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Industry and Synergies

Synergies

Industrial symbiosis (IS) is not new, and there have been numerous academic papers written on the subject.

Here is a broadly accepted version of what is the world’s understanding of industrial symbiosis is…

“Industrial symbiosis engages diverse organisations in a network to foster eco-innovation and long-term culture change. Creating and sharing knowledge through the network yields mutually profitable transactions for novel sourcing of required inputs, value-added destinations for non-product outputs, and improved business and technical processes.”

Lombardi, D. R. and Laybourn, P. (2012), Redefining Industrial Symbiosis. Journal of Industrial Ecology, 16: 28–37. doi: 10.1111/j.1530-9290.2011.00444.x

Definitions like this make IS sound complicated and all encompassing. It’s how the academics define it. At KIC we believe this is only a small part of the industrial symbiosis story.

In a nutshell, what they are saying is that industrial symbiosis is about product and by-product exchanges, carried out on commercial terms. Or putting it another way, it’s the product or by-product inputs and outputs of one contributing to the inputs and outputs of another.

The KIA is referred to as the world’s best practice example of industrial symbiosis at work. The schematic shown here maps the synergy exchanges as they were in 2013. In the Kwinana Industrial Area (KIA) we literally have the best example of industrial symbiosis in the world!

Normally people talk about synergies as products and by-products, like in the diagram. The schematic shows but one dimension of IS, there are three more.

The synergies help to make the participating companies more internationally competitive, and this is good. It’s also good for the environment because one company’s waste becomes the input for another.

What is this and why is it valuable?

When two individual companies exchange a manufactured or waste product, usually on commercial terms, this is known as a synergy exchange. Industrial symbiosis is where a whole cluster of industries have many exchanges simultaneously and continuously occurring – this is what happens in the KIA.

These exchanges grow over time as more companies move into the area. The synergies help to make the participating companies more internationally competitive, and this is good. It’s also good for the environment because one company’s waste becomes the input for another. The by-product is no longer a waste needing to be disposed of to the environment.

The value is created for participating companies when, through synergy exchanges, they are able to reduce costs of production, thus increasing their relative competitiveness. Yes, there may be positive environmental outcomes, which is good, but the ‘acid test’ question is “did it improve my bottom line?”

Knowing what product and by-product exchanges are possible within a cluster aids the locational decision process for a prospective new entrant. Each new entrant that participates in the exchanges, increases the overall strength of the cluster itself. Everyone wins. While ‘the world’ talks about the product-based exchanges as being what industrial symbiosis is all about, at KIC we talk about four synergy dimensions, and these are the:

  • Product/by-product synergy
  • Skilled workforce synergy
  • Secondary industry synergy
  • Governance synergy

There’s a big, new wave of industry heading for Kwinana to set up their processing plants so they can take their place in the lithium battery value chain. Why? Because we have all four synergy types in Kwinana, and none of the other heavy industrial clusters do.

Product/By-product Synergy

There are around 150 exchanges operating on commercial terms amongst the industrial companies located within the Western Trade Coast (WTC). Add to this the bespoke products which are manufactured to customer specifications and the number of exchanges grows substantially.

These exchanges developed organically over at least 40 years or more. Representatives from one company talking to their equivalent in a nearby company. Product processes set up to meet the needs of a neighbouring company, by-products once stored or sent to landfill being recognised as an input product into another’s chemical processes. Energy in the form of steam or hot water being seen as an economically viable resource by another.

KIC through its Board and specialist committees has, since incorporation in 1991, been central to the facilitation of the conversations, and it is from the conversations that so many of the exchanges have emerged. This is why we refer to the mode of growth as being organic. Few, if indeed any, exchanges were initiated as a result of public sector interventions. Organic growth.

Skilled Workforce Synergy

The ‘human resource’ synergy in the Western Trade Coast refers to the 30,000 highly skilled and experienced workers that are directly and indirectly employed in KIA.

Two thirds of these workers live within 15kms of their place of work. This means the industrial area is surrounded by residential communities that understand industry. This is an important side benefit of this synergy dimension.

These workers choose to work in the WTC rather than away in the regions via fly in/fly out arrangements, they don’t want to move to other regions to live, and they don’t want to uproot their families. They get to sleep in their own beds when they’re off-shift. They value these lifestyle and career progression characteristics.

What many are in fact happy to do is to move between companies within the industrial area, advancing their experience base and taking promotions.

When a new company builds its plant in Kwinana, it will more than likely attract workers from within the local area. The new company starts up with experienced employees.

What about the future workforce? To answer that, have a look at what we’re doing under the ‘Education’ tab. You’ll see what Kwinana industry is doing to show the students in the region’s high schools that their future careers may be closer to home than they think.

Secondary Industry Synergy

The third synergy is the ‘secondary industry synergy’. Surrounding the Kwinana heavy industrial core where the chemical manufacturing and refining industries are located is a belt of companies that exist primarily to service the nearby major industries. They are connected to heavy industry.

These businesses are the expert fabricators, constructors, engineering workshops, plant and labour hire suppliers, and the specialist equipment maintainers.

There is a financial advantage in these secondary industries being located close by to big industry, their customers, as opposed to establishing in regional or remote areas where these service industries can’t sustain themselves.

Heavy industry has a strategic advantage in having the secondary industries close by because aside from being on industry’s doorstep, they deliver top quality local content products and services to their customers, and have their local reputations to uphold.

Why? Because a great reputation for service, reliability and quality is in their long-term interests.

Heavy industry has a strategic advantage in having the secondary industries close by because aside from being on industry’s doorstep, they deliver top quality local content products and services to their customers, and have their local reputations to uphold.

Governance Synergy

For those reading this from abroad, in Australia we have three tiers of government, these being Federal government, Western Australia’s State government and local municipal government.

First let’s look at Federal governance first. This synergy dimension is about national leadership, and in this context, policy leadership in the heavy industry space. The important aspect of Federal government leadership is the provision of a stable national policy framework, good international relations facilitating international trade and market development, and a supportive industrial relations and taxation environment.

The Federal aspect of the governance synergy is quite strong.

Now to the State of Western Australia. It is important here to make a distinction between the elected and departmental aspects of State governance.

Broadly speaking elected governments have provided a stable environment for industry, there are however some notable exceptions to this; namely there has been a failure to adequately ensure the long term protection of the industrial buffer zone, an unwillingness to commit to bipartisan major infrastructure decisions such as the future location of the Perth metropolitan port activities, and to the provision of certain other major capital works infrastructure projects, all of which would serve to provide increased certainty and competitiveness for industry. A bipartisan approach to setting the broad direction for industry would be useful. But what has been described here as a shortcoming is a not uncommon characteristic across many countries. It is certainly common in the Australian federation.

Departmental governance is generally adequate. There are numerous public sector departments and agencies with some degree of governance responsibility for the Western Trade Coast. It is commonly observed that the sharing of information and resources is problematic. Whilst strategic infrastructure, land use and transport planning for the industrial area seems uncoordinated across the departments, the industrial area functions adequately despite this. There is a great deal of room for improvement and this could easily be achieved through a single agency model.

Municipal governance is also problematic, and is compounded because the WTC is contained within three local council municipalities.  The councils generally have responsibility for local planning and local infrastructure management.  They each have their own local priorities, planning schemes, corporate cultures and approaches to their public infrastructure maintenance.  In reality, this needs to be simplified, and the way to achieve this is to have just the one municipality with local governance responsibility for the entire WTC. 

In summary, the governance synergy has its good aspects and difficult challenges.  Whilst there is a good deal of room for improvement, in an internationally relative sense, the overall governance synergy is delivering good outcomes for industry.  To improve this dimension, the public sector governance of industry, there needs firstly to be a focus on developing clear long term, bipartisan national and State policy leadership, and secondly to accept there is a governmental role to facilitate of the common-use infrastructure that industry needs for it to compete effectively in international markets.  This is not to necessarily say government needs to pay for it, on the contrary, all it needs to do is facilitate the projects.  There is plenty of private sector interest in delivering the projects under the Public Private Partnership (PPP) model. 

There are some clear opportunities to improve the governance of the Western Trade Coast.  KIC is suggesting that a ‘Development Authority’ be created by the State government with responsibility for planning for the development of the whole WTC – the industrial area within the industrial buffer zone, to implement and manage the various development projects involved, and to engage in internationally-focused industry attraction activities.    

Put simply, the challenge for this synergy dimension is for it to fulfill its role in facilitating an efficient infrastructure environment within which industry can thrive.

Case Study for Kwinana Industrial Area

Hypothetically, let’s take a new project coming to the KIA, locating itself in amongst the existing industrial companies. Maybe this could be your project? How does it work?

The Construction Phase:

Your materials, fabrication, project management, and human expertise is sourced ‘from just over there’ in the Naval Base general industrial area, from within the secondary industry support belt. Your fabrication and construction supplier has done this sort of work many times before, and done it well, and because of this you’ve got your requirements met on time and within budget, with good quality materials used and delivered. Any defects or adjustments were sorted out with a phone call. Remember the importance of reputational maintenance.

The Operational Phase:

Your industrial process needs material inputs and it produces outputs.

  • Input materials (maybe process chemicals) needed for your production are sourced from suppliers located ‘up the road’, so minimal transport costs to get these materials to your site – they are piped to you via the pipeline corridor.
  • A power supply is available to you via a neighbouring source of renewable energy. So via ‘the back fence’ you get ‘behind the meter’ priced energy.
  • You source a high proportion (if not all) of your workforce from within the industrial area, from existing companies located ‘up, down and across the road’.
  • You’ve got process by-products to deal with. Are they destined to go to a landfill? If so, that will be a very costly arrangement, and none too good for the environment. As an alternative to landfilling, the company ‘down the road’ will pay you for it because they can use it as an input material for their own chemical process. They pay you for it, and so your by-product now generates an income stream for your operation.

This scenario is essentially accurate. It is a real-life case example of the opportunities that are before a ‘new energy metals industry’ company beginning to settle into the reality of industrial symbiosis in the heavy core of the WTC industrial area.

We have been observing prolific downloading of the product and by-product synergy schematic from our website. There have been literally dozens of company representatives that have taken the KIC tour of the industrial area in the last couple of years. All of this interest points to a fascination with the possibilities the synergies offer to their projects.

 The Kwinana synergies are the reason why many lithium-industry companies have chosen to locate their enterprises here, and why many are looking carefully at the financial opportunities they present.

A working example

Use the link to take you to a real life set of product and by-product synergies in action. The document is one of KIC’s published newsletters and was written during the COVID-19 Western Australian community isolation phase. During this time there were fears individual industries could be closed down due to workers being required to stay at home. The article sets out why such an approach would be unwise because of the industrial interconnectedness.

Synergy schematic upgrade project

In association with Murdoch University and several Masters of Engineering students, KIC has commenced a project to review the synergies schematic. The project will confirm the current product and by-product synergies, add the new exchanges that have occurred since 2013 when the schematic was last published, and digitise the platform for a presence on this website. The other three synergy dimensions will also be added. It is intended that a feature will include the ability to interrogate for product exchanges to assist potentially new industries to the area to make contact with suppliers or receivers of materials. The project is expected to be completed in late 2020.

Want to Know More?

If you are representing a company considering the Kwinana cluster for your project, be sure to contact the KIC and to talk with the Director. KIC will assist you to engage with other relevant companies in the area and to put you in touch with the right people in government’s public service. The stronger the cluster, the better off everyone within it is.

Contact Us

PO Box 649
Kwinana WA 6966

Tel: (08) 9419 1855

Email: admin@kic.org.au

Contact Us

PO Box 649
Kwinana WA 6966

Tel: (08) 9419 1855

Email: admin@kic.org.au