Solvay SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Integrating sustainability into its business and investments: One of the key aspects of the Group's strategy is its decision to change its Capex approval policy to include an internal CO2 cost that is higher than the market rate (€ 75 per tonne) with a view to promoting a move towards investment in more sustainable activities. We may offer lower profitability than normal business, but the organization does not want to invest without profitability in order to reduce CO2 emissions. The organization also retains financial rigor in its investments. The Group also assessed the potential impact on investment and business opportunities of its aggressive goal to reduce its greenhouse gas emissions by one million tons by 2025. The goal of moving towards an absolute reduction strategy is to align the company with efforts to decarbonize the European economy by 2050 and is proof of Solvay's commitment not to expand its business to the detriment of the environment. Solvay's SPM system helps reduce CO2 emissions and resource consumption.

2. Changing mindsets through the circular economy: Much of today's economy is linear but the linear model is finite: raw materials cannot be consumed forever and the climate is changing drastically. Transition to a circular economy offers solutions and endless incentives. Solvay must change the value chain of its customer. The organization has agreed to become a Global Partner of the Ellen MacArthur Foundation. The Foundation opens up opportunities to engage with leaders in the field, and also opens up access to training and learning. The company should also look for ways of incorporating the circular economy into its business model, an initiative that is still in its early stages but which explores areas such as enhancing the recyclability of composites and metal recovery. Circular economy is an emerging new economic system that is durable and creates value on a sustainable basis; it keeps all products re-circulating constantly, without waste and without waste. This aims to reduce the amount of waste associated with products and services during their use time.

3. Innovation acceleration in batteries for EV-vehicles: The EV market foresees an annual global growth of +30% in the next four years - set to make up 80% of the Lithium-ion (Li-ion) battery market by 2022. The demands for electric vehicles and consumer electronics will drive strong growth in Li-ion batteries. However, the requirement is of advanced technology for faster charging, better layout of battery pack and higher energy density. Reducing costs per kWh is also critical because electric vehicles are striving to compete with automobiles. Solvay is at the cutting edge of battery innovation. Solvay’s ambition is to provide its customers with new and efficient materials to solve challenges in the field of batteries. At the heart of the prestigious EWHA Womans University, Solvay's R&I Center in Seoul is able to build unique partnerships with customers and key market players. The company has joined its peers in the European SAFT initiative to research, develop and industrialize solid-state batteries. And in parallel, they have developed proprietary technology to make a solid electrolyte and support the transition to solid-state batteries. And the company expect their performance on this high-barrier-to-entry market to accelerate even further. One of their high energy solutions which will benefit them a lot in the coming future is Energain® technologies. This will allow next-generation Li-ion batteries to operate at a higher voltage for higher energy density and are now being validated for both electric vehicles and consumer electronics.

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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. Initiatives for Greenhouse Gas reduction: In 2018, the effect of organic growth on greenhouse gas emissions and frequency was offset by emission reductions achieved by renewable energy programs (0.2 Mt CO2), such as Solvay's Jasper County Solar Farm and the Solwatt ® energy efficiency system in-house. Solvay has achieved a 24% reduction in GHG intensity over the past three years, meeting our 20% goal by the end of 2018. Climate change and energy transition are high on the business and political agenda. It is important that future growth doesn’t come at the expense of the planet. In 2018, the company has set a new ambitious goal to reduce its absolute emissions by 1 million tons CO2 by 2025 at constant scope. Solvay invests in a fresh biomass boiler at its soda ash plant in Rheinberg, Germany. This initiative will cut the plant’s CO2 emissions by more than 30% (minus 190 kt/year) while improving its competitiveness. The new boiler, which will be launched in May 2021, will burn recycled wood waste. This initiative follows previous energy transition projects undertaken at soda ash sites in Bernburg (Germany) and Rosignano (Italy), thereby helping the Group achieve its pledge to reduce its CO2 emissions by an absolute 1 million tons by 2025.

2. Offering innovative sustainable solutions: Multinational companies need to focus on value addition by offering sustainable products and solutions to their customers. By the end of 2018, 50% of Solvay’s net sales had been marked as "Sustainable Solutions". Changes in their portfolio (distribution of less aligned companies) explain most of the progress; technology programs to create more sustainable solutions have contributed. The major challenges they face are maintain 50% of Group sales in solutions through innovation, organic growth, investment, etc. Circular Economy principles bring new challenges. Solvay’s use of renewable raw materials and renewable energy needs to increase. The study of Sustainable Portfolio Management (SPM) is rooted in main team and GBU business processes. It helps analyze the portfolio and allocate resources to upgrade its sustainability. Each innovation acquisition or investment project in excess of € 10 million is assessed using the SPM approach to ensure its contribution to sustainable and higher growth. In 2018, more than 100 Solvay workers were educated on circular economy concepts, while 20 of its experts took part in master classes at the Ellen MacArthur Foundation focusing on the transformation of business models and product life cycles. One example is how it can redesign our molecules to support the circularity of the end product through bio sourcing: we have created Amni ® Soul Eco, our biodegradable polyamide yarn, with a strong focus on eco-friendly clothing production.