Introduction
SABIC (Saudi Arabia Basic Industries Corporation) is one of the world’s largest manufacturer of chemicals and industrial polymers. Founded in 1976, the company has transformed the rural regions of the Persian Gulf and the Red Sea into industrial capitals, has seen a tenfold increase in production since its inception up to the 2010s, is affiliated with 18 Saudi producers, and fathered a fully-integrated subsidiary to manufacture metals (Enabling Tomorrow’s Solutions, 2015). Being a large-scale chemicals producer, the company is under the world’s constant surveillance as to its sustainability. The present paper is aimed at analyzing SABIC’s practices by relying on the nine principles pillaring the notion of sustainability (Epstein & Buhovac, 2014).
Sustainability principles
Ethics
In 2015 SABIC launched an executive workshop to communicate the criticality of ethical leadership (Enabling Tomorrow’s Solutions, 2015). The company conducts due diligence investigations prior to starting any interaction with its suppliers. Within its Fair Employment Practices policy and as a member of the United Nations Global Compact, the company complies with the local employment regulations in whichever region it operates and endorses a culture of non-discrimination.
Governance
SABIC has established a sustainability council consisting of 10 leaders from different departments, with the CEO as the chairperson (Enabling Tomorrow’s Solutions, 2015). This governance structure was set in 2009, together with a steering committee that also involved chief executives from all tiers. The latter is subdivided into several teams (topic, functional, and business), each of which tackles the interests of individual shareholder groups.
Transparency
In 2013 SABIC joined Pearl Initiative, the Middle Eastern establishment promoting transparency as an indispensable part of business culture and a facilitator of competitive position. The company also submits its reports to the Global Reporting Initiative (GRI) to communicate its climatic and environmental impact out in the open.
Business relationships
SABIC Marketing Ltd. (SML) was established to make extra shipping and trade options available to the customers. It has partnered with various organizations offering sustainable shipping and storage within Saudi Arabia and abroad.
Financial return
As of 2015 the company’s dividend payout was 55%, growing in a steady proportion to its net income (Dividends, 2016). The information about the company’s income and the contact information is present on the company’s website for open access.
Economic development
SABIC’s agrinutrient solutions are targeted at increased crop bulk at a lesser amount of the solution itself, which makes crop production more cost effective. A similar strategy is applied in packaging: SABIC’s linear low-density polyethylene can be used in lesser volumes to produce more package units and thus reduce costs as well as carbon dioxide emissions. Its polypropylene products used in health care reduce the cost of disposable items while at the same time improving their quality. The company’s goals include incorporating more consumer-oriented sectors and facilitating cost efficiency in all of them.
Value of services
The company is updated on global trends and needs with regard to economy, culture, and the environment. As it looks forward to integrate key resource management and sustainability, it optimizes consumer goods and products with regard to their functionality, price, and environmental friendliness.
Employment practices
SABIC opposes forced labor and child labor and promotes workplace diversity. As a global establishment operating in several countries and receiving its supplies from all over the world, the company is adherent to local employment practices. The employees receive diversity and workplace ethics training.
Protection of the environment
In 2015 SABIC opened a CO2 purification plant to purify up to half a million metric tons of the substance (RYADH, 2016). The purified emission is channeled to the company’s partners to be recycled and used in commodity and food production. The K 2016 exhibition in the Netherlands featured an array of new sustainable materials developed within the company’s “Chemistry that matters” program, such as Lexan (a reusable UV) and impact-resistant construction material (Kukner & Noels, 2016).
Analysis
Despite being a globally-recognized company, SABIC has only recently emphasized sustainability as an indispensable component of its growth. Before the company set it as one of its major priorities, it experienced a fall in revenues (by 0.5% in 2013) because of a decrease in petrochemicals costs—the key segment of the company’s income (Starling, 2015). The fall made the board realize the need to shift to more sustainable practices despite the company’s entitlement with extreme profitability in the market (with an EBITDA margin of 28% in 2014) and territorial advantages (Starling, 2015).
Because the company realizes its dependence on the gas feedstock, complying with the global sustainability trend is the only way for it to further flourish. Non-sustainable practices would make such scope of expansion impossible for a chemicals manufacturer, but SABIC is compliant with all the fundamental principles of sustainability: It improves the quality, durability, and cost-efficiency of materials, develops and implements strategies for effective resource usage, globalizes itself by embracing the diversity of cultures and human rights, and facilitates economy improvement, thus adding the value to its products.
Conclusion
Overall, SABIC’s strategies are sustainability-focused and are adherent to the industry-specific megatrends and consumer demands. Having assisted the company in overcoming revenue flops, they provide it with a strong base for further expansion.
References
Dividends. (2016). Web.
Enabling Tomorrow’s Solutions: Sustainability Report 2015. (2015). Web.
Epstein, M. J., & Buhovac, A. R. (2014). Making Sustainability Work: Best Practices in Managing and Measuring Corporate Social, Environmental, and Economic Impacts. Oakland, CA: Berrett-Koehler Publishers.
Kukner, B., & Noels, K. (2016). SABIC addressing global trends through ‘Chemistry that Matters™’ at K 2016. Web.
RYADH. (2016). Sabic showcases achievements in sustainability report. Web.
Starling, R. (2015). IHS: innovation and sustainability are key to growth at SABIC. Web.