Note 8: Cradle-to-grave carbon footprint

Carbon footprint cradle-to-grave

Product carbon footprint

Climate change has never been a more important topic. The Paris Agreement reached at COP21 sets legally binding targets on countries to reduce their greenhouse gas (GHG) emissions, accelerating the transition to a low carbon economy.

In our 2020 sustainability objectives, carbon footprint has an important role – not only for its measure of climate impact and protection, but also because we are using it as a proxy for how efficiently we are using raw materials and energy in our products. Our target is to reduce our product cradle-to-grave carbon footprint by 25 to 30 percent per ton of sales between 2012 and 2020, including the impact from VOC emissions. We intend to achieve this through innovative products/solutions, technology and energy management, and by creating more value from fewer resources. Collaboration with suppliers and customers is crucial for our success.

Our assessment this year indicates a total product footprint, including the impact of VOCs, of around 24 million tons of CO₂(e), which is 4 percent lower than 2015 and 14 percent lower than 2012. CO₂(e) per ton of sold product is 6 percent lower than 2012.

We made good progress in 2016, although our 2020 cradle-to-grave ambitions remain challenging. Our new facility in Frankfurt, Germany, has delivered major efficiency improvements, in addition to continuous improvements at other sites. Our share of renewable energy continues to improve, partly offset by other changes in power/steam sources. Emissions from our own production were 21 percent lower than in 2012. We accelerated our work with suppliers and have increased sales of paints with a lower carbon footprint in Asia. For some other businesses, the trend is towards higher footprint products. Since 2012, our upstream emissions have reduced by about 14 percent and downstream by about 13 percent.

Total carbon footprint

The company’s product carbon footprint of around 24 million tons is made up of around 21 million tons of CO₂(e) from the main greenhouse gases and 2.6 million tons from VOC emissions. The footprint from our own operations and transport is 3.7 million tons of CO₂(e). In addition to the product footprint of around 24 million tons, there is 0.2 million tons of CO₂(e) from energy sales, and about 1 million ton from non-product related Scope 3 activities, such as capital goods and commuting. Scope 2 emissions are calculated using the market-based method (GHG Protocol, 2015). We have also assessed all Scope 3 categories according to the GHG Protocol Scope 3 standard.

More information on our assessment method for carbon footprint cradle-to-grave can be found in Note 2. A detailed breakdown of our greenhouse gas emissions, including Scope 3 and Scope 2 location-based emissions, is available on our website.

Management plans

Each Business Area has an improvement plan, with targets and programs for different parts of the value chain. These are reviewed and updated on a routine basis, with progress monitored by the relevant management team and as part of our regular Operational review meetings.

Research activities to identify alternative raw materials are continuing, while procurement activities accelerated during the year. For example, specific plans and targets have been agreed with an increasing number of key suppliers. See Note 7.

We have also strengthened the assessment of investments to include a carbon price and continue to ensure that we are spending capital in a way which optimizes the improvement across our businesses and the company as a whole. See Economic value creation.

The illustration above highlights the impact of our main initiatives in different areas of our value chain:

• Raw materials that are more energy and material efficient for our customers
• Improved energy efficiency and fuel mix for our energy intensive operations
• Improvements in formulation to reduce product footprint, particularly during customer application

In the following, improvement activities for raw materials, our operations and the product solutions we deliver to customers are discussed.

Raw materials

Raw materials contribute around 40 percent to our cradle-to-grave carbon footprint.

Raw material strategies

The procurement strategy for the next few years is to move further beyond availability-price-synergy towards cross-functional sourcing, integration and value chain orientation. Buying on price will move towards total cost of ownership, while selected supplier relationships will move towards cooperation and partnering. We see this as a way to leverage the size and scope of our global business, our position with suppliers and to drive competitive advantage.

In order to further improve our raw material strategies, we have institutionalized a standard sourcing strategy development approach and linked this to a capability improvement program. More than 160 procurement professionals across the globe have been trained and we will continue to develop these capabilities.

Complexity reduction

Raw material slates have been developed for all key areas of spend. These slates define the core list of preferred materials/suppliers as the basis for our future formulations. Health and sustainability aspects, such as product safety and environmental concerns, are among the key criteria applied to determine preferred raw materials.

The slates form the foundation of our standard raw material management processes. Teams of procurement and technical experts are in place to maintain the slates, manage introduction and retirement and identify opportunities to migrate products to our core raw materials. Since the start of the raw material slate program, 30 percent of non-core raw materials have been phased out.

Supplier improvement plans

In 2016, we continued to work with key suppliers to develop carbon footprint improvement plans across the whole value chain through operational improvements, material substitution and/or specification optimization. Clear action plans and commitments are in place to reduce their carbon footprint on a year-on-year basis. See Note 7.

Bio-based raw materials

Bio-based materials can, in most cases, offer an option to reduce our cradle-to-grave carbon footprint.

In order to accelerate the deployment of bio-based materials relevant to our markets, we have been setting up and developing partnerships across our supply chain. Our strategy focuses on cost-competitive, high-impact materials. In addition, we carefully consider feedstocks to ensure that bio-based materials are sustainably sourced and managed.

This approach will support the emergence of a new bio-based industry, while at the same time enabling the company to tap into alternative feedstock sources so that we can offer more sustainable products and reduce our cradle-to-grave carbon footprint. During 2016, we made progress with our existing partnerships and announced additional collaborations involving a number of our key raw materials:

• Waste-derived chemicals: We are part of a consortium – together with value chain partners Van Gansewinkel, Air Liquide, AVR, Enerkem and various others – exploring the feasibility of setting up waste-to-chemicals facilities in Europe. In 2016, the consortium announced that the Port of Rotterdam in the Netherlands has been chosen as the preferred location for the first facility. The project has the support of the Port of Rotterdam, the City of Rotterdam, the province of South Holland and InnovationQuarter. We are now working together to finalize the business case, the selection of the location and to start applying for permits. This promises to be a major step towards the circular economy and would close the loop by converting waste back into useful products
• Algae-derived oils: Our work with biotech company TerraVia (formerly Solazyme) is nearing completion. This should lead to a multi-year supply agreement for up to 10,000 tons annually of renewable Tailored™ algal oils. The target product is designed to have improved functional and environmental performance, as well as a lower overall cost to AkzoNobel
• Bio-based epichlorohydrin: In partnership with Solvay, EY and various epoxy resin producers, we have worked to track and encourage the use of bio-based epichlorohydrin in our global value chains. The aim was to reach around 20 percent of our global indirect use in 2016. During the year, we reached as high as 14 percent. We are now working with our partners to improve the methodology, and apply it to other value chains
• Steel mill off-gas derived chemicals: In June 2016, we announced our participation in the Carbon2Chem consortium. This brings together industry players ThyssenKrupp, BASF, Clariant, Covestro, Evonik, Linde and Siemens with academic partners including FHI Berlin, Fraunhofer, Max Planck Institute, Ruhr University Bochum, RWTH Aachen, University Kaiserslautern in a €60 million project to produce useful chemicals from steel mill waste gas

These partnerships and products have the potential to make a major impact on the long-term sustainability of our supply chains. In 2016, 12 percent of all our organic raw materials came from bio-based (renewable) sources (2015: 11 percent). This is 6 percent (2015: 5 percent) of the total volume of raw materials purchased, including other raw materials such as salt, minerals and clays.

Own operations

The improvements we made relating to energy and greenhouse gases can be found here. Other environmental aspects of our operations are included in Note 9.

Energy use

The energy we use on our sites contributes about 15 percent to our cradle-to-grave carbon footprint. Energy is important for all our operations, especially some of our Specialty Chemicals businesses, because they use energy as a major raw material for their products.

• Energy use per ton of production reduced to 5.5 GJ/ton. Absolute energy use was up 1 percent to 97,000 TJ, both in line with a change in product mix and volume changes
• In 2016, 49 percent of our sites improved their relative footprint with regard to energy use compared with 2015
• The total cost of energy in our production was about €0.6 billion
• Energy mix has changed compared with 2015: Renewable energy share increased by two percentage points to 40 percent, and coal and nuclear shares reduced by one percentage point. Natural gas and other fossil shares remain the same

We use energy scans to increase awareness and identify savings opportunities in all our businesses. During 2016, this resulted in a number of energy improvement projects, including:

• The production of chlorine using new membrane technology is now fully on stream in Frankfurt, Germany, reducing energy use by more than 25 percent and saving over €6 million a year
• In Arnhem, the Netherlands, carboxy methyl cellulose production was improved by optimizing control loops, resulting in an energy reduction of more than 5 percent, which represents over €100,000 a year
• In Rotterdam, the Netherlands, new work processes introduced by our Specialty Chemicals business resulted in energy savings of €100,000 a year
• At our Decorative Paints site in Garin, Argentina, a number of cost-saving measures were introduced following an energy scan. These related to the use of LEDs, high efficiency motors and compressor optimization and resulted in savings of €21,000 a year
• The installation of new LED lighting at a Performance Coatings site in Pudong, China, resulted in an energy reduction of more than 60 percent. The total savings will be in excess of €10,000 a year
• At our Powder Coatings plant in Reading, US, the replacement of an old chiller with the latest technology resulted in a 12 percent energy reduction, saving more than €100,000 a year
• In the Netherlands, all sites have made an energy efficiency plan covering the period 2016 to 2020

Renewable energy

Renewable energy is an important aspect of the improvements required to achieve our 2020 strategic carbon footprint target.

Our renewable energy supply strategy has three focus areas: protecting our current renewable share, participating in cost-effective, large energy ventures and exploring commercially feasible on-site renewable energy generation.

The diagram above details our energy mix and renewable energy use. We launched a number of key initiatives during 2016 in order to increase the use of renewables in our energy supplies and decrease our carbon footprint. These include:

• Krammer wind park: AkzoNobel has formed a unique consortium to source power from renewable energy projects for part of their operations in the Netherlands. The first deal involves a multi-year agreement with Krammer wind park, which was established by two cooperatives together with 4,000 members in the south-west of the Netherlands. It will be at full capacity of 105 MW in early 2019. The four companies involved have agreed to source a total of 350 million kWh a year, equivalent to the total annual consumption of 100,000 Dutch households
• Renewable steam: The first steam was delivered from the sustainable steam project in Delfzijl, the Netherlands. We have signed a 12-year agreement with Dutch energy provider Eneco to purchase steam generated from reclaimed wood. The partnership will help to reduce AkzoNobel’s CO₂ emissions by more than 100,000 tons a year
• Netherlands on-site solar: Solar panels have been installed at our locations in Amsterdam and Arnhem (100 kW), while construction is ongoing for panels at our R&D facility and factory at Sassenheim (500 kW)
• Renewables in the Nordics: The power contract for the Nordic region was expanded to 60 percent renewable energy in 2016. This is mainly comprised of hydro energy, along with wind energy from the VindIn consortia

Thanks to these initiatives, the proportion of renewable energy in our operations is at 40 percent.

Greenhouse gas emissions from operations

Greenhouse gas (GHG) emissions from our facilities are primarily related to the fuel and power we use. This section reflects the performance of our own operations covering the gate-to-gate scope.

Total greenhouse gas emissions per ton of production decreased by 5 percent to 209 kg/ton CO₂(e). Absolute GHG emissions decreased to 3.7 million tons of CO₂(e). These were both caused by a change in product mix and production volumes of main energy consumers.

• At our Specialty Chemicals site in Alby, Sweden, a new boiler was installed, saving 5,000 tons of direct CO₂ per year
• At LeMoyne in the US, our Specialty Chemicals business optimized the furnaces, resulting in savings of more than 2,200 tons of direct CO₂ per year
• In Jundiaí, Brazil, the electricity contract for our Specialty Chemicals business was changed to 100 percent biomass, resulting in a reduction of over 4 kilotons of CO₂ compared with 2016

Logistics, distribution and car lease

As part of our performance improvement program, we have started to manage warehousing and logistics at a regional AkzoNobel level. This will result in a reduction of warehouses and combined transport solutions. It will also have a positive effect on our footprint.

We are involved with Smartway in the US and Green Freight Europe in the EU, focusing on CO₂ reduction.

The carbon emissions for our lease car fleet were 121 g/km on average, a 2 percent improvement from 2015. These data are based on available data from EMEA. We plan to expand the coverage of our lease car CO₂ reporting in 2017.

Customer product solutions

Our sustainability agenda emphasizes resource effectiveness and solutions for our customers, which in turn help them to be more energy and resource effective. We aim to continue developing more sustainable solutions and stay ahead of the competition.

The headline metric we have used since 2009 relates to eco-premium solutions. This measures products or solutions that have a significant benefit over mainstream products in the market in defined environmental and social sustainability aspects (e.g. GHG emissions), when assessed across the total value chain (see Note 4). This metric is challenging and is used as a driver for more sustainable innovations. A comparison with mainstream is now being recognized as good practice at many companies and organizations (e.g. WBCSD Addressing the Avoided Emissions Challenge).

Many of our products help our customers to produce a low carbon product, or contribute to processes that support the transition to a low carbon economy (e.g. water-based paint, coatings with new curing technologies and chemicals used in LED lighting). In total, 13 percent of our 2016 revenue was from these leading eco-premium solutions that avoid GHG emissions for our customers, compared with the mainstream solution. Examples include:

• Interpon ReFlex: Meets lighting manufacturers’ continuous demand for coatings with a higher reflectance. This means more light is emitted from the lighting unit because less is absorbed by the coating, boosting the effective output of commercial lighting and reducing emissions
• Dulux Weathershield Keep Cool: Reflects infrared heat, cooling exterior walls by up to 5°C. It means residents use less air conditioning and less energy as a result, leading to independently verified savings of up to 15 percent
• Aquasilk: An innovative water-based wood coating with superior hardness and excellent clarity, designed to make it easier for the Chinese furniture industry to make the transition to more sustainable water-based coatings. The product contains substantially lower levels of volatile organic compounds (VOCs) than the traditional solvent-based systems they replace

Other products that help reduce global greenhouse gas emissions are not captured by this leading measure. We have estimated about half of our total sales are covered by our main drivers for our carbon footprint reduction: renewable energy, renewable raw materials, VOC reduction and energy-efficient production processes.

Our chemicals businesses use 47 percent renewable energy or heat in their operations. Overall, 12 percent of our organic raw materials are from renewable sources. Both of our most energy intensive businesses operate leading energy-efficient technology. Energy and material efficiency is crucial for our production processes and continuous improvement is part of daily operations.

Our paints and coatings businesses continue to introduce new and reformulated solutions with significantly reduced volatile organic compounds (low/zero VOC). For example, more than 80 percent of our decorative paints and 15 percent of our protective coatings are water-based or low/zero VOC (as opposed to solvent-based), while our powder coatings reduce VOC emissions in use (compared with solvent-based alternative solutions). These products are only counted as an eco-premium solution where the standard in the market is still solvent-based.

One example of leading practice is the work on “post-user” waste in the Decorative Paints business. This is the paint left over by our customers/consumers when they have finished a painting job. Evidence suggests that 10 percent of all paint purchased ends up in the waste stream. This is a huge waste of valuable resources and is becoming a concern to national and local governments as disposal costs rise.

In the UK, we have worked with a social enterprise for many years to collect and re-use this paint though social and community groups. We are now going a step further, working with waste management companies and small entrepreneurial paint manufacturers, to support the remanufacture of paint into a fully recycled product, better suited to the needs of larger social and community projects. These pilots will be extended into Benelux in 2017. We are also investigating whether it will be possible to incorporate small amounts as a raw material into existing branded products.