Royal DSM: decarbonising business operations

What was the plan?

Royal DSM (DSM) is a health, nutrition and biosciences multinational headquartered in the Netherlands. In 2019, the company announced its goal to reach net zero GHG emissions across its operations and value chains by 2050. At the time, DSM was one of the first companies to align its climate targets with IPCC recommendations. It also worked with the Science-Based Targets initiative (SBTi) to set an interim target to reduce GHG by 30% by 2030 compared to 2016 levels. It is important to realise that these targets were considered extremely ambitious at the time.

What was the challenge?

Setting clear and actionable emissions targets was an initial challenge for DSM, particularly given the technical complexities of measuring Scope 3 emissions. It was important to explore the origins of raw materials and connect specific numbers to targets. Finding the balance between climate action and other business-critical criteria, such as cost and performance, also remains an ongoing challenge for gaining buy-in for DSM’s targets from its value chain.

What strategies did DSM use?

To achieve its climate targets, DSM has implemented a multi-layered strategy:

  • In August 2021, DSM released a more ambitious set of climate targets also approved by SBTi, including increasing its GHG reduction target to 50% by 2030.
  • It has signed power purchase agreements for renewable power. DSM is targeting at least 75% renewable power supply by 2030, with 100% renewable power supply at the earliest opportunity.
  • DSM reports on Scope 3 emissions. The company runs a supplier and customer support programme called CO2REDUCE, to help both customers and suppliers reduce their emissions with the objective of reducing overall emissions.
  • DSM introduced an internal carbon price. Initially this was set at €50 per tonne of CO2. In 2021, this was doubled to €100 per tonne.
  • DSM assigned climate targets to each of its business divisions, aligned with the overall 2030 goals for the organisation’s direct emissions.
  • It organised a €1 billion revolving credit facility with its long-term banking partners to meet the capital outlay required for increasing its renewable energy capacity and investing in other climate-mitigation initiatives. The facility links the interest rates owed by DSM to its success at reducing its emissions, providing it with a financial incentive to complete and even exceed its 2030 targets.

By taking dramatic emission-reducing measures, the company hopes to provide an example of meaningful climate action to its suppliers and contribute to wider policy discussions.

What were the outcomes?

Sjoerd Dijkstra, the Global Lead Strategic Marketing and Sustainability at DSM stated that “Setting meaningful targets for the individual business-unit level – and not just the corporate level – is a vital step towards creating an organisational culture that prioritizes climate as well as one in which people feel empowered to start taking action themselves” (CISL, n.d.a:2).

According to Dijkstra, meaningful targets and a clear implementation strategy prompted supplier interest and collaboration.

Another outcome of climate targets has been innovation. An example of this is DSM’s resins and functional materials business, Decovery®: a family of plan-based resins for coatings and inks with a significantly lower carbon footprint than traditional paint resins. DSM was able to sell this whole business to Covestro in 2020. By being transparent about its innovation process and the science behind it, DSM created a commercial opportunity as well as carbon savings.

DSM’s climate reduction targets continue to evolve and become more ambitious. Although most targets have been exceeded, there are continued challenges, such as Scope 3 reporting.