Value chain

The objective of our new strategy is to create more value from fewer resources – right across the value chain.

  • Value for our customers by providing products which have excellent functionality and generate resource/energy benefits ahead of competitive products
  • Value for the environment through more effective use of natural resources, and a significant reduction in specific greenhouse gas emissions across the value chain
  • Value for society through the positive impact of our products in our end-user segments
  • Value for our business by focusing on our end-user segments – delivering growth and profitability

Key performance indicators – value chain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ambition

 

Target

 

Target

 

 

2010

 

2011

 

2012

 

2013

 

2013

 

2015

 

2020

1

2010-2012 restated due to KVC review.

2

Product related (raw materials and packaging).

3

Non-product related.

Carbon footprint

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carbon footprint cradle-to-grave per ton of product (% reduction from 2012)

 

 

 

0

 

2

 

 

 

25-30

Carbon footprint cradle-to-gate per ton of product (% reduction from 2009)1

 

1

 

3

 

1

 

4

 

5

 

10

 

Carbon footprint own operations (Mton CO2(e))

 

5.2

 

4.8

 

4.7

 

3.9

 

 

<4.6

 

<4.6

Products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eco-premium solutions with downstream benefits (% of revenue)

 

 

 

17

 

18

 

 

 

20

Eco-premium solutions total (% of revenue)

 

21

 

22

 

22

 

24

 

 

30

 

VOC in product (% reduction from 2009)

 

<5

 

6

 

10

 

 

 

 

Raw materials and suppliers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Critical PR2 spend covered by supplier management framework (% of spend)

 

 

 

69

 

80

 

80

 

90

 

Product related suppliers signed Vendor Policy (% of spend)

 

91

 

95

 

97

 

96

 

96

 

96

 

NPR3 suppliers signed Vendor Policy (% of spend)

 

 

77

 

80

 

83

 

80

 

80

 

Suppliers on SSV program since 2007

 

266

 

304

 

373

 

392

 

 

 

Own operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational eco-efficiency footprint measure (% reduction from 2009)

 

7

 

11

 

13

 

24

 

20

 

30

 

Resource Efficiency Index

The adoption of a Resource Efficiency Index as a key financial indicator results from the conviction that global population growth and increasing resource constraints will drive new business models in the materials and energy intensive industry sectors. In the chemicals industry, sustained business success will require product and process innovations that generate much more added value from each unit of raw materials and energy used across the value chain – be it with our suppliers, in our own operations or with the users of our products.

The Resource Efficiency Index is defined as gross profit (or gross margin) divided by cradle-to-grave carbon footprint – reported as an index.

The index development was based on input from a range of financial analysts and environmental specialists and wide internal consultation.

  • We selected gross profit as an indicator of added value as it is comparatively stable and captures the effects of efficiency improvements
  • Carbon footprint is a good proxy for resource efficiency across our value chains

The Resource Efficiency Index will be a long-term indicator for AkzoNobel. Although margin variability may affect performance in any given year, the trend must clearly be upwards. A review on our performance over the past five years reveals a gradually increasing trend. Many factors have contributed to this, some of which are:

  • Improvements in energy efficiency
  • Increased renewable and low carbon energy supply
  • The ongoing switch towards waterborne coatings
  • Margin improvements as a result of higher value added products

To continue to drive further improvements in resource efficiency across the value chain, we will start measuring the REI on an ongoing basis as of this year.

Resource Efficiency Index
gross profit/CO2(e) indexed

Resource Efficiency Index (gross profit/CO2) (indexed) (bar chart)

REI 2009-2013 reflects the performance of AkzoNobel and is based on a constant portfolio – as of the end of 2013. REI 2009-2011 is indicative and has been approximated. Cradle-to-grave carbon data for 2009-2011 is based on:

  • Cradle-to-gate carbon data as measured and reported
  • Gate-to-grave carbon data has been extrapolated based on 2012 data, adjusted for product volumes in 2009-2011

Lifecycle assessment

Lifecycle thinking is the basis for all our sustainability work. It is included in many of our processes, including:

Product development and eco-premium solution assessment

The eco-premium solutions concept includes sustainability aspects along the value chain. It encourages the development of more innovative, sustainable products. We continuously aim to reduce the environmental footprint of our product value chains.

Carbon footprint assessment

We measure the carbon footprint of all our key value chains (376 in 2013) using a full cradle-to-grave, or screening, lifecycle assessment.

Marketing propositions

We are developing environmental product declarations for some products, as part of our marketing activity.

Investment decisions

Since 2008, it has been mandatory to include an eco-efficiency assessment for investment proposals exceeding €5 million.

Eco-efficiency analysis (EEA) is our standard assessment method, based on a combination of lifecycle assessments and lifecycle costing. Assessment work is carried out by business and corporate specialists and is based on ISO 14040-44 and a corporate lifecycle assessment database.

Value chain impacts

While we focus on carbon footprint as a proxy for raw material and energy efficiency, our lifecycle assessment considers a range of impacts. Examples from 2013 include:

Raw materials

We have worked with value chain partners to gain a better understanding of the value chain impact of titanium dioxide and the main variables which affect carbon footprint. The main drivers appear to be energy source and TiO2 co-product/plant configuration rather than the process route.

Biodiversity

Working alongside the IUCN Leaders For Nature program, our focus during 2013 was on three pilots to identify hotspots in our value chains and case studies to raise awareness of our reliance on stewardship of eco-systems in our operations. We used the LCA impact assessment tool ReCiPe to review pilot cases from three business units.

According to the Millennium Ecosystem Assessment, the main drivers for biodiversity impact are habitat change (land use change), over-exploitation, invasive alien species, pollution and climate change. For our pilots, the main impacts were up and downstream of our operations, with the main drivers being land use/transformation and climate impact.

This has given some initial focus areas for activity, which align well with our overall sustainability programs, for example:

  • Continued focus on climate change (an important element of the new strategy)
  • Water use and discharge in water scarce areas (an extension of our sustainable fresh water risk assessment work)
  • Sourcing of renewable raw materials (an area under development with our new strategy)
  • Product assessments for our eco-premium solutions (which already include land use)