A sustainable Solution, as defined by the Solvay Sustainable Portfolio Management (SPM) tool, is a product in a given application which brings higher sustainable value. The product must demonstrate a lower environmental impact in its production phase, while also making a better social and environmental contribution along the entire value chain.

Indicators and objectives

Within Solvay, Global Business Units (GBUs) are accountable for delivering the ambitious Group target for sustainable business performance: by 2025, realize €1 of revenue out of every €2 in Sustainable Solutions.

By the end of 2017, 49% of the turnover in the assessed portolio of product-application combinations is qualified as “Solutions”, a significant improvement compared with the previous year. This improvement comprises:

• seven percentage points due to changes in scope (Technology Solutions SPM assessment completion, Polyamides and Intermediates divestment);
• minus one percentage point from the erosion of Solutions from the existing portfolio.

We readily acknowledge that most of the significant progress towards reaching the 50% Group revenue in Solutions comes from Solvay portfolio changes, whereas the existing portfolio is experiencing slight erosion. This demonstrates the challenges we still face in reaching the 50% target in Solutions through other business levers (organic growth, R&I, capital expenditure, etc.).

The SPM systematic portfolio assessment is aligned with the financial perimeter of the Group. Changes in scope during the year, as reported by the financial reporting, are reflected in the scope of SPM. The 2017 portfolio assessment is based on 2016 sales.

Correlation between SPM analysis and sales growth

SPM is designed to boost Solvay’s business performance and deliver higher growth. Over the last three years, Solvay’s products have experienced significantly different annual revenue growth rates depending on whether customers and consumers are seeking out Solvay’s products to match their unmet social or environmental needs.

Volume annual growth rate per SPM category:

• Solutions: +3%
• Challenges: -2%

(based on sales with the same product, same application, and same SPM ranking over the last three years representing 44% of Group sales, out of which two-thirds came from volume growth).

External validation

* Product Application Combination

Since 2009, Arthur D. Little (ADL), our partner in developing and improving the SPM methodology, has performed in-depth verification of the Market Alignment results. In 2017, ADL screened every Product Application Combination (PAC) in the database and selected 150 PACs for deeper review: 75 with higher value for Solvay based on multiple criteria, and 75 on a random basis. In addition, Solvay submits 50 PACs per year to ADL for review. All the PACs in the database will be reviewed at least every five years. By the end of 2017, ADL had reviewed 200 PACs.

Discussions with Arthur D. Little reveal that we reach the same conclusion for 192 PACs out of the sample of 200, representing an "agreement rate" of 96%. For two PACs (1%), Arthur D. Little reached a better conclusion than Solvay, representing sales of €56 million. For six PACs (3%), Arthur D. Little reached a more negative conclusion than Solvay. By extending the analysis to similar PACs, the sales amount to €190 million. A further materiality analysis on the markets signals is going on and the results will be subject by a third-party review. In the meantime the conclusions from Solvay prevail.