Circular Economy Carbon Productivity

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1 Circular Economy Carbon Productivity Dr. Achim Ilzhöfer, Covestro Deutschland AG, Leverkusen covestro.com

2 Agenda Carbon Covestro Productivity At a glance Prototype tool to measure the return on carbon employed Covestro Circular Economy Energy and resourceefficiency along the product life cycle 2

3 Inventor and leader in high-tech material solutions At a glance LEADING GLOBAL POLYMER PRODUCER IN POLYURETHANES ITS DERIVATIVES AND POLYCARBONATES 3

4 Covestro leading in the world of plastics 14 bn in sales 16,200 employees 1 Listed on the DAX stock exchange Large portfolio Products and solutions for many industries Global player 30 sites worldwide Close to markets, customers and suppliers Highly innovative 1,000 employees in research and development 80 years of ideas and inventions 4 Financial year calculated as full-time equivalent (FTE)

5 Key industries in focus Automotive and transportation Construction Wood and furniture Electrics and electronics Chemicals Sports/leisure, cosmetics, health and others / Möbel 19% 17% 18% 12% 8% 26% 5 Percentages: Share of total sales in financial year 2017

6 Our sustainability goals Five goals for 2025 Align research and development with the UN sustainability goals Apply own dedicated sustainability standards to all suppliers Reduce own specific greenhouse gas emissions by 50% Improve living conditions of 10 million people in underserved markets Use carbon in the most intelligent way 6

7 CARBON PRODUCTIVITY VALUE CREATION THROUGH SMART USE OF CARBON A PROTOTYPE TOOL TO MEASURE THE ENVIRONMENTAL RETURN ON CARBON EMPLOYED (EROCE) 7

8 Carbon Productivity Vision Drive a new perspective on value creation through carbon Catalyse new insights about carbon at various stakeholder levels Support collaborative creation of a tool which will be made available as open source, embraced by key stakeholders and adopted across industries Consortium officially announced Carbon Productivity initiative at the UN Global Compact Breakthrough Summit FEDERCHIMICA Workshop: Chimica ed Economia Circolare June 18

9 Carbon Productivity Defining a measurement and improvement tool Carbon Productivity Circular economy Bio-based materials Value created Non-renewable carbon as input for energy and feedstock Product innovation CO 2 capture Renewable energy Efficiency Supply chain 9 FEDERCHIMICA Workshop: Chimica ed Economia Circolare June 18 Source: SYSTEMIQ

10 Suggested metrics Two prototypes from a suite of metrics suitable for different applications 1 2 Financial Return on Carbon Employed Revenue generated, per unit of nonrenewable carbon consumed. Environmental Return on Carbon Employed Non-renewable carbon consumption avoided, per unit of non-renewable carbon consumed. Can be used for a company or product to support tracking and improvement. Can be used to guide and measure production innovation towards net positive products. 10 FEDERCHIMICA Workshop: Chimica ed Economia Circolare June 18 Source: SYSTEMIQ

11 Improvement framework: The natural carbon cycle provides a model R I P L 11 FEDERCHIMICA Workshop: Chimica ed Economia Circolare June 18 Source: SYSTEMIQ

12 R I P L Collaborative methodology Applying carbon productivity across value chains Carbon capture and utilisation Bio-based alternatives Input materials Recycled inputs Supply chain improvement Efficiency or process gains Renewable energy and fuel sourcing Use phase innovation products & business models Design for carbon banks and material loops Recovery Manufacturer Retailer End of life and recycling After-use recovery FEDERCHIMICA Workshop: Chimica ed Economia Circolare June 18 Source: SYSTEMIQ

13 Example: Environmental return on carbon employed (polycarbonate car windscreen) Environmental ROCE demonstrates that PC glazing has lifetime carbon benefits relative to industry standard Polycarbonate windscreen compared to laminated glass: Light-weighting reduces fuel consumption by 0.11 BOE over life After-use recovery of polycarbonate saves 0.02 BOE 0.12 BOE to produce one windscreen; 0.05 BOE for glass Environmental Return on Carbon Employed (EROCE) EROCE=50 Fossil carbon use avoided Barrels of oil equivalent Fossil carbon input Barrels of oil equivalent = = ] 0.11 Use-phase fuel saved compared to glass After-use recovery compared to glass 0.12 Barrels of oil equivalent to produce Adjusted for higher prodn. footprint 1 ] *100 => Conclusion: Product has lifetime carbon benefits relative to the industry standard Half of the total fossil carbon consumed in production is repaid during use and after use 13 FEDERCHIMICA Workshop: Chimica ed Economia Circolare June Polycarbonate production has higher fossil fuel consumption than glass during production. Source: SYSTEMIQ illustrative analysis of Covestro s internal life-cycle analysis data 2. BOE: Barrels of Oil equivalent

14 A practical tool for climate mitigation and a change in mindset FROM. Carbon is the enemy TO Carbon as a source of value Decarbonisation Creating more value from less fossil carbon Mitigation and reduction Productivity increases and re-coupling to new sources of carbon Focus on carbon emissions from company-owned facilities 1 Life-cycle and circular view of carbon including product use and after-use 1 Analysis of ET Global 100 data shows that Scope 1 and 2 GHG emissions (emissions related to company-owned facilities and direct energy sourcing) make up less than 30% of the life-cycle emissions of a product, and even for those companies reporting, only one-third report more than five Scope 3 emissions categories 14 FEDERCHIMICA Workshop: Chimica ed Economia Circolare June 18 Source: SYSTEMIQ

15 COVESTRO CIRCULAR ECONOMY ENERGY AND RESOURCE-EFFICIENCY ALONG THE PRODUCT LIFE CYCLE 15

16 Covestro Circular Economy Thinking and acting sustainable and circular! Alternative raw materials Resource efficient Production Bio-based raw materials, intermediates and products e.g. Desmodur eco N 7300 Bio-Anilin Reduce impact from Energy- and resource efficient Chlorine production Reduce impact from Durable and recyclable products Industrial symbiosis Assessment of waste streams from other industrial sectors and post consumer waste as feedstock and future raw material option CO 2 Carbon2Polymers Carbon4PUR Intersectorial Validation of waste-streams Foster Life Cicle Thinking CO 2 building block for Polymers cardyon TM Energy- and resource efficient processes Enable our partners Resource-efficient and environmental friendly products 16

17 Alternative raw materials Fossil fuel substitution Covestro puts great emphasis on new raw materials like CO 2 and biobased feedstock an alternative conserving fossil resources and contributing to a sustainable and circular future. CO 2 Carbon dioxid as Carbon source New innovative flexible foam component with up to 20% CO 2 We already use CO 2 for the production of flexible PU foam components further applications are in our R&D pipeline. In PU coatings for automotive and furniture and textile paint we offer bio-based products (e.g. Desmodur eco and Impranil eco) with plant-derived carbon content. Plant as Carbon supplier Varnish component with up to 70% bio-based carbon content 17

18 Discovering new alternative feedstock options New products and R&D projects Biomass Bio-based hardener for car and furniture coatings Bio-based aniline for insulating materials Bio-based resins for stable wood construction materials CO 2 /CO CO 2 -based Polyols for soft-foam applications (cardyon ) CO 2 -based Polyols for flexible tubes, car seats and insulating materials New CO-based Polyols for insulating materials and coatings Waste- / waste-gases Industrial Symbiosis Waste of one sector could be a feedstock for the other Recycled Polycarbonate for Blend-Applications Availability and quality analysis of post-consumer plastic waste 18

19 Sustainability Impact Conserving resources in a holistic way Contribution to resource efficiency and substitution of fossil raw materials New processes need to be demonstrably more environmental friendly than conventional production processes Clear role of Life Cycle Assessment (LCA) Carbon footprint need to be demonstrably lower than in existing conventional products 19

20 CONCLUSION 20

21 Future Challenge Substitution of fossil raw materials and maximizing carbon productivity Carbon is the most important resource for the chemical industry Fossil carbon carrier like crude oil is currently the most important raw material 4% 6% of the global crude oil demand are employed in the production of plastics Crude oil resources are finite and will be replaced in the long run by more sustainable raw materials (regarding climate mitigation policies) Markets are subject to fluctuations 21

22 Conclusion Developing circular economy models $ Plastic waste should not be landfilled or disposed in the environment Energetic recovery and CO 2 reuse is an transient option of recycling Key for a circular economy is a harmonized EU waste framework directive Innovation Need (intersectorial and along the value chain) Sectorial and national Recycling Centers (for technical plastics) Ecologic and economic validation of waste to feedstock conversion routes Sustainable research and investment need financial support - an investment in the future Increasing carbon productivity 22

23 Covestro AG Zukunftsgerichtete Aussagen This presentation may contain forward-looking statements based on current assumptions and forecasts made by Covestro AG. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Covestro s public reports, which are available on the Covestro website at The company assumes no liability whatsoever to update these forward-looking statements or to adjust them to future events or developments. 23

24 Thank You for your attention Dr. Achim Ilzhöfer Global Circular Economy Manager Covestro Deutschland AG COV-CTO-OF-ESP E60, Leverkusen Germany covestro.com 24