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Note 12: Products and solutions

AkzoNobel’s challenging target to increase the percentage of eco-premium solutions to 30 percent of revenues by 2015 involves teamwork and cooperation with stakeholders across the entire value chain. Sustainability and the reduction of our ecological footprint are embedded in AkzoNobel’s strategy for RD&I and these aspects are inherent throughout the innovation process. Our sales and marketing professionals have a pivotal role to play in engaging with customers to identify products to meet their immediate functional needs, and to deliver against immediate and longer term sustainability requirements.

Eco-premium solutions

Eco-premium solutions help to create value for our businesses and our customers. They provide top line growth opportunities because of their improved performance in areas such as raw material use, manufacturing processes and product innovation. These solutions demonstrate improvements in our own operations and across the entire value chains in which we operate. We seek to offer solutions that allow our customers, their customers, or the end-users, to minimize their environmental or safety impacts. We also achieve improvements by working with our suppliers to reduce their eco-footprints. Our innovations are focused on identifying new and lower footprint product formulations, processes and applications with the aim of serving our customers’ needs with as little environmental and safety impact as possible.

We have an ambition to increase the share of revenue from eco-premium solutions year-on-year to at least 30 percent. This is a challenging goal because the assessments are made against equivalent mainstream, or standard, products in the market, which is a moving target. Since 2008, our businesses have carried out annual assessments of their product and RD&I project portfolios. In 2012, total revenue from eco-premium solutions was about €3.5 billion. We have maintained the proportion of revenue from eco-premium solutions for the company as a whole, which stayed flat at 22 percent despite tough trading conditions, cost pressure and product downtrading. This figure is the composite of revenues achieved by Specialty Chemicals (25 percent), Performance Coatings (14 percent) and Decorative Paints (26 percent).

Eco-premium solutions
in % of revenue

Eco-premium solutions as % of revenue (bar chart)

An eco-premium solution is measured using a quantitative analysis or a qualitative assessment focusing on six categories: toxicity, energy efficiency, use of natural resources/raw materials, emissions and waste, land use and risks (e.g. accidents). The eco-premium solution must be significantly better than currently available solutions in at least one criterion, and not significantly worse in any.

VOC in products

AkzoNobel remains committed to taking a leadership role in the reduction of VOCs within the coatings industry and we are beginning to see the impact of substantial RD&I effort in reducing the VOC content of our products. In view of changing market dynamics, we have adopted a renewed implementation mode in our strategy for reducing the use of VOCs in our products. We will focus on implementing our VOC reduction projects on a regional basis, and to that end we will continue to use the comprehensive model created by a cross-functional group of RD&I, marketing and product stewardship in order to track and quantify the progress of our projects.

The world has changed substantially since we initiated this program in 2009. Our sales forecasts are showing that the balance of growth is beginning to shift. We are now expecting to see less growth in waterborne wall paint products globally, but on the other hand, we expect higher growth in China, where historically market conditions have been more favorable towards a product portfolio that is on average higher in VOC content.

Our resolve to reduce the use of VOCs remains strong; we will focus heavily on Europe and North America, where we are in the process of implementing the highly promising results of RD&I projects that resulted in reformulated products, reducing or even eliminating VOCs. In 2011, the Decorative Paints business managed to reduce the average VOC content in its products by 18 percent and 15 percent in Europe and North America, respectively (compared with the 2009 baseline). Total VOC content in all our products sold in these markets has dropped by 17 percent and 22 percent, respectively. Our forecasts show that this reduction trend will continue in the future.

We are making technological progress in reducing VOCs in products sold in China, but we must also keep up with the market and match our product offering to customer demand. It is a feature of the coatings market in China that customers are not migrating as quickly as customers elsewhere towards low or zero VOC products. We have key projects in place to mitigate the absolute output of VOCs, but we forecast strong growth in product categories that are comparatively high in VOC content. Therefore, we will not be able to reach the same level of VOC content reduction that we have set out to achieve in other markets.

Despite the changes in our global sales mix, we are already seeing results of our RD&I projects. We will continue to measure and analyze the VOC content in our products on an annual basis. Our evaluation of the 2011 position shows that against the 2009 baseline, we have realized a 6 percent reduction in average VOC content across our coatings and paints product ranges.

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