Recreating Sustainable Business, from the Bottom up

Recreating Sustainable Business, from the Bottom up By John Gardner The author describes how the shift to the circular economy is picking up speed and will transform how the aluminium rolled products and recycling industry does business in the future. Novelis has chosen to view this change as an opportunity, rather than a threat, and are moving fast to respond. "We also made the difficult decision to withdraw from products where end of life recycling was limited and the use of recycled content was restricted, such as certain laminated foil products." "Original equipment manufacturers (OEMs) in the automotive industry are under pressure from both government and consumers to improve fuel economy and reduce carbon emissions." In today’s evolving global economy, carbon comes at a cost and both manufacturers and their customers are starting to be held accountable. Carbon taxation, both direct and indirect, is already a reality in many jurisdictions around the world, including much of the European Union, New Zealand, South Africa, South Korea, Quebec and numerous regions in China. Many experts project carbon cost between $40 to $50 USD per carbon tonne. The result is not just higher carbon costs for manufacturers who don’t change their carbon consumption. As the cost of carbon emissions increases, the value of recycle based low carbon products grows for everyone in the supply chain. When Novelis spun off from the nearly century-old aluminium company Alcan in 2005, we had a long history of buying and producing primary aluminium to make our flat rolled products. Knowing that aluminium is infinitely recyclable and that recycling aluminium uses only 5 percent of the energy and avoids 95 percent of the greenhouse gas (GHG) emissions associated with primary aluminium production, we soon decided to make a transformational change in our business model and never look back. In 2011, Novelis set an aggressive agenda to achieve 80 percent recycled content in our products and put recycling at the heart of our business strategy. This required transforming our business from a linear to a circular business model and shifting our supply base from primary metal producers to scrap suppliers. It was a radical shift. Disruptive. But we knew it had to be done, for the sake of our business, our customers and the resource constrained world that we live in. At the time, our global business had 32 percent of our production inputs made up of recycled content. Today, we have achieved 53 percent recycled content, and that number continues to climb, as we work toward our long term goal of 80 percent. Achieving this level of high-recycled content will cut the absolute embedded carbon in our products in half and take out 10 million tonnes of carbon a year from our customers’ supply chains. In addition to the environmental benefits, this new circular model ensures us more supply chain security and provides value-added products to our customers. With our new circular business model coming into place, we are continuing to evolve as a business to reach higher and higher amounts of recycled content. To do so, we have established a number of key work streams across our global organization, from product design and recycling technology, to expanding our recycling capacity, to re-engineering our supply chain and collaborating on end of life recycling rates. Here is a look at what we’ve accomplished so far. Organization Acting on this new global strategy required significant changes to our organizational structure, including the appointment of a Vice President of Global Recycling and the establishment of a global coordinated recycling team. This also involved aligning R&D, Procurement, Commercial, Supply Chain and Manufacturing and other functions to focus on the big shift to the closed loop system. We also made the difficult decision to withdraw from products where end of life recycling was limited and the use of recycled content was restricted, such as certain laminated foil products. Product design and recycling technology To move towards a more circular economy, it is critical think about product design. This has been a key focus for our technologists, often in collaboration with our customers, particularly in the automotive industry, where evolving design specifications are critical to developing products with lighter weight, greater recycled inputs and easier recyclability. Original equipment manufacturers (OEMs) in the automotive industry are under pressure from both government and consumers to improve fuel economy and reduce carbon emissions. By combining the lightweight characteristics of aluminium with high-recycled content, automotive OEMs can leverage the light weighting potential of aluminium even further. Closed-loop recycling systems with customers such as Ford and Jaguar Land Rover will drive the recycled content of our automotive aluminium sheet to 40-50 percent within the next one to two years. Long term, Novelis is committed to delivering 70 percent recycled content in our automotive sheet products. That’s why, in 2012, we opened our Novelis Global Research & Technology Center (NGRTC), to focus on recycling technology and new product design. As a result, in the automotive market, we have developed more recycle-friendly alloys with higher recycled content (RC), such as our RC 5754 alloy used by Jaguar Land Rover. In 2014, Novelis launched our certified high-recycled content evercan™ for aluminium beverage cans, and in early 2015, we launched our certified high-recycled content evercycle™ portfolio for specialty applications, such as food trays and catering containers. Our R&D team is also working on new technologies to separate and process different scrap inputs to support our recycling operations around the world. Capital investment Building the infrastructure to move from 32 to 53 percent recycled content globally is no small undertaking, especially as demand for our products is expected to grow by more than 30 percent over the next five years. As a result, Novelis has invested more than $500 million USD in expanding our global recycling footprint, opening new facilities and expanding existing operations in South Korea, Germany, Brazil and the United States. These new assets have nearly doubled our aluminium recycling capacity to 2.1 million tonnes per year, while also broadening the range of scrap that we process. With the addition of our new facilities, Novelis has built an unparalleled global recycling network. Our footprint allows us to better serve our customers by offering them certified, high recycled content products wherever they operate. We also believe that export of scrap between regions around the world is costly, inefficient and generates unnecessary transport emissions. Our global asset base allows us to recycle material where it is generated and put it immediately back into productive use. Re-engineering the supply chain Having a recycling based sourcing strategy diversifies inputs and broadens our supply base. In just five years, Novelis has moved from a handful of primary aluminium suppliers to tens of thousands of local scrap collectors around the world. This makes our inputs less susceptible to sudden shocks to the market – political or financial - and makes our supply to customers more robust. Furthermore, as we reduce our dependence on the upstream supply chain of mining, refining and smelting, we will cut our absolute greenhouse gas emissions in half - even as our business grows. We have also learned that the best way to preserve the value of recycled aluminium is to convert it back into the same product, over and over. This avoids the value destruction often associated with downcycling, or recycling material into lower-grade products. This is an area where aluminium truly shines versus our competition. In order to avoid downcycling, it’s important to sort and separate alloys prior to recycling. The closed loop recycling systems that Novelis has established with our packaging and automotive customers allow us to efficiently separate alloys on a large industrial scale. Because our customers help us maintain the maximum value of the material, we are able to offer the highest value to them for their separated scrap. Collaboration to build post-consumer recycling Novelis is already recycling 60 billion beverage cans around the world annually, but expanding post-consumer collection infrastructure and supporting recycling education is a necessary pillar to our success in the long term for both cans and other products, including auto and building construction. In addition to buying from thousands of scrap dealers around the world, we also operate our own network of consumer-facing recycling collection centers in the United Kingdom, Brazil and Vietnam. In Brazil, we also have relationships with five can collectors’ cooperatives, each with 200+ members. In the U.S., Novelis sits on the board of the Recycling Partnership, guiding investments in local recycling infrastructure and awareness. And we’re increasingly collaborating with customers, regulators and other stakeholders to support policies that enable more efficient recycling. Transparency Throughout this transformation, transparency has been imperative. To ensure trust and transparency with all stakeholders, our high-recycled content products are certified by reputable third parties, such as SCS Global Services. We have also established a sustainability advisory board made up of leading, external experts to guide us and monitor our results since 2011. As a result of our strong commitment to sustainability, Novelis was recognized for our efforts during the World Economic Forum in Davos this year and we have become the first metals company ever admitted to the World Wildlife Fund’s Climate Savers Program. Looking back Looking back, the year 2011 was truly a defining moment for Novelis. We realized that in our industry, the circular economy was not only possible, but clearly achievable. Not only does recycling make good business sense for the industry, it is essential to our long-term growth and competitiveness. The infinite recyclability of aluminium, with high post-consumer recycling rates and high-recycled content, is one of its greatest advantages over competing materials such as PET and carbon fibre. In a world of very real limits to our natural resources, recycling of aluminium is a powerful tool to drive growth in our markets while simultaneously reducing our industry’s environmental impact.

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