For Covestro, innovation as a driver for greater sustainability in line with the United Nations Sustainable Development Goals (SDGs) is a core element of our strategy and an integral part of our identity. Our understanding of innovation is broadly defined: We do not rely on traditional research and development alone, but rather also on the great potential for creativity throughout the company. We encourage all employees to promote innovation at Covestro.
In order to maintain and reinforce our position in the global arena, we continually work at all levels in close partnership with the Board of Management member responsible for Innovation, Sales, and Marketing to develop new products, improve established ones, and optimize manufacturing and processing procedures. Application areas, business models, and business processes are also subject to ongoing review. We draw on decades of experience and demonstrable success in these endeavors.
By managing innovation systematically throughout the Group, we ensure that our ongoing and planned activities and our project pipeline always satisfy the needs of our customers as well as user and consumer industries. Covestro uses a wide variety of tools to achieve this: For example, we use a standardized method to assess every research and development project and incorporate the resulting findings into ongoing and future projects. The global, digital platform idea.lounge is available for discussing and working on new, creative ideas from all parts of the company. Apart from that platform, we made an additional digital platform called “Covestro Ideenmanagement” (Idea Management) available to our employees in Germany in the year 2019. All suggestions for improvement are managed in our company system for submitting suggestions.
At Innovation Celebrations, we recognize employee projects from around the world that reflect our broad understanding of innovation. The awards serve to recognize innovative ideas for products and applications, production and production processes, business models and commercialization, internal business processes, and patents and intellectual property.
Sustainable R&D portfolio
Covestro’s product pipeline already puts many different sustainable solutions on the market. Going forward, however, we intend to develop and market products even more closely aligned with the SDGs. Attaining this goal means continually changing over our product range to more sustainable solutions. For instance, in research and development (R&D) we have already begun our pursuit of a much more sustainable project portfolio. This R&D strategy enables us to identify and research unconventional and unique approaches early on, and therefore to contribute to the SDGs with our R&D products and technologies.
Our innovation goal
We want our R&D project portfolio to be aligned with the SDGs. By the year 2025, 80% of project expenditures for research and development will take place in areas that contribute to reaching these goals.
2020: 51% of project expenditure
We set ambitious thresholds for the standards we use to assess projects to see if they meet this goal, and we have decided to only consider projects that additionally contribute to reaching the SDGs in measuring our progress toward this target. To this end, we implemented a Group-wide assessment process as part of the existing innovation process we use to review how projects are progressing. All R&D projects are subjected to an assessment based on expert interviews. A total of 22 questions are asked to semi-quantitatively or qualitatively assess the impact of each project’s results on all 17 SDGs based on certain rules. Only solutions that exceed a defined threshold for contributions compared with current market solutions will be included in this calculation. This assessment and the process, including all subsequent steps, are expected to be applied to all existing and new projects in the R&D pipeline by 2021. In the reporting year, we assessed projects using this process that already account for 96% of the R&D project costs incurred in fiscal 2020. Within this 96%, 51% of the R&D project costs exceed our defined threshold.
In fiscal 2020, our R&D expenditure amounted to €262 million (previous year: €266 million). This mainly went toward developing new application solutions for our products and refining products and process technologies. As of December 31, 2020, 1,205 employees* worldwide (previous year: 1,217) worked in R&D, most of them at the three major R&D centers in Leverkusen (Germany), Pittsburgh, Pennsylvania (United States), and Shanghai (China).
In addition, we raised awareness of the SDGs and their potential for Covestro among employees by holding information sessions and by way of a Group-wide campaign in the reporting year. The objective here is to further fill the R&D project pipeline with sustainable solutions.
* The number of permanent or temporary employees is stated in full-time equivalents (FTE). Part-time employees are included on a pro-rated basis in line with their contractual working hours.
Use of digital technologies
Covestro is committed to further pursuing digitalization along with the associated new opportunities for the entire chemical and plastic value chain. In the year under review, the outbreak of the global coronavirus pandemic and the associated safety measures instituted in the production facilities and administrative buildings greatly accelerated the implementation and use of digital tools throughout the entire company, which was already underway. This included the rapid proliferation throughout the Group of digital workplace initiatives featuring new digital platforms for work and communication.
Covestro utilizes the opportunities arising from digitalization with a comprehensive strategic program and especially the intelligent use of data, thus setting new standards in cooperation with customers. We increasingly anchor digital technologies and work methods in production, along the supply chain, in research and development, in administrative corporate functions, and at all points of contact with customers as well as in the development of new business models. In order to implement our strategic program directly and with focus, we set up a senior-level decision-making body under the leadership of the Chair of the Board of Management to manage the Covestro-wide portfolio of digitalization projects. A key decision-making criterion is the concrete benefit for our customers. During the reporting year, we set up a team focused on digital solutions (Digital Solutions Lab) at the Leverkusen (Germany) site, which provides technical support for developing and implementing digital products and business models. In production and technology, Covestro conducts a program called OSI2020 for the digitalization of technical, operational, and maintenance-related activities.
Covestro recognizes digitalization as a comprehensive ongoing development that includes various priorities and advances at different speeds. We have used data analysis for a number of years now for production processes, and continually invest in employees and infrastructure to systematically promote digitalization – thereby improving the efficiency of work and production processes using modern data processing and the intelligent interconnection of systems.
In this connection, Covestro is also continuing to ramp up the continuing digitalization of research and development. Key initiatives here are the further expansion of a high-performance computing cluster at the Leverkusen site and a partnership agreement with Google Ireland Ltd., Dublin (Ireland), aimed at researching quantum computing and making this novel technology usable for the development of innovative processes and products. During the reporting year, we also continued work on building a company-wide platform for the work of our data scientists in all corporate functions. In fiscal 2020, we laid the foundation for this project by launching a new Covestro-wide method for delivering data, computing capacity, and predefined services in the cloud.
Strategic partnerships and collaborations
To remain innovative, Covestro not only closely cooperates with its customers around the world, it also collaborates with partners from academia and industry under the banner of open innovation, which is of great strategic importance for the company. Bilateral cooperations and collaboration in large, publicly funded consortia characterize our partnerships with research facilities and universities as well as with companies along the value chain.
Covestro maintains long-standing and strategic partnerships with various universities. This includes cooperating with renowned partners throughout the world, such as RWTH Aachen University (Germany), Tongji University in Shanghai (China), and Carnegie Mellon University in Pittsburgh, Pennsylvania (United States).
We work with and invest in start-ups under the auspices of the Covestro Venture Capital (COVeC) approach, Covestro’s venture capital arm, which was newly developed during the reporting year. This work involves connecting the need of start-ups for financing, customer networks, and market access with our strategic goal of securing long-term, sustainable business performance. In fiscal 2020, Covestro invested in the French start-up Crime Science Technology (C. S. T.). This investment enables Covestro to strengthen the specialty films business for identification documents and to secure access to the Optical Variable Material (O. V. M) technology for polycarbonates and polyurethanes.
In addition to working with start-ups, Covestro also collaborates with established partners. An example of a collaboration in a consortium project is the Kopernikus project Power-to-X (P2X), which is subsidized by the Federal Ministry of Education and Research. The transportation, industrial, and heating supply sectors need low-emissions solutions if Germany is to achieve climate neutrality by the year 2050. P2X researches one of the most promising approaches: technologies that convert green electricity into other forms of energy or materials, e.g., fuels, heat, and gases, or chemical raw materials and plastics. Along with partners, Covestro is investigating how hydrogen and CO2 can be converted into polymer building blocks that are urgently needed in the chemical industry.
We participate in initiatives to further drive the development of the CO2 technology platform such as the Carbon4PUR research project sponsored by the European Union (EU) in which we have been a member since the year 2017. This entails researching the use of industrial waste gases like carbon monoxide as new sources of raw materials for the production of insulation materials and coatings in conjunction with 13 other industrial and scientific partners.
In the interest of closing carbon loops, electrochemical processes offer a good starting point for forward-looking, circular solutions for the energy-efficient manufacture of basic chemicals. In pursuit of this goal, Covestro collaborated with RWTH Aachen University (Germany) and the Jülich Research Center (Germany) to establish the Competence Center for Industrial Electrochemistry ELECTRA in Aachen (Germany).
Alliance Management, a corporate function at Covestro, provides support throughout the Group in planning and implementing partnerships and networks and for raising the issues of innovation and sustainability at the state, federal and European policy levels.
Innovation in the reportable segments
In the Polyurethanes (PUR) segment, we are continually working on innovating polyurethane industry products with newly developed materials and process improvements throughout their entire life cycle, particularly core applications comprising rigid and flexible polyurethane foam, and composite materials. Our customers in the insulation, refrigeration appliance, furniture, and automotive industries along with many other industries can rely on our modern technologies and the highly motivated experts in our global network for developing their applications. The large number of new patent applications for our innovative technologies underscores Covestro’s leadership role in the collaboration with other companies in the polyurethane industry.
Furthermore, we develop sustainable, circular approaches to flexible foam applications by working with industrial and scientific partners to steadily improve the recycling of flexible polyurethane foam. This represents an important step toward turning polyurethane-based products into potential sources of raw materials for future production. An example of putting this into practice is our participation in the pan-European PUReSmart research project, which involves nine companies and academic institutions from six countries.
Covestro is also systematically conducting research in the PUR segment to determine how CO2 and renewable carbon compounds from carbohydrates can be used intelligently as an alternative raw material to crude oil. Covestro has developed a new type of polyol for use as a component in flexible polyurethane foam that is manufactured on an industrial scale and contains as much as 20% CO2. Sold under the brand name cardyon®, this product is already on the market in various applications such as mattresses, materials for sports flooring, and vehicle interiors.
Another new area of focus for the PUR segment is innovative research into chemolysis. In combination with use of the high-performance computing cluster, we want to use chemolysis to recapture raw materials for our production activities from polyurethane applications.
In fiscal 2020, we also continued to develop and refine flame-retardant insulation materials for the construction industry and further optimize insulation for the refrigeration appliance sector. By continually improving the insulating properties of refrigerators and refrigerated containers and boosting productivity, our materials contribute to sustainably optimizing the refrigeration chain in the global food supply.
Moreover, we were able to use new digital technologies to increase the productivity of rigid foam products for the household appliance and construction industries in the past fiscal year. These are initial successes we achieved by using digital tools to develop new Covestro products and enable them to be processed into large industrial goods at existing plants.
An exemplary use of state-of-the-art composite elements in the automotive industry is our improved solution for filling hollow spaces to help cut noise in the passenger compartment of vehicles.
Our development of novel polyurethane products for infusion technologies is another example of our innovation performance in fiscal 2020. For the first time, Covestro delivered polyurethane raw materials for the construction of wind turbines. The polyurethane resin developed and produced by Covestro was used to manufacture rotor blades for wind turbines, which were installed in a wind farm in eastern China. Fiscal 2020 also saw the subsequent commercialization of this technology, with initial customers in China converting their production to the new polyurethane technology.
In the Polycarbonates (PCS) segment, we are developing new polycarbonate-based materials and new technological solutions tailored to meet increasingly complex customer requirements in the areas of mobility, health, and electronics/LEDs. The key here is optimizing the performance of optical systems, improving safety, integrating functions, improving energy efficiency and sustainability, reducing the weight of components, and developing new design options.
Sustainable products and technologies taking into account the SDGs are being developed or are already available for all areas of application. Numerous products contain some percentage of recycled materials from various recycling paths. In addition, we are now also introducing new products for the first time that are made of chemically recycled base chemicals. The composite materials of the future are being optimized for recyclability of all of their components and additives. In addition to monolithic polycarbonate solutions for the automotive, electronics, and health care industries which are easier to recycle, our application development team is also working on ways to optimize processes and develop products that reduce the energy required at the end of a product’s life cycle.
The trend toward modern and integrated light elements – made possible by LED technology – is a theme that can be traced through all industries, but particularly in the field of mobility. Due to their excellent optical performance and thermal stability, transparent polycarbonates are the ideal material for innovative solutions.
We focus consistently on the growing interest in LED technologies in the lighting market. Our newly developed products combine outstanding optical properties with exceptional longevity. In this way, Covestro supports the trend toward maintenance-free, sustainable, and efficient LED lighting.
In the automotive sector, the growing number of driving assistance systems, sensors, and camera systems can be seamlessly integrated with the sensor-transparent materials we market under the Makrolon® brand. We also fulfill the new requirements for sustainable electric drives by developing new functional and flame-retardant products, e.g., for the manufacture of ultra-light, impact-resistant honeycomb structures to protect batteries, vehicles, passengers, and battery case components.
We showcased a comprehensive vehicle passenger compartment concept featuring innovative and functional materials solutions that address current mobility trends such as autonomous driving, electric drives, and car sharing at K 2019, the world’s leading plastics trade fair held in Düsseldorf (Germany). We also presented new applications for polycarbonates and polycarbonate blends for use in the global expansion of the 5G technology. Plans call for the seamless integration of an expanded network of antennae and base stations into the cityscapes of the future to increase public acceptance of these systems. Covestro is working with university students at the Umeå Institute of Design in Umeå (Sweden) and with Deutsche Telekom AG, Bonn (Germany), on draft concepts. In a pilot project, the partners tested creative design concepts for small 5G antennae and base stations, including adaptation of their color and surface texture. Covestro has also developed a multi-layer film solution made of polycarbonate and polymethyl methacrylate (PMMA) for use in manufacturing 5G-ready smartphones. Thanks to the innovation and a new manufacturing process, the back of the smartphone appears glass-like without being fragile.
For the electronics industry, our new product portfolio meets customers’ sophisticated demands as regards optical and high-gloss display properties. With the new materials, it is now possible to realize larger displays with three-dimensional design.
We have also made consistent advancements in the field of high-performance materials. At our Markt Bibart (Germany) site, we commercially produce our continuous fiber-reinforced thermoplastics (CFRTP), which are sold under the Maezio® brand name. These composites combine the rigidity and strength of carbon fiber or fiberglass with the mechanical properties and efficient processability of polycarbonate resins. This makes applications more rigid and lighter, increasingly stable, and even more aesthetically pleasing. These materials thus open up new design possibilities for important industries such as IT, mobility, and consumer goods.
Coatings, Adhesives, Specialties
The Coatings, Adhesives, Specialties segment (CAS) serves a large number of specialized industries. In the reporting year, we worked with our customers and partners to introduce significant innovations, focusing on efficiency, sustainability, and promoting our specialties.
We again updated our product portfolio of innovative high-performance crosslinkers in the Ultra line. These products stand out due to their very low residual monomer content, thereby improving industrial hygiene. In addition, we participated in the Terminus research project sponsored by the EU’s Horizon 2020 program, which aims to make multi-material packaging available to the circular economy and therefore to enable higher-quality recycling of individual materials.
Moreover, the CAS segment launched a new precursor for low-emissions, aqueous polyurethane furniture coatings that significantly accelerates the drying process. An extensive life cycle analysis was conducted in cooperation with Hesse Lignal, Hamm (Germany). The carbon footprint of finishes using the water-based coatings was improved compared with previously available coatings. In fiscal 2020, we also continued to promote the use of biobased raw materials in our products to help conserve additional resources and improve the carbon footprint. For example, we developed a new crosslinking agent for coil coatings whose content is approximately 30% renewable.
Together with a partner, we launched a textile coating based on purely aqueous and solvent-free formula components for breathable and yet water-resistant synthetic leather using polyurethane dispersions. The production technology developed by Covestro enables coated textiles to be produced using up to 95% less water and 50% less energy than processes involving organic solvents. For this reason, the technology received the Solar Impulse Efficient Solutions label, a distinction reserved for sustainable and environmentally friendly, but also profitable, solutions.
In terms of thermoplastic specialty elastomers, Covestro collaborated with RWTH Aachen University to develop an industrial process for manufacturing CO2-based elastic textile fibers to partially replace crude oil as a raw material. The fibers can be used for applications such as stockings and medical textiles and are made of our precursor cardyon®, which contains CO2. We additionally worked with Air Fom, Taichung (Taiwan), to develop a patented solution for airless tires that is based on expanded thermoplastic polyurethane (eTPU) by Covestro. It avoids the disadvantages of airless products available to date. Air Fom recently received a gold medal from the renowned Edison Award in the category of transportation/personal mobility for the innovation.
Covestro has also developed new elastomer solutions to meet the need for sustainable products in the mining industry. Currently, the screens used in this industry contain a steel insert. At the end of their life cycle, they are difficult to separate from the cast polyurethane elastomer, meaning they can be recycled only with substantial effort. The new composite material developed by Covestro replaces the steel structure in the screens, enabling them to be recycled more easily. This allows the materials to be returned to and help close the raw material loop from manufacture to use to recycling of a plastic product.
In addition, we developed a specialty polycarbonate film containing more than 50% carbon from plant biomass. Compared with a film made from petrochemicals, this material’s carbon footprint is much smaller. Sony Corporation, Tokyo (Japan), used Covestro materials to achieve a breakthrough in the development of augmented reality displays. The company used a photopolymer film to produce an innovative display prototype that can project floating images within a 360-degree field of view while at the same time being highly transparent.