POLAROID CORPORATION
Company Profile
- Location: Waltham, MA
- Size: 11,000 employees
- Annual Revenues: $2.4 billion
- Business: Specialty chemical manufacturing
- Industry Sector: Chemicals Processing/Manufacturing
Capital Investments
A closed-loop batch still solvent recovery system had been left only partially completed for several years due to cash flow problems. Should the project be permanently canceled or should additional investments be made to complete the project?
Business Benefits
The benefits of completing the still are heavily dependent on a number of decisions related to chemical production. Five different scenarios were created and analyzed to represent these decisions, yielding 12-year net present values ranging from -$1.4 million to +$3.4 million.
Why Was Project Performed?
Polaroid had designed a state-of-the-art, closed-loop, multipurpose batch still solvent recovery system for one of its facilities. At the time of the study, construction on the project had stopped for several years due to cash flow problems. The company had invested approximately six million dollars in the state-of-the-art system; an additional four million dollars was needed to complete the system as designed, primarily for equipment and control components.
During the construction delays changes to facility operations took place which, together with the significant construction downtime, rendered invalid the firm's initial profitability analysis. Tellus Institute was asked to revisit the original project analysis with a particular focus on identifying and -- if warranted and feasible -- quantifying less tangible cost items.
Project Description
When it was designed, the solvent recovery still was intended to provide two classes of savings: (1) reduced waste disposal fee costs, and (2) reduced raw materials purchases. During the construction delay, which lasted several years due to ongoing competition for capital funds, facility production plans changed, clouding the question of how many waste streams on site would be suitable for batch still recovery.
Adding to the complexity of the analysis were multi-facility production planning issues, company and government hazardous waste reduction goals and air emission regulatory issues. For example, the production facility at which the batch still had been partially constructed had no other solvent recovery capacity on site. A second production site in the same region had several operating recovery systems, but all were operating at full capacity. This limitation on available solvent recovery capacity had clear production implications for production lines that used expensive raw materials or that generated solvent wastes deemed too expensive to simply ship off site for disposal. In addition, government regulations restricted shipment of wastes between the two sites for solvent recovery, further constraining the company's flexibility for planning production.
Having a batch still system on site would also affect the company's ability to meet both internal, company-wide hazardous waste reduction goals, as well as similar state-mandated goals. The batch still was viewed internally as an important component of future hazardous waste treatment and air emissions flexibility.
Analysis
Initially it was thought that easily quantifiable waste management costs, such as permit costs, labor costs for shipment manifesting, etc., would play a significant role in the analysis. It soon became clear that these costs, although relevant, were not decision drivers in an investment of this size.
It became clear that the primary cost drivers were of two types:
The handler for one of the facility's waste streams (designated Stream A) had safety problems in the past, and the facility's environmental manager would like an alternative treatment option. In absence of the batch still, the only alternative was cement kiln treatment, estimated to have a cost eight times that of the current handler.
The ability of the facility to expand production to include a major intermediate product (Product X) that the firm was currently buying from another manufacturer. Without the batch still recovery system, the costs associated with waste disposal and raw material would make in-house production too expensive.
In addition, the completion of the batch still could be carried out at lower cost by modifying both its design and construction techniques. Five different scenarios were developed: 1) using the kiln to recover waste streams generated on-site, assuming they would otherwise be handled as they currently are; 2) as (1), but assuming Stream A's would otherwise face cement kiln disposal; 3) as (1), but implementing the lower cost completion method; 4) handling waste from production of Product X with the still, thus enabling the savings this on-site production would yield, and; 5) as (4), but implementing the lower cost completion method.
Financial Parameters
Not provided.
Financial Results
12-year NPVs ranged from -- $1.4 million [for (1)] to +$3.4 million [for (5)] for scenarios representing different waste stream mixes, capital expenditure, etc. The TCA helped illuminate the critical link between the batch still project and broader questions of production planning capacity and flexibility. In order to preserve these competitive capabilities, upper management approved funding for completion of the batch still project. The experience has informed continuing refinement of company's cost accounting system.
Institutional Change
Prior to the analysis of the batch still, Polaroid had looked at compliance without taking into consideration any possible benefits other than compliance itself. This project showed Polaroid that concurrent evaluation of compliance and engineering can enhance facility performance. The comprehensive analysis used in this project serves as a model for how Polaroid now analyzes all projects.
Contact
Deborah E. Savage or Allen L. White, Tellus Institute, 617-266-5400.
Source
White, A.L., D.E. Savage, and A. Dierks, "Environmental Accounting: Principles for the Sustainable Enterprise." Originally presented at the 1995 TAPPI International Environmental Conference, Atlanta Georgia, May 7-10 1995. DISCLAIMER: This database presents a number of case studies developed in recent years by a diverse group of organizations. The concepts, terms, and approaches represented throughout the database represent many different philosophies and means of applying environmental accounting principles and don't necessarily reflect the position or views of the US Environmental Protection Agency. Through production of this database, the EPA is presenting many different possible approaches to environmental accounting without intending to endorse any one.
White, Allen L. and Deborah E. Savage, "New Applications of Total Cost Assessment: An Exploration of the P2-Production Interface." Pollution Prevention Review. Winter 1994-1995.
Revised: 04/09/98