Note 1: Sustainable products

Value for customers

Our passion for paint means we strive to be the reference for innovation and quality, and that requires investment. Our value selling agenda is strengthened continuously, and is one of the main drivers for further improving the sustainability of our portfolio. This helps to accelerate market penetration and margin growth and drive progress towards our Winning together: 15 by 20 strategy.

Sustainable portfolios

Our portfolio approach promotes the use of safer and more sustainable products in all stages of the value chain. We translate societal developments into product offers. We take action to manage harmful substances in advance of legislation, future-proofing our products against changes in regulations. We constantly review our existing offer in close alignment with our strategic focus. This ensures the delivery of products and solutions that are fit-for-purpose in the markets we want to lead.

Eco-premium solutions with customer benefits

in % of revenue

Sustainable products – Eco-premium solutions with customer benefits (bar chart)

Since 2012, we have measured the eco-premium part of our product portfolio – those solutions with clear sustainability benefits that outperform the market.

In 2018, sales for this segment totaled 22% of our revenue. present a moving target because we measure our performance against the market reference, which is continuously evolving. By constantly innovating, our aim is to maintain eco-premium solutions at a sustainable 20% of revenue through 2020, which will help to drive margin improvement and revenue growth.

Another significant portion of our portfolio fits into the category. These are solutions offering clear sustainability benefits, but are overall on a par with other offers. Initial assessments indicate that eco-performers are 20% of sales, making total sales of sustainable solutions 42%.

Products classed in the performer category meet the needs of our customers and are comparable to mainstream alternatives.

The transitioner and priority categories contain substances highlighted as being of concern by some stakeholders, such as governments, NGOs, customers and public groups. We manage hazardous substances through our priority substance program, which promotes the use of more sustainable and safer products.

Our priority substance program takes a systematic approach to the identification, expert review and management of all hazardous substances used in our products. Only when safe use of a priority substance is demonstrated can it remain in use for AkzoNobel products. The process includes reduction, restriction and phase-out (when they can be substituted with safer and sustainable alternatives). The priority category includes products containing hazardous substances with phase-out dates (see Priority substance management in Note 7).

Portfolio assessment

Sustainable products – Portfolio assessment (illustration)

VOC in products

Our ambition to move towards zero (volatile organic compounds) in products is ongoing. We continue to focus on developing products with significantly reduced VOC content. This transformation has both environmental and health benefits and allows us to remain ahead of legislation.

Our Decorative Paints organization is running a multi-year strategic program called “Waterway”. It’s designed to lead the market to water-based trim and woodcare product ranges. In 2018, this switch gained further momentum. The distinctive benefits of water-based products have been included in several marketing campaigns. The sales volume and value of water-based woodcare and trim paints increased in line with the ambitious targets for 2018. Our innovation plans form a solid foundation to improve year on year towards lower VOC emissions.

In Performance Coatings, we also strive to develop and offer lower VOC products to meet changing market requirements and stay ahead of upcoming legislation. Over the years, we have developed lower products in all our business units and are focused on linking this to our sustainable portfolio via the eco-premium and eco-performer solutions.

Short-term incentives (STI)

We want to strengthen the link between our people, our strategic priorities and the various initiatives across our businesses. We therefore cascaded the relevant metrics into the sales, marketing and technical teams.

From 2018 onwards, specific targets on value selling have been included in the personal objectives and incentives of all employees. This will help us to deliver more sustainable portfolios, reflecting not only our current product offers, but also ensuring a well-stocked technology and innovation pipeline.

Eco-premium solutions with customer benefits

A measure of the sustainability performance of our products. An eco-premium solution is significantly better than the offer in the market in at least one mainstream criterion (toxicity, energy use, use of natural resources/raw materials, emissions and waste, land use, risks, health and well-being), and not significantly worse in any other criteria. Downstream benefits include a tangible sustainability benefit for our customers.

Eco-performer

An eco-performer is a solution offering clear sustainability benefits, but that is overall on a par with the mainstream offer in the market.

VOC

Volatile organic compounds.

VOC

Volatile organic compounds.