Koninklijke DSM SWOT and PESTLE Analysis

Strength

1. Global and broad nutritional and other specialty ingredient solutions business: In the Nutrition segment, the portfolio for Royal DSM include nutritional ingredients which includes vitamins, minerals, enzymes, nutritional lipids, yeasts, carotenoids and eubiotics. It also includes texturants, flavors and cultures. This level of diversity makes the portfolio complete and the level of integration makes the portfolio resilient as it limits exposure to single products or customers, while at the same time benefits from the opportunities that are created by global trends. There is an increase in local players in different geographies. Since cost cutting becomes a challenge for them, DSM provides tailored nutritional solutions to these players which are possible due to their global presence and constant innovations through research and development. DSM also helps global players by helping them reduce their manufacturing and R&D costs with the help of their premix capabilities. They also provide innovative solutions to both local and global players to reduce sugar, salt and fat.

2. Leveraging unique technology capabilities to develop innovative, sustainable solutions: Royal DSM is focused on building a strong innovation pipeline that is aimed at driving long-term growth. The company is leveraging its technological capabilities to create solutions that address some of the biggest challenges facing society and the planet such as climate change, resource scarcity and malnutrition. In 2019, Royal DSM invested 5% of sales in R&D with this aim in mind. The company’s R&D capabilities encompass all the segments and have multiple success stories to show its competency. The company gains early access to new ideas by engaging in external innovation with academia, start-ups and other partners. Project Clean Cow is one of its success stories. This project is an innovative feed solution that reduces the emissions of greenhouse gas (GHG) methane from cattle by at least 30%. The company is all set to commercialize this product in Europe by late 2020 or early 2021.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Move towards renewable energy: Royal DSM has always been a big supporter of renewable energy and has always taken conscious steps towards achieving their goals of using renewable energy. In April 2020, DSM signed its largest renewable energy Power Purchase Agreements (PPAs) to date with Origis energy in USA and EDPR in Europe. Power Purchase Agreements are essentially contracts between two parties, one of which generates electricity and the other party uses it. With the signing of the PPA by DSM, the company has added a capacity of 76MW of renewable energy in Europe and 78MW in USA. This will help DSM cut down its CO2 emissions by around 85,000 tons per year. These will cover a little less than one-quarter of DSM’s current total annual power consumption. This also pushes DSM ahead of schedule in reaching their ambitious target of 3/4th of their power consumption to be through purchased renewable energy.

2. Reduction of carbon footprint from operations: Royal DSM has decided to lead by example when it comes to tackling climate changes. DSM has set a goal to reach net-zero carbon emissions before 2050. It has taken concrete steps in this direction. With the signing of Power Purchase Agreements with Origis and EDPR in early 2020, DSM would be cutting down CO2 emissions by around 85,000 tons per year. The company has decided to ensure all new investments by the businesses to be carbon neutral. DSM is one of the few companies in the world that has also adopted Internal Carbon pricing. Such pricing puts a monetary value on greenhouse gas emissions, which businesses factor into their operations and investment decisions. Such models serve a useful purpose as it helps redirect investments towards low-carbon technologies. DSM also supports their suppliers with emission reduction projects which are undertaken by CO2REDUCE programs. DSM thus has taken the right steps in this direction and is in fact ahead of their schedule in achieving their targets.