the world1, with more than a hundred segments and employing over 10 million people does not enjoy an easy recollection in people\'s mind. Along with its contribution to the world economy, the chemical industry has always impacted and changed our lives more than any other industry. Almost every other industry from agriculture to automobiles and electronics uses products from the chemical industry.

The chemical industry is a very complex chain comprising of several bits and pieces. The front end of this industry is limited and the major part of the industry is back end by nature. Our products have enabled the automobile industry to reduce weight, noise and emissions in cars. We have helped improve fuel economy and improved safety in transportation. Our products prevent food spoilage and provide safe drinking water for millions.

One valid reason why the chemical industry does not enjoy a clear image is probably due to the fact that most of our products are not directly consumer facing but are used in other industries. Since the effects of chemical innovations are often only indirect and the lay person is not aware of our contribution, it usually goes unnoticed. Even the few direct customer facing businesses like detergents, salt etc are associated with the FMCG industry more than the chemical industry. In fact the chemical industry has a larger spectrum of industrial customers than any other sector. Over 80% of chemical products are used as intermediates by other industries.

The world tends to think of everything, including industries, in terms of the way it manifests itself. Hence while in case of other industries both their products and image manifest itself to the common man, in our case it is not so clear. The chemical industry will count as the most silent or invisible industry with the most visible impact. An analogy with the chemical industry could be spirituality or religion wherein the principles are simple but what lies behind it is very complex and difficult to grasp. Though this industry is therefore markedly different from others, it is indeed world class in size, scale and most importantly - impact.

Chemical Industry - Negative perception

Having a fuzzy imagery while not desirable may not necessarily be bad in itself.

At my request, the Tata Strategic Management Group recently undertook a dipstick study to find out what images people associate with specific industries. When people were asked about the telecom industry, they were quick to mention mobile phones and communication. The auto industry immediately brought to mind speed and mobility. IT industry was associated with computers and connectivity. However on being asked about the chemical industry, the results are something that should give us all a reason to pause and think hard - it invoked images of a danger sign or a chimney bellowing smoke. Further, on being specifically asked about contributions that the chemical industry has made towards improving the quality of our lives, majority of the respondents admitted ignorance. On the other hand, there was complete unanimity about the chemical industry\'s hazardous impact on the environment.

A recent study by Covalence2 (a Geneva based ethical research organization) ranks the chemical industry amongst the lowest on ethical reputation. The report highlights waste management, information to consumers, product human risk and environmental impact of production as major concern areas for the chemical industry, in turn leading to public calls for more safety, transparency and sustainability.

Another recent pan European survey by CEFIC3 indicated a slight improvement in acceptance of the industry\'s contribution to maintaining living standards. However, three quarters of those surveyed still thought that the industry should face \'stricter control\'. The report also highlighted that when it comes to issues of trust, acceptance and willingness to work in the chemical industry, the perception has only worsened over the years.

1. The chemical industry usually has a fuzzy and vague image recollection; and if at all there is an image association, more often than not it is negative.

2. Over the last few decades people have become more perplexed and concerned about the products that we produce and rarely are we given credit for making their lives better.

The negative image association is in fact more worrying. So what has gone wrong? Why has the world become oblivious to the revolutionary changes brought about by the chemical industry and focused only on the negatives?

Where may the industry have gone wrong?

Back in the late 1800s, chemistry was a noble profession - contributions to improving the quality of life was hailed and chemical engineers, indeed the chemical industry, could stand tall and proud of their efforts. The industry was characterized by technological and product innovations that improved life considerably. Early chemical companies can be compared to the software and computer giants of the 1990s: new, innovative, revolutionary and recognized for their contributions to society.

Can we today imagine a world 50 years hence where software or telecom industry will be hailed as villains and the revolutionary impacts it has made on society is completely forgotten? It would appear presumptuous or downright foolish to even suggest so, but perhaps this is not as outlandish as it would seem - this is precisely what has happened to the chemical industry.

Every industry has some negative fallouts or repercussions. For example, holding mobile phones to your ear for prolonged periods are claimed to have an adverse impact on the human brain, proliferation of automobiles has led to concerns on pollution and depletion of petrochemical resources. But as long as the negative fallouts are minimal and not a pattern, the industry continues to survive and perhaps even thrive and prosper. Industries acquire a negative image when mankind over exploits resources in pursuit of benefits. For instance, the mining industry acquired a negative image due to over-exploitation of natural resources leading to polluted environment for miles around. A similar fate appears to have befallen the chemical industry today.

It is only in the last forty years that the public perception of the industry has deteriorated. While the chemical industry in the first half of the 20th century enjoyed the general reputation of being a high-tech sector that improved life considerably, a number of accidents4 in recent decades shocked the general public and extensive media coverage cemented the negative image that the chemical industry had acquired starting in the 1960s. Ever since Rachel Carson drew attention to the adverse environmental effects of pesticides in her book \'Silent Spring\'5 there has been a growing concern and awareness of environmental issues. The terrifying images of people suffering from chemical warfare in the Second World War also left an indelible image in people\'s mind. Later during the 1970s as global pollution rose up the agenda, more often than not it was tracked down to chemical companies who were literally forced to clean up their act.

Image does matter…

Industries with unfavourable connotations have always found it difficult to grow and thrive whether in terms of public opposition or shortage of bright professionals who wish to pursue careers in that field. Over the years this often vague and unfavourable image has increasingly been responsible for roadblocks for the chemical industry in the form of:

- Stricter regulations: Stricter regulations imply deployment of additional resources and consequently increased cost of doing business e.g. REACH, which came into force from June 1, 2008, is expected to increase the expense for every single kind of product. This could result in closure of several SMEs and resultant loss of jobs in emerging economies.

- Discerning consumers: Consumers all over the world are becoming sensitive not only to the dangers of using products manufactured under sub standard conditions but also to the environmental effects of these products. Recent withdrawal of toys from American stores over concerns of hazardous materials is a pointer in this direction. If the industry does not realize and acknowledge the concerns of its consumers it will continue to face similar opposition.

- Lower valuations: According to Young & Partners, US based chemical industry investment bankers, equity issuance by chemical industry participants has historically been very modest due to lawsuits associated with chemical industry resulting in low company valuations.

If the industry does not wake up and improve its image the situation could deteriorate further. We would make ourselves vulnerable to extraordinary intervention by policymakers and regulators and this regulatory intervention might not necessarily be based on scientific analysis, but on misinformation or as a result of exaggerated hysteria and popular prejudice.

The Reality - an innovative industry improving human life

Much of the innovative work in chemical technology is concerned with taking a product that can be made on a laboratory scale and developing a process that works on an industrial scale. In reality, the chemical industry has contributed some of the most important products that touch human lives, be it food, plastics, cosmetics, toiletries, paints, paper, textiles, or pharmaceuticals.

Its role in shaping human lives cannot be better explained than in the worlds of Professor Ronald Breslow of Columbia University and former President of the American Chemical Society, who said \"... the way modern life differs most from that of earlier times resulted from our learning how to take the molecules of nature and alter them to better serve us\".

The examples below amply demonstrate this viewpoint.

Agriculture

According to Hugh Grant, President and CEO of Monsanto, today there is 20% less agricultural land as compared to 1950s but the population of the world has more than doubled to nearly 6.6 billion. This has led to a tremendous push for increasing the productivity of the land under cultivation. Companies like Monsanto, Bayer, Agrium, and Yara continue to spend significant amounts on R&D to address this challenge through improved fertilizers, pesticides and transgenic seeds.

Synthetic fibres

The introduction of fibres is another important innovation to come out of the chemical industry. The introduction of Nylon by DuPont marked the beginning of the polymer (plastic) revolution. Nylon has now grown into a distinct material category essential for modern life. Many companies continue to introduce new fibres that find varied specialized uses e.g. Invistas\'s stretchable and smooth fibre LYCRA or Dow\'s XLA fibre for marine endurance application.

Automobiles and Aeroplanes

The contribution of chemistry to automobiles, ranging from internal combustion to fuel additives, tires, paints & coatings cannot be denied. According to industry experts, every new car contains chemical products (plastics, additives and coating) worth over USD 1,000. The use of innovative materials in car bodies is one of the most important technological changes of the century. BASF has contributed significantly to the development of Tata Nano, a disruption in the auto industry. This trend of employing low cost light weight material for automobiles is likely to intensify in the future.

The next generation of commercial liners will use composites in about half of their structural components which will help longer range aircraft perform better by significantly reducing weight, using lesser fuel and fewer carbon emissions.

Pharmaceuticals

Chemical synthesis has been at the root of one of the most important sciences affecting human lives - the pharmaceutical industry. By making synthetic drugs possible, chemistry has made medicines more affordable and economic. Moreover, it has enabled research on the body\'s biochemistry that would otherwise be impossible. Advanced research in diagnosis and treatment has made it possible to introduce therapies for previously incurable ailments. Novartis was amongst the first to use \'molecular targeted therapy\' for \'Glivec\' (chronic leukaemia) which has since changed the paradigm of drug discovery.

The Challenge - Building a sharper positive brand imagery

Changing public opinion is often a very difficult and uphill task but with concrete and collective steps the industry can expect some real progress. The stakeholders and society in general continue to make their expectations clear and it is critical for the industry to undertake actions that will sharpen and project its true image to them.

FMCG companies have traditionally been successful in creating brands that evoke positive feelings in consumers. They have successfully created brands that are youthful, relevant and in line with their customers\' needs. By effectively leveraging innovation and technology they have been able to reinforce their image of providing value and benefits to human life consistently. Finally, they have very effectively and regularly communicated these attributes to the public by continuously developing new communication channels and customer touch points.

The chemical industry should take a leaf from the books of marketing organizations and look at re-branding itself to change its image. We should treat the chemical industry as a brand and consider adapting product branding strategies of consumer product organizations for the industry as whole and establish a positive public image.

I would like to briefly touch upon 5 areas to explain how this can be done -

1) Establish associations or imagery that people can relate to

Tata Chemicals today is the world\'s second largest producer of soda ash (after its acquisition of General Chemicals). But the common man does not understand or comprehend what soda ash is or what it means in terms of current and future opportunities. Instead if I put it this way, \"We can all see the current boom in the real estate and construction industry. All new commercial buildings today typically have a large glass façade and the usage of glass for construction is only going to increase as this boom continues. Now Tata Chemicals is the second largest producer in the world for soda ash which in turn is the principal ingredient for making glass which goes into these buildings\", suddenly it becomes more understandable and impactful. By demystifying our products, we can make it more relatable and establish a connect with the common man.

2) Establish industry value - Innovation remains the mantra

The industry should continue to adopt innovation & technology as the driver for future growth thereby re-establishing its heritage as an industry adding value to human life. Advinus, a Tata Group company, is focused on the delivery of innovative solutions and services for drug discovery and development for pharma R&D. The brightest talents here are continuously at work to develop innovative molecules to cure metabolic, inflammatory and neglected diseases of the developing world like malaria, leprosy and dengue.

The future is likely to present even more enormous opportunities with a confluence of the three fundamental sciences viz. chemistry, biology and physics, providing a platform for further game changing innovations.

Biotechnology holds great promise as a solution for some of the major challenges facing the world today. Research and development in the biotech industry could have far reaching impacts on improving the food and energy scenario in addition to its implication on human health. Introduction of next generation GM crops may well be the solution to the global food crisis.

Employing nanotechnology could enable the chemical industry to selectively manage materials at nano-scales and develop materials with new properties that offer significant advantages. Prominent industrial houses in India, including the Tata Group, are investing precious time and money into nanotechnology with a view to creating more innovative and breakthrough products with the potential to rewrite the future.

3) Address current societal concerns

The chemical industry must work towards developing solutions for the most relevant and immediate problems which will create the maximum impact on today\'s generation. Climate change, concerns over future availability of hydrocarbons and the food crisis are critical issues facing the world today.

Sustainability efforts like Green Chemistry6, alternative feedstocks and energy conservation will not only address environmental issues but also incorporate social and economic concerns.

Biomaterial is a mega trend that businesses can respond to, both as an opportunity and a solution to the challenges of reducing dependence on hydrocarbons. Conversion of cellulosic biomass/ waste to fuel can play an important role in producing low cost biofuel and contribute to the world\'s requirement for renewable sources of energy. This will also go a long way in minimizing the diversion of food crops (e.g. maize) for production of biofuel and address the current food versus fuel debate.

Biodegradable polymers, besides its huge applicability in packaging, also have the potential to improve treatment for acute inflammatory illnesses by delivering drugs, proteins and snips of ribonucleic acid to disease locations in the body. Solar energy is increasingly receiving a lot of interest nowadays. Photovoltaic power systems integrated with building design (BIPV) allows architects to create energy efficient buildings without compromising on comfort or aesthetics. Municipal and industrial water treatment is another major concern area for the community which also offers huge business potential for water treatment chemicals.

By attacking problems which are on top of everyone\'s mind today and responding to society\'s concerns we can continually remain youthful and relevant.

4) Build consumer interface - Ingredient branding

The chemical industry in the past has lacked a consumer interface that could make its contribution to development through product innovations visible to the average person. Like Intel which has made a successful effort at technology branding through the \"Intel Inside\" campaign, companies can adopt an \'Ingredient branding\' approach especially for products that are critical intermediates for other consumer facing industries. DuPont has effectively done this with its Nomex fibres for leading brands of toothbrushes and Teflon for non-stick cookware where it is explicitly mentioned on the packaging. Branding campaigns like these will help consumers to recognize the contribution of the chemical industry in making their lives better and safer.

5) Reinforce industry credibility through effective communication

The role of communication cannot be over-emphasized.

All efforts to form a favourable public opinion will fail in the absence of open and effective communication. Lack of public understanding about rationale for the industry\'s actions and non-transparency inadvertently creates an information vacuum. Recognizing the importance of an open and honest dialogue with policy makers and customers will pave the way for a meaningful two way relationship.

The Tata Kissan Kendras (TKKs) started by Rallis aims to increase touch-points and institutionalise regular channels of communication with the farmer. The TKK centres besides being a one-stop point for agro-chemical products by providing the farmer with trusted agro inputs like seeds, fertilizers, pesticides, irrigation and farm implements, also provides world class technical products like soil, water and plant testing. Specialists, such as faculty members from agricultural universities and government institutions visit the centres to conduct extensive training on improved farming practices, backed up with actual demonstration sessions. Efforts like these will hopefully win over the loyalty of the community.

A UK based not-for-profit company Yorkshire Chemical Focus (YCF) came up with a novel way of bringing home the importance of chemicals in people\'s lives with an event called \'Life without chemicals - a one-day challenge\' in June 07. Volunteers were challenged to live without chemicals for 24 hours and the brave contestants accumulated points for everything they used containing chemicals with points listed under the four categories of essential living, work, lifestyle and luxuries. The sponsors, Ciba Specialty Chemicals, offered a day\'s experience for the winner with the least accumulated points, which could be a helicopter ride, a makeover, rally driving or a health spa day. According to Jane Mockford, CEO of YCF \"What was interesting about the challenge was that people found it incredibly difficult to achieve. Most of the participants had no idea what a big part chemicals play in their everyday lives and it proved to them that there is a very positive aspect to the chemical industry that they don\'t often hear about.\"

The ICCA7 (International Council of Chemical Associations) has done a credible job in communicating with providing more health and environment information about industry products and operations. Along with such collaborative efforts it is also imperative that individual companies act in a similar manner and open up communication channels with customers, investors, government bodies and local communities.

In conclusion I would like to re-emphasize that the chemical industry needs to act fast to regain its rightful position as a responsible technologically focused industry. We need to continually engage with our consumers and communicate the value the chemical industry adds to their daily life. We need to look at re-branding the industry so that we project a more realistic image. Lastly we should pursue innovation even more vigorously with renewed focus on sustainable development and address problems which plague the society today.

Notes and References:

1 The chemical industry is in fact the second largest contributor to the world GDP. (source: IndiaChem 2000 - Vision statement by Mr. Mukesh Ambani)

With over 70,000 product lines in its portfolio, the chemical industry accounts for over 3-4% of global GDP. This makes it among the largest manufacturing industries in the world. Total value of chemicals produced in 2002 was EUR 1841 billion (~USD 1.9 trillion based on 2002 year end exchange rate) (source: The Chemical and Pharmaceutical Industry in China, Chapter 1 The Global Chemical Industry, publisher Springer Berlin Heidelberg, Copyright 2005).

2 Covalence Chemical Industry Report 2007: Covalence is a Geneva based ethical reputation research firm. In 2007 report, the chemical industry came 9th out of 10 in Covalence\'s EthicalQuote ranking, ahead of Oil and Gas. Covalence tracks the ethical reputation of multinationals by sourcing information from companies, the media and civil society.

3 Pan European CEFIC survey: The European Chemical Industry Council (Confédération Européenne des Fédérations de l\'Industrie Chimique) is a Brussels-based organisation representing national chemical industry federations and chemical companies. The survey report mentioned was first published in 1992, and since then every two years the organisation has released a survey aiming to gauge the public\'s perception of the chemical industry.

In 2008 CEFIC conducted telephone interviews with over 12,000 people across the UK, France, Belgium, Holland, Germany, The Czech Republic, Hungary, Poland, Spain, Italy and Sweden. Its results demonstrated that \"huge\" country-by-country differences exist in attitudes to the chemical industry. There is not a \'European public opinion\' but a Europe of public opinions, the survey states, before comparing results from both France and the UK to demonstrate such diversity in attitudes: \"The French … are more fearful of new technology and increasingly critical of companies\' low corporate social responsibility, whereas [the UK] appears increasingly concerned by companies\' increased focus on profits and possible subsequent loss of jobs.\"

The survey did, however, find some similarities across Europe. Three-quarters of those surveyed thought that the industry should face \"stricter control\", and around half of those surveyed believe the industry is more open and informative than ever. The survey also showed trends in general public opinion of the sector: \"It is clear that the public accepts our vital contribution to employment, the economy and to maintaining living standards. However, when it comes to issues of trust, acceptance and the willingness to work in the chemical industry we have regressed in the eyes of the public in the last two years.\"

4 The most prominent accidents took place in 1976, 1984 and 1986. First, dioxin, one of the most toxic chemicals known to date, escaped from a chemical plant just north of Milan, Italy. Wind carried the toxic cloud to the municipality of Seveso, where about 37,000 people were exposed to chemicals, some of which came down with health problems only a few hours later. 4% of local farm animals died and the remaining 80,000 were killed to prevent contamination from filtering up the food chain. In 1984, the leakage of toxic chemicals at a Union Carbide plant in Bhopal, India, resulted in the death of 3,800 people and led to $470 million in compensation payments. Only two years later a fire at a Sandoz plant in Switzerland caused significant pollution of the Rhine River and together with the Seveso accident came to symbolize in the public mind the dangers of chemical production in densely populated Europe. The leakage of toxic chemicals that had been buried for decades in the Love Canal forced the evacuation of local residents in 1980 and galvanized the U.S. public to address the nation\'s toxic waste problems. (Source: Chemical Industries after 1850 - Article for the Oxford Encyclopedia of Economic History - Johann Peter Murmann, Kellog School of Management - May 17, 2002)

5 Silent Spring: author - Rachel Carson, published by Houghton Mifflin, publication date - September 1962. The book is widely credited with helping launch the environmental movement. The book was widely read (especially after its selection by the Book-of-the-Month Club and an endorsement by Supreme Court Justice William O. Douglas), spending several weeks on the New York Times best-seller list, and inspired widespread public concerns with pesticides and pollution of the environment. Silent Spring facilitated the ban of the pesticide DDT in 1972 in the United States.

The book documented detrimental effects of pesticides on the environment, particularly on birds. Carson said that DDT had been found to cause thinner egg shells and result in reproductive problems and death. She also accused the chemical industry of spreading disinformation, and public officials of accepting industry claims uncritically.

Silent Spring has made many lists of the best nonfiction books of the twentieth century. In the Modern Library List of Best 20th-Century Nonfiction it was at #5, and it was at #78 in the conservative National Review. Most recently, Silent Spring was named one of the 25 greatest science books of all time by the editors of Discover Magazine.

6 Green Chemistry: design of chemical products and processes aimed at reducing or eliminating the use and/or generation of hazardous substances.

7 ICCA: The International Council of Chemical Associations (ICCA) is the world-wide voice of the chemical industry, representing chemical manufacturers and producers all over the world. ICCA promotes and co-ordinates Responsible Care and other voluntary chemical industry initiatives.