New business models driving fresh approaches to sustainability
Sustainability has long been embedded in everything we do at AkzoNobel – it has become an integral part of the way we do business. As the world changes, however, our approach to sustainability adapts, improves and changes with it.
For example, being sustainable today goes far beyond simply generating more sustainable product solutions. Truly innovative companies are embracing ever-evolving business models that offer a clear link to longer term economic success.
So there’s now a much stronger focus on developing sustainable business models across the value chain – with both private and public sector partners. It’s a new way of thinking which is stimulating fresh approaches to service delivery and partnerships, as well as driving leadership in market transition.
These new models represent an evolution in how sustainability is driving innovation and generating revenue growth. They are accelerating the belief that sustainability represents the only way to do business, building on the more traditional model of sustainable product and process innovation.
We made good progress with three innovative business models during 2016. They not only harness the value-creating potential of sustainable innovation, but also tackle some of the unresolved economic, environmental and social challenges the world is facing. Explained in detail below, they demonstrate how true leadership in sustainability can benefit balance sheets and at the same time help to transform entire industries.
Service models
Our customers fully understand that we don’t just sell products – we also provide product performance, such as insulation, heat reflection and antifouling. But we are always striving to do more.
Many of our businesses already deliver additional services to the products they sell. For example, in Vehicle Refinishes, we are helping bodyshops to become more efficient by recycling solvents and reducing both drying time and energy costs. Our Intersleek marine coatings also offer several benefits, such as fuel savings of up to 10 percent.
Intersleek has been at the forefront of helping to make the shipping industry more sustainable for a number of years, but recent developments are taking this to a whole new level. It’s a classic example of how sustainability is contributing to new business models.
How our carbon credits scheme works
With new global agreements in place that have set carbon reduction targets, two sectors found it difficult to set limits – the aviation industry and the shipping industry. The aviation sector was eventually able to put a global plan in place, but for the shipping industry it has proved more difficult. Our Intersleek foul release coating is helping to change that. We can offer a viable solution which is already making a positive impact and is laying the foundations to enable the shipping sector to make rapid progress.
The product itself has been a success for many years. The game-changing development which could prove so pivotal is that we’ve introduced a new tool – Intertrac Vision – which provides owners with performance predictions bespoke to individual vessels, depending on their shipping routes, speed and activity. We further built on this by establishing a landmark carbon credits scheme to reward ship owners for converting to sustainable hull coatings, such as those available in our International product range.
Our Intersleek foul release coatings are playing a key role in helping to make the shipping industry more sustainable.
Developed over a number of years in conjunction with The Gold Standard Foundation and Fremco Group, the award-winning initiative made its biggest award to date in 2016, when Grimaldi – who specialize in maritime transport – were presented with a total of 109,617 carbon credits, valued at more than $500,000 at the time of the award.
Shipping needs to see more uptake in clean technology to improve its sustainability. Our carbon credits program proves that by making the investment, ship owners can benefit from both increased efficiency gains and lower fuel costs.
These benefits were only made possible by reinventing the service we provide to our customers. In Intersleek’s case, we developed the products, the performance of those products, the tools to measure the resistance of the hull and the fuel efficiency, and introduced a market-based mechanism which will enable the shipping sector to make the transition to becoming a more fuel efficient, modern industry.
The carbon credits scheme is spearheading the ongoing evolution in our service models that is putting sustainability at their core. By making such a strong link to longer term economic success, we are enabling sustainability to make an even bigger contribution to driving our innovation, helping our customers and generating value for the company.
Partnerships
People often used to question how partnerships could lead to profitable business development. But as companies continue looking for ways to use more renewable resources and de-carbonize their energy, partnerships are becoming an increasingly valuable and effective way to strengthen your business.
At AkzoNobel, we’ve been particularly active as a consortium leader in recent years, notably in our Specialty Chemicals business. There are several examples of how we are linking up with other business partners, as well as bringing together multi-stakeholders from the private sector, academia and the public sector to create public-private partnerships with a strong focus on sustainability.
A good example of this is the continuing emergence of Power Purchasing Agreements. It’s a model which is gathering momentum in north-west Europe in particular, as well as developing quickly in India and North America.
Two years ago, AkzoNobel took the initiative and formed a consortium to jointly source power from renewable energy projects for part of our operations in the Netherlands. During 2016, we signed a joint agreement to buy electricity from Krammer wind park, which has been established by two local cooperatives with 4,000 members in the province of Zeeland. The four companies involved have agreed to source a total of 350 million kWh a year once the Krammer wind park becomes operational in 2019. This is equivalent to the total annual consumption of 100,000 Dutch households.
The partnership model works particularly well in the Netherlands, where we still lose around 2 percent of all our energy in the country purely from residual heat. This is mainly due to the steam and hot water lost from energy and power production. There are solutions for harnessing this waste – the biggest source of energy in the chemical industry is heat – but they require collaboration.
The first thing you need is a partner who is willing to use the high temperature steam or hot water. Then if lower temperatures are involved, cities can use this to heat houses. But somebody needs to build the grid. So it requires a combination of local government, power companies and the chemical company itself. Together, they can reduce wasted energy and heat and enable each other to benefit from energy at low cost, and even innovate from gas to biosteam. This is exactly what we do in Hengelo in the Netherlands, where our salt production site sends its residual heat to a local residential area.
In nearby Delfzijl, we are purchasing sustainably generated steam from biomass from Dutch energy provider Eneco. By reducing our dependence on fossil fuels, we expect to cut CO2 emissions at our Delfzijl plant by an amount equivalent to what is produced each year by 12,500 Dutch households.
Our ultimate aim is to help increase the share of renewable energy in the Netherlands, which currently stands at around 5 percent. Globally, AkzoNobel’s own renewable energy share is about 40 percent. We are determined to increase this figure, further de-risk ourselves and strengthen our business for the future – and partnerships will play a big role in helping us to achieve this.
Market transition
As one of the world’s biggest decorative paints companies, we invest a substantial amount of time and money in new technology and innovation to improve the products we offer to our customers. We also pay close attention to market trends, anticipate likely developments (when we’re not setting the pace ourselves) and constantly identify growth opportunities.
One example of where we are at the forefront of a market transition which will help generate future growth is in water-based paints
One example of where we are at the forefront of a market transition which will help generate future growth is in water-based paints. There was a time when professional painters and decorators tended to shy away from water-based products, with solvent-based paint being very much the preferred option for trim and woodcare.
Fast forward to today and things are very different. Innovation has resulted in major advances in the quality of water-based products. They are fast-drying, odorless and offer better color retention, as well as being kinder to the environment. As a result, adoption of water-based products is gathering pace, particularly in Europe and Latin America.
The environmental benefits are clear enough. For example, one ton of solvent can have the same impact as eight tons of carbon. When they enter the air, solvents also contribute to smog and air pollution. With countries all over the world having agreed to nationally determined carbon reduction limits, it’s likely to be only a matter of time before we see a global shift to water-based coatings.
In anticipation of this move to more sustainable solutions, our Decorative Paints business has developed a new market approach which will help us to drive and accelerate the transition that’s starting to take place.
During the last few years, an ongoing transformation has been taking place within the business to shift its portfolio more towards water-based and VOC-free. It involves our products globally as we continue to de-risk ourselves from carbon and is already having an impact in countries where health and well-being is becoming a lifestyle choice.
For example, the pace of change towards water-based coatings in China owes much to government initiatives, such as the increase in taxes on solvent-based coatings introduced around a year ago. They understand the problems caused by solvents and we welcome steps that countries such as China are taking in an effort to encourage market change.
A lot has certainly changed in the last ten years and VOCs are now at a significantly lower level. There is still a lot more to do, however, and we are working hard to lead and accelerate the transition through both innovation and education. We know the world is ready and we have a portfolio of sustainable solutions available to drive the ongoing market transition.
Volatile organic compounds.