The Union of the European Lubricants Industry announced in October the formation of a task force charged with developing a framework to measure the sustainability of lubricant companies. UEIL officials emphasized that the group is working proactively to define requirements that the European Union is already beginning to introduce for the industry.

The formation was announced at unions annual congress in Budapest by Apu Gosalia, vice-president for sustainability and global intelligence at German lubricants company Fuchs Petrolub. Gosalia is the chairman of the task force, which will evolve into a fully fledged committee of the association at a later stage. For its first year, though, the task force will essentially function as a think-tank.

We need more flexibility and breathing room in the early stages. Not everything is set in stone yet regarding requirements, targets and timeframe, Gosalia told the congress. Three task force meetings are planned over the next year and are to be held in Brussels.

Growing Concern

One of the groups main tasks is to write a framework for lubricant suppliers to report about their sustainability efforts. Around the world there is increasing interest in sustainability – the idea of businesses and individuals taking more responsibility for their impact on the environment and society.

Public perception of the energy industry – of which base oil refining and lubricant manufacturing are a part – is mixed, according to a survey by consultancy EY. It found that less than half of those surveyed had a generally positive view of the industry as whole, while only a quarter of executives it quizzed said the industry had the publics trust. This is mainly linked to negative perceptions of its environmental impact. This lumps the lubricants business in the same basket in the public consciousness.

The lubricants industry is often associated with the oil industry and has carried in a way the stigma of the oil industry, even if the lubricants industry itself enables an enormous positive impact on the environment, Valentina Serra-Holm, president of UEIL, told LubesnGreases. This positive impact is delivered by reducing friction, therefore energy use, and increasing the lifetime of equipment, thereby reducing the demand for steel and other raw materials.

However, this negative perception by association, Serra-Holm pointed out, is not helped by the invisibility of the industry itself.

All that value that lubricants generate…in terms of positive contributions and sustainability…is somewhat hidden and not communicated. This muted communication, she said, contributes to a general lack of understanding of what the industry does by the public and governments.

Standard Kit

Gosalia said European lubricant suppliers also have a business interest in developing a standard; since 2017, the European Union has required public interest entities and businesses with at least 500 employees to file non-financial declarations on sustainability and diversity, including information about key performance indicators for ecological impact, such as energy consumption and carbon footprint.

On at least four issues – environment, social, human rights and bribery and corruption – the Non-Financial Reporting Directive (Directive 2014/95/EU) requires business to not only report on their policies, but also on the outcome thereof, including due diligence. On top of that, companies have to disclose their risks and how they are managed. Finally, entities with more than 500 employees need to make public the key performance indicators relevant to their business.

Gosalia said that at some point, the regional body will extend that requirement to smaller companies and begin to mandate that businesses meet some level of sustainability.

We dont want to end up with a situation where everyone understands something else on sustainability in our industry and in the end we all lose against external regulatory bodies who will then define the standard for us, Gosalia said. That is why we need to develop a standard for our own lubricants industry in Europe by ourselves, and this can be achieved in the sustainability task force and later in the sustainability committee.

Fortunately, the EU Directive does not mandate reporting against a given set of key performance indicators, nor does it prescribe a specific reporting framework. If the UEIL succeeds to set up a framework at industry level, participating companies would only have to specify which reporting framework they have used.

For the past three years, Fuchs has worked with raw material suppliers of the lubricants industry to develop a standard for measuring the carbon footprint of its supply chain. Gosalia said ecological impact will be one criteria of the sustainability framework but there will also be others – measures of a businesss economic sustainability and of its social impacts.

We need KPIs beyond performance and price for selling lubricants, also on the basis of sustainability criteria, Gosalia said. For the ecological dimension, it is important that the industry starts working toward a lifecycle assessment, measuring impacts at every point in the process and along the value chain.

For example, not everything that is biodegradable must be sustainable per se. In the same vein, the products that are not biodegradable may still very well be considered sustainable. It depends on our definition and calculation of sustainability at every stage of the process and value chain.

Making a Difference

Gosalia contended that lubricant companies should actually receive credit for their social impact. Noting that some 30 percent of global energy production is lost to friction, wear and corrosion, he told the audience that the industry needs to draw attention to the fact that its primary focus is to reduce all of these.

Many stakeholders [in] our industry still think of it as black, dirty and ugly, he said. This is not the case. We reduce more CO2 with our products in their use phase than we actually produce in making them. My personal sustainability motto for the chemicals industry, to which the lubricants industry also belongs, is Make the cash. Reduce the trash. This message needs to reach young people in particular if the industry is to attract the best talents in the future, he said, as the next generation expects different things from employers than in the past. It is no longer only about money, the career or job security. It is working for a good and sustainable company that they want.

Here, potentially disruptive industry trends can be seized upon as an opportunity, Gosalia also said.

We can analyze so much nowadays that we can actually make the lubricant talk. Lube specifications in the future will already have sustainability criteria incorporated, he added.

Gosalia noted that organizations other than lubricant companies will be allowed to participate in the task force.

For the first time, the entire process and lubricants industry value chain will work together, from raw material suppliers to lube blenders, customers and end-of-life treatment representatives, he added.

The task force will cooperate closely with the European Rerefining Industry Section of the UEIL and the unions health, safety and environment committee, as well as the Sustainability Initiative of the German Lubricant Industry, which Fuchs helped to form under the umbrella of the German Lubricants Manufacturers Association. It also plans to coordinate with external parties.

We do not have to reinvent the wheel and do everything by ourselves, Gosalia told attendees. If EU bodies have done the right work on appropriate sustainability methodologies – and most of them have – then we must talk to them and take their methodologies. We need to work towards creating a coalition of the willing.

Indeed, the EU Directive acknowledges that a host of non-financial reporting frameworks exists in various sectors and that companies can and do rely on these frameworks.

Good Timing

The timing of the UEIL taskforce might be particularly appropriate. During the second quarter of 2018, a fitness check on the EU framework for public reporting by companies was carried out, with stakeholders submitting a total of 388 responses.

While the majority of participants said the framework for public reporting was beneficial in achieving the objectives of safeguarding stakeholders interests, ensuring financial stability, developing the internal market, integrated EU capital markets and promoting sustainability, respondents were also critical with regards to costs compared to actual benefits when it comes to non-financial information.

The overall assessment of promoting sustainability was that it is still not adequately addressed at the global level, with respondents looking to the EU to take a leadership role. Some participants added that countries should strive towards reaching beyond EU requirements, especially when it comes to sustainability. Additionally, respondents said of public reporting that it can only have a limited impact on sustainability on its own, and that there is a need for greater expertise on sustainability in company boards.

These outcomes mirror Gosalias own observations since breaking the news in Budapest last October. To date, the enthusiasm in the industry for the initiative has been reassuring, he said.