Innovation

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 (R&D) 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 work at all levels in close partnership with the Board of Management member responsible for Innovation to develop new products, refine established ones, and optimize manufacturing and processing procedures. Likewise, application areas business models, and business processes are subject to ongoing review.

Covestro split innovation activities into two core areas in the 2021 fiscal year. For one, we conduct business-related R&D in the business entities, focusing on specific, short- and medium-term R&D issues.

For the second area, the corporate Group Innovation function mainly deals with medium- and long-term sustainability, circular economy, and digital transformation issues. Group Innovation is also responsible for providing a globally harmonized R&D infrastructure as well as providing the reportable segments and their business entities with support for R&D. Group-wide steering committees chaired by the Chief Executive Officer (CEO) network and coordinate the two core innovation areas.

Innovation Management

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 user and consumer industries. Covestro uses a wide variety of tools to achieve this: For example, we use a standardized method to assess every R&D 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, an additional digital platform called “Covestro Ideenmanagement” (Idea Management) is available to employees in Germany and is used to manage all suggestions for improvement throughout the company. 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 in the “Products and Applications,” “Process and Manufacturing,” “Business Model and Commercial,” “Business Processes,” and “Intellectual Property Strategy” categories.

Sustainable R&D-Based Innovation Portfolio

Covestro already has many different sustainable solutions on the market and, going forward, aims 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 R&D we have already begun our pursuit of a much more sustainable project portfolio. This focus 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

Status 2021

54%

of project expenditure

2020: 51%

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 are expected to be used in areas that contribute to reaching these goals.

We set high standards for evaluating our projects in line with our ambitious goal and therefore only consider projects that make an additional contribution to the SDGs when measuring our progress. In fiscal 2020, we incorporated a Group-wide assessment process into the existing innovation process that measures our progress on projects to quantify this additional contribution. This involves subjecting all R&D projects to an assessment based on expert interviews with experts in which we ask specific questions to evaluate the impact of the project and its results on all 17 SDGs. Only projects adding specifically measurable value to the SDGs over and above that of solutions currently on the market are included in the measurement of our goal attainment. This assessment matrix was applied to Covestro’s R&D portfolio in the 2021 reporting year. In this portfolio, 54% and therefore €40 million (previous year: 51% and €41 million) of R&D project expenditure exceeds our defined threshold. The acquisition of RFM expanded our R&D pipeline, but the integration of these R&D projects into Covestro’s project portfolio will not be completely finished until the coming reporting year. For this reason, the above metric includes only the R&D portfolio existing at Covestro prior to RFM’s integration into the company.

In fiscal 2021, our total R&D expenditure amounted to €341 million (previous year: €262 million). This mainly went toward developing new application solutions for our products and refining products and process technologies. As of December 31, 2021, 1,477 employees* worked in research and development worldwide (previous year: 1,205), most of them at the three major R&D facilities in Leverkusen (Germany), Pittsburgh (Pennsylvania, United States), and Shanghai (China).

Use of Digital Technologies

We are committed to further pursuing digitalization along with the associated new opportunities for the entire chemical and plastics industry value chain. 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 functions, and at all points of contact with customers as well as in the development of new business models. A steering committee for decision-making has been set up, the Digital Governance Body (DiGoB). It is chaired by the Chief Executive Officer (CEO) and tasked with always keeping the specific benefit for our customers front of mind. Another area of focus in the reporting year was switching the technology for delivering data, computing capacity, and predefined services to the cloud.

Last year, the Digital Solutions Lab in Leverkusen (Germany) established a team of digital solutions professionals to provide expert support for developing and implementing digital products and business models. An initial example was the roll-out of our new service that is part of the CLUE (Competitors Landscape User Explorer) platform and makes comparing products available on the market easier. Another team of experts handles data science, algorithms, machine learning, and artificial intelligence (AI). Based on a Group-wide data analytics platform introduced last year, application cases are developed, operationalized, and scaled up, if possible.

An important initiative for further improving the profitability of our R&D activities is the expansion of our high-performance computing cluster at the Leverkusen (Germany) site to create new computing capacity. Digital R&D also uses flexible cloud-based services to accelerate feasibility studies and the early development of applications and models, which can be seamlessly integrated into local high-performance computing clusters. Furthermore, we are working in conjunction with start-up Ware Corp. in Palo Alto (California, United States), and the quantum artificial intelligence team from Google Ireland Ltd., Dublin (Ireland), on the promising quantum computing technology. Complex mathematical problems that exceed the computing capacity of commonly available computers can be solved by providing the necessary software and hardware for this purpose.

Highly sophisticated simulation methods illustrating chemical processes and physical phenomena are standard at Covestro and help speed up the development of new or improved products and processes. For this reason, these are increasingly developed in-house at Covestro. Moreover, a global, Group-wide R&D knowledge platform has been built to provide easy access to all search results of recent years and all types of current R&D data. Furthermore, sensor data for selected production and processing systems is available. This helps users obtain data-driven insights into ways to accelerate product development and to improve production. Covestro is also stepping up efforts to improve data quality and data collection processes for developing algorithms to predict material qualities, support product development, and enable better understanding of interconnected information.

We are digitizing laboratories by implementing processes to allow for hands-free documentation using speech recognition and automated data collection from laboratory hardware. During this process, we also aim to increase data quality and workplace safety. The same applies to the automatic collection of processing data from plants. For instance, unusual incidents in process control can be identified more quickly. We continue to use data analysis 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 addition, a centralized standard system (Covestro Monitoring Platform) was created to provide support such as cost-efficient and predictive maintenance of equipment and plants.

Strategic Partnerships and Collaborations

Covestro aims to increase the efficiency of our research with in-house activities and strategic collaboration with industrial and scientific partners. Bilateral alliances and collaboration in large, publicly funded consortia characterize our partnerships with research facilities and universities as well as with companies along the value chain.

In fiscal 2021, Covestro expanded the COVeC (Covestro Venture Capital) approach and invested in QC Ware Corp., Palo Alto (California, United States), a leading developer of quantum algorithms. Covestro has been working with a QC Ware Corp. quantum chemistry team since the year 2020, which has already led to the development of two patented basic technologies for chemical quantum computing simulations. The investment aims to step up research into the use of quantum algorithms for simulating chemicals and securing a long-term partnership with QC Ware Corp.

Covestro maintains long-standing and strategic partnerships with various universities. These include RWTH Aachen University (Germany), Tongji University in Shanghai (China), and Carnegie Mellon University in Pittsburgh (Pennsylvania, United States).

Overview of the top three partnerships with universities

The QuinCAT – Quick Incubation in Catalysis incubator supported by the German state of North Rhine-Westphalia is under construction jointly with RWTH Aachen University and will begin operating in the year 2022. The incubator will be a place for developing ideas involving chemicals to enable the founding of a start-up company as a second step. Covestro provides consulting on this process, and will be represented by our CEO on the steering committee when it convenes.

Along with 21 partners from nine countries, including RWTH Aachen University, the collaborative CIRCULAR FOAM project was launched in fiscal 2021 with Covestro as its coordinator. The goal here is to close the material loop for rigid polyurethane foams, which contribute to a significant increase in energy efficiency as insulation in refrigerators and buildings. To date, however, there has been no coordinated waste management or suitable recycling process for this material. This project will develop an end-to-end solution and prepare for implementation of this concept across Europe over the next four years. From the year 2040 onward, this will potentially prevent the generation of 1 million metric tons of waste and the emission of 2.9 million metric tons of carbon dioxide (CO₂) per year, while also saving €150 million in incineration costs. The project receives support from the European Union’s Horizon 2020 research and innovation program.

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 and the Jülich Research Center (Germany) to continue establishing the Competence Center for Industrial Electrochemistry ELECTRA in Aachen (Germany). Facilities were commissioned in Aachen, and the research building is being constructed in Jülich. ELECTRA will be a Competence Center for research on more effective, robust, durable, and safe electrolyzers.

Another 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. Some promising chemical intermediates have been developed that are being tested for polyurethane and coating applications. Covestro is also investigating the possibility of participating in the third funding phase of the Kopernikus Power-to-X (P2X) project with a concept for chemically scaling of this class of substances.

In order to further drive the development of the CO₂ technology platform, Covestro has, since the year 2017, coordinated the Carbon4PUR research project sponsored by the European Union (EU). 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 Europe. A key success of Carbon4PUR is the identification of new types of catalysts enabling the manufacture of new polyols. With the help of these catalysts, our research partners were able to produce polyols at laboratory scale using carbon monoxide-based gas mixtures. Carbon monoxide (CO) makes up 27% of this unique precursor. The new technology was assessed and deemed to be beneficial both ecologically and economically, and was successfully produced at a semi-industrial scale. Our partners have already demonstrated initial applications for the product: Plastics manufacturer Recticel, Brussels (Belgium), and chemical company Megara Resins, Megara (Greece), have both conducted product tests based on the research results.

In cooperation with Circularise, The Hague (Netherlands), and DOMO Chemicals, Leuna (Germany), Covestro participates in the Circularise Plastics project to develop an open blockchain standard for establishing a data exchange protocol. This is intended to facilitate the identification of materials along the value chain so that the best possible recycling option at the end of the product’s life cycle can be determined. The unique thing here is that the stored information is only accessible to those with a justified interest so that sensitive product information remains protected. Based on the success of the initial partnerships, Covestro is also expanding pilot projects with Dr. Ing. h. c. F. Porsche AG, Stuttgart (Germany), and other original equipment manufacturers (OEMs) to enable traceability of the carbon footprint and other sustainability metrics for materials and products along the supply chain and to digitalize this process using blockchain technology.

Process Technology

Another key driver of innovation at Covestro is process technology. All of these activities were combined in the corporate Process Technology function in fiscal 2021 to optimally unlock the resulting potential and to provide the best possible assistance for tackling challenging strategic targets in terms of competitiveness, sustainable growth, and the circular economy. This function is responsible for process technology in Covestro’s production activities and supports operations in the segments. The focus is on continual improvement of our production processes, process design for new production facilities, the development of new process technologies, and scaling newly developed products to industrial scale. Success in these endeavors depends materially on maintaining and systematically upgrading of Covestro’s technological competencies with a clear focus on our employees, successful networking with internal and external partners, and digital transformation in production and technology.

In recent years, we have developed a number of disruptive processes to technological maturity and implemented them, significantly improving our resource and energy efficiency in particular. For instance, the development of gas-phase phosgenation of toluylene diisocyanate (TDI) at the Dormagen (Germany) and Shanghai (China) sites led to energy savings of up to 60% and a reduction in carbon emissions by 60,000 metric tons per year compared with conventional methods. Another example here is the oxygen-depolarized cathode technology for manufacturing chlorine. This technology is currently being incorporated into the new chlor-alkali facility Covestro is building in Tarragona (Spain) and is already being used in Krefeld-Uerdingen (Germany). In fiscal 2021, this enabled our electrolysis operations to cut carbon emissions by 4,400 metric tons.

Other notable examples are cardyon®, a technology used to manufacture CO₂-containing polyether polyols, and the recycling of saline process wastewater in polycarbonate production. Also worth mention is the novel adiabatic-isothermal phosgenation (AdiP) technology we recently began deploying in a pilot plant in Brunsbüttel (Germany) for manufacturing our key product: diphenylmethane diisocyanate (MDI). This technology enables us to conserve up to 40% of the steam and 25% of the electricity normally used per metric ton of product, as well as to reduce carbon emissions by up to 35%. Our intellectual property is protected with a broad portfolio of patents.

Recently, important breakthroughs were achieved in the development of processes for manufacturing biobased aniline and other carbon-based polymers as well as optimizing processes and expanding the portfolio of products manufactured from biobased pentamethylene diisocyanate (PDI). We also reached an important milestone in the development of new technologies for recycling plastics in fiscal 2021 with the successful commissioning of a pilot plant at the Leverkusen (Germany) site for the purpose of chemically recycling flexible polyurethane foams, which are used for applications such as mattresses.

Innovations in the Segments

Innovation in the Performance Materials Segment

We work continually in the Performance Materials segment to add new raw materials and optimized processes to our products to develop them into industry standards in the established applications. Our particular focus here is on our core applications – rigid and flexible polyurethane foams for insulation and the automotive and furniture industries. We optimize our products in their applications throughout the entire life cycle based on market requirements. The innovation departments in the business entities and various corporate functions work on this across national boundaries to ensure that processes are improved, e.g., to save energy and cut product costs.

An example is the new process for manufacturing long-chain polyethers with a higher filler content for flexible foams with improved properties. Use of this product increases firmness while also permitting greater air circulation. We also provided application technology assistance for the energy-efficient manufacture of MDI in Brunsbüttel (Germany) using the AdiP process and the use of the product in standardized applications such as polymeric MDIs for rigid foams and specialties.

In the interest of enabling the transition to a circular economy, we deliver resources and contributions to basic research as well as making scaling to industrial scale possible. The previously mentioned use of CO₂ as a raw material, e.g., for cardyon®, and the support of collaborative projects such as Carbon4PUR are two examples of these activities.

Another area of focus is supporting the development of new digital tools for the R&D functions of all business entities and their implementation at our customers’ companies. The aim here is to improve the efficiency of laboratory workflows on the one hand and to more efficiently develop new polyurethane products on the other.

Innovation in the Solutions & Specialties Segment

The Solutions & Specialties segment serves a number of specialized industries. In the 2021 reporting year, the segment worked with our customers and partners to introduce and implement various innovations aimed at efficiency, sustainability, and promoting our specialties business.

This year, Covestro took an important step toward achieving our vision of becoming fully circular by launching the world’s first climate-neutral* polycarbonate plastic. Mass-balanced raw materials made of biobased wastes and residues** using renewable energy were the key to unlocking this possibility. Firstly, an assessment of climate neutrality was completed by applying the mass-balancing method. This entails allocating the percentage of alternative raw materials used in the manufacturing process to the polycarbonates. Renewable energy is also used in the manufacture of mass-balanced products, so the carbon footprint*** for the segment of the product’s life from resource extraction to manufacture of the product to delivery to the factory gate could be assessed as climate neutral. Covestro’s production sites in Krefeld-Uerdingen (Germany), Antwerp (Belgium), and Shanghai (China) are already certified for the production of mass-balanced products according to the ISCC PLUS methodology. The drop-in approach enables fossil-based raw materials to be replaced gradually without requiring that existing processes or workflows be changed. The resulting products are of equally high quality and perform the same as fossil-based polycarbonates.

The Decovery® line of products is a series of partially biobased resins for industrial, architectural, and packaging solutions. These products are based on renewable raw materials and have a smaller carbon footprint than fossil-based raw materials, whereas they have better properties, e.g., strong adhesive properties. They therefore provide a solid starting point for high-quality paints, wooden floor coverings, cladding, adhesives, barrier coatings, and top coats. This enables our customers to meet their environmental and sustainability obligations while using completely biobased materials. An example of this is the development of a biobased acrylic paper with a barrier coating that replaces plastic layers in paper packaging and was certified as completely recyclable by research institute Papiertechnische Stiftung (PTS), Heidenau (Germany).

The use of fossil-based raw materials can also be reduced in the manufacture of wood coatings for furniture. The furniture industry is at the front of the pack in introducing water-based solutions as an alternative to conventional products containing solvents. Bayhydur® eco 701-90, a hardener that is partly biobased, can be used to improve the sustainability of furniture without reducing coating performance.

Biobased polyesters for one-component (1K) stoving systems are likewise already available on the market, but the thermally activated polyurethane hardeners have been a limiting factor to date for maximizing the share of biobased material used while maintaining high performance. Covestro brought to market Desmodur® eco BL 7175, the first partially biobased, thermally activated polyurethane hardener based on an alternative isocyanate. Besides using a greater share of renewable energy in stoving systems, the product performs better than standard types.

In cooperation with our raw material suppliers, we have also expanded our portfolio to include Makrofol® und Platilon®, partially biobased polycarbonate films made of thermoplastic polyurethane, which are used especially in the textile and consumer goods industries. Moreover, our newly developed Desmopan® EC range includes up to 60% carbon from biomass. Compared to fossil-based thermoplastic polyurethanes, the carbon footprint of these products can be shrunk by more than 20% without compromising quality or performance. Based on this technology, we worked with a customer to develop a biobased foam midsole for a new outdoor trail shoe.

We developed a complete environmentally friendly coating solution in close cooperation with the wind turbine value chain including manufacturer Xinjiang Goldwind Science & Technology Co., Ltd., Urumqi (China), featuring low emissions of volatile organic compounds (VOCs) and excellent durability. It consists of a solvent-free gel coat, an aqueous 2K gel coat, and a polyaspartic-based protective coating for the leading edge. This solution was awarded the 2021 JEC innovation award, which has been the leading prize for the development and use of composite materials for a quarter century.

In terms of household appliances, the latest developments in rigid polyurethane foams for the refrigeration chain address current technical and regulatory challenges being experienced by OEMs. The goal is to improve the sustainability and insulating capacity of these foams and to increase the profitability of refrigerator manufacturing. Enhanced polyols, isocyanates, and catalysts enable refrigerators to be removed from molds more quickly while maintaining wall thickness, which results in higher productivity in production. In the construction industry and household appliance industry, our Baymer® rigid foam systems are a key component in the manufacture of metal composites. One target of this development is to improve the product’s inherent flame-retardant quality to obtain a higher fire classification. Here also, the focus is on improving the sustainability of core polyurethane materials: halogen-free rigid foam systems developed on the basis of sustainable raw materials.

On our way to becoming fully circular, we additionally upgraded our portfolio of cardyon®-based elastomers and found an alternative to our proven TDI amine types. The latter deliver improvements in health and environmental protection.

In addition to our goal of striving for a circular economy, improved industrial hygiene standards and meeting new EU safety standards are issues very relevant for the entire value chain. This goes hand in hand with improved workplace safety for employees involved in production and application. Desmodur® ultra and Bayhydur® ultra, Covestro’s high-performance crosslinkers for coatings and adhesives, can be used directly in our customers’ current formulations. By further reducing residual monomer content in compliance with the European Union’s Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation, they unlock the potential for customers of increased product safety without sacrificing the performance of conventional 2K polyurethane coatings.

The RFM acquisition allowed us to also combine the crosslinking platforms of both units. Thanks to its unique chemical design, the NeoAdd™ PAX product family in particular offers excellent chemical and water resistance and outstanding adhesion to many different substrates. It does not require warming after use, which enables a higher degree of chemical resistance per smaller quantity of product. Moreover, the product is REACH-compliant and, due to its profile, requires reduced labeling compared with other products in the same chemical class. Along with several industry partners, Covestro is successfully introducing this new crosslinker product family in the packaging, industrial wood, and leather processing industries.

In view of the fact that an increasing share of vehicles is electric, the requirements of global transportation and energy markets for the properties and design of electronics applications are changing. We have refined our products to meet this need. An example is the lightweight Bayblend® polycarbonate/ABS blend, which is a suitable solution for various battery modules such as cell holders. It remains stable at both low and high temperatures and therefore guarantees optimal operating efficiency as well as meeting flame-retardancy standards. Covestro and EVBox B.V., Amsterdam (Netherlands), evaluated the use of polycarbonate made from mass-balanced biobased waste and residues for electrical charging stations. EVBox B.V. is scheduled to introduce Makrolon® RE charging stations for the European market in the year 2022.

At K 2016, the world’s leading plastics trade fair, Covestro presented its vision of a seamlessly functional vehicle front end, which became a reality in the year 2020 in an electric vehicle using our Makrolon® polycarbonate product. Covestro developed an innovative automotive headlight concept from this material. Compared with conventional solutions, the new modular design has fewer individual parts, which reduces the number of assembly steps required as well as space and cost. On the whole, the new headlight prototype is over 1.5 kg lighter and therefore cuts emissions and expands the vehicle’s reach. Thanks to the headlight’s modular construction and use of a single type of plastic, the expense and effort of sorting and storing recyclable material also decreases. In addition, technologies for measuring distance and speed and cameras will be incorporated into the headlights in the future. This requires the use of heat-conducting materials to channel away heat generated by the electronics and light sources. With Makrolon®, heat management can be integrated directly into the housing of the new headlight concept.

Head-up displays are being used increasingly in the automotive industry to project images and information in the driver’s field of vision. Covestro stepped up its collaboration with WayRay, a technology company specializing in augmented reality products headquartered in Zurich (Switzerland) to create these projections. The holographic optical elements developed by WayRay with Covestro’s photopolymer film Bayfol®HX enable users to delve completely into virtual reality regardless of the distance to the object; at the same time, the necessary volume for the projection unit used is reduced. Bayfol®HX is also part of a partnership between Covestro and Meta Materials Inc., Dartmouth (Canada), which specializes in casting lenses. The goal is to use proven technologies to incorporate Bayfol®HX directly into prescription glasses for augmented reality. This highly integrated solution combines embedded functional elements with pre-formed prescription glasses.

In terms of the healthcare market, Covestro concentrates on developing application solutions that meet the growing demand for medical services worldwide. This is directly linked to the SDGs: after all, the products are intended to improve access to medical services in emerging economies. Examples here are the use of Makrolon® in new diagnostic tests for coronavirus infection and the use of Apec® in a newly designed breathable mask.

Electronic bandages worn by patients are already being used widely in various areas of medicine, such as patient monitoring and diagnosis, in line with the increasing digitalization of healthcare. The bandages make numerous vital sign monitoring applications possible and allow people undergoing medical treatment to move around freely. In conjunction with the Accensors division of InnoME GmbH, Espelkamp (Germany), Covestro used Platilon® TPU film and the Baymedix® thermoformable foam to develop a new concept for electronic bandages. These consist of two components: a single-use adhesive patch with sensors and a reusable patch containing the electronics (e.g., measuring technology and electricity supply).

New materials are being introduced for the electronics industry that have excellent insulating, mechanical, and weather-resistant properties and are therefore particularly suitable for the 5G network and the Internet of Things. With a growing portfolio of recycled plastics, customers can meet their own sustainability targets while maintaining high material standards. For applications such as high-speed networks, heat management solutions were developed that reduce weight and complexity while at the same time improving product life, recyclability, and the entire carbon footprint.