Strategy, Management, and Implementation
A key component of Covestro’s Group strategy is the aim to become fully circular. This helps us address the environment-related sustainability aspects of our activities in particular. This means moving away from the use of fossil-based raw materials and a holistic orientation toward regenerative production and business models in order to keep the environmental footprint of our business activities, such as the concentration of CO2 in the atmosphere, within planetary boundaries.
The aim is to return products and materials to the value cycle at the end of their life cycle – as a whole, in the form of polymers, or in molecular or other chemical forms. The use of other renewable sources of carbon and the intended full conversion to regenerative methods of production, e.g., with renewable energy, are supplementary measures Covestro will take. They are aimed at helping the company become fully circular in the future and on this basis achieve climate neutrality within the company and increasingly launch products with a more climate-friendly footprint. In the reporting year, Covestro took additional steps to meet these objectives.
OUR CIRCULAR ECONOMY GOAL
We are actively working on identifying suitable circularity targets and indicators.
We intend to create more value sustainably and increase our carbon productivity by continually using fewer carbon-based fossil resources, taking a regenerative approach, and closing material loops. The goal is to decouple our value-generating activities from nonrenewable and noncircular raw materials such as fossil carbon.
Our global Circular Economy strategy program is our contribution to promoting and enhancing the circular economy. In fiscal 2022, a number of different initiatives were managed under this program, with a special focus on advocacy and market design, technological development, the identification of technology paths, and the development of appropriate nonfinancial indicators. New ways of cooperating in the technology and market development environments as part of research consortiums, and alliances such as the World Economic Forum (WEF) and the Alliance to End Plastic Waste, were investigated in the year 2022 and actively pursued and enhanced with different partners.
Key indicative findings and questions regarding the circular economy strategy are handled by the Group’s top-level governance body on environmental, social and governance (ESG) issues.
Measuring the Circular Economy and Trends in Relevant Indicators
Efforts toward building a circular economy in the company can be measured by verifying the degree to which we can replace fossil sources of carbon for production with alternative raw materials and create a closed loop for producing renewable inorganic compounds. We accomplish this for carbon sources by concentrating on products and processes that permit us to employ biomass, CO2, and raw materials recycled from waste. Synthetic raw materials manufactured using green electricity, such as hydrogen, are also becoming increasingly important. In particular, Covestro can leverage procurement on the one hand and the development of our own innovative process technologies for biotechnology, and plastics recycling using chemical means on the other. We are counting on new strategic partnerships to promote recycling within the value chain to make alternative raw material use transparent and to ensure used plastics are recycled at the end of their life cycle.
We continued to work on identifying suitable circularity indicators in the year under review. We assessed the corresponding options in order to define appropriate nonfinancial indicators and targets for Covestro and use them to steer the company further in the direction specified by the corporate vision. The indicators considered include the proportion of alternative raw materials in production or the proportion of circular solutions in the overall product portfolio.
Recyclability and End-of-Life Solutions
Our core technical competence is the development and application of complex chemical procedures and processes. In particular, we want to use this expertise to establish innovative chemical and biochemical recycling and production processes for a circular economy. We want to establish specific processes that will allow us to focus on producing from plastic waste the raw materials that Covestro requires. The use of these recycled raw materials in our production processes will lead to products with a lower carbon footprint and increase the recycling ratio. In addition, we also want to use raw materials that were recycled in upstream stages of the value chain at Covestro. To this end, we use ISCC PLUS-certified raw materials and intermediates. On the whole, chemical recycling processes are an important tool to help Covestro in gradually replacing the use of fossil-based materials and in closing carbon loops. We therefore want to use the circular economy and our climate targets as a way to reduce the environmental footprint of our product portfolio and make it climate-neutral. These processes will continually be verified by means of a life cycle assessment (LCA), in other words, taking into account effects and contributions throughout the entire life cycle.
Covestro is currently researching recycling processes for its own products and materials in more than 20 projects. Of particular importance for Covestro are processes with which materials can be chemically or enzymatically transformed back into their molecules. The secondary raw materials obtained in this manner are of a comparable quality and have properties similar to conventionally manufactured raw materials, and can therefore be reused to manufacture products and materials.
Covestro is already testing the thermal decomposition of chemical compounds at elevated temperatures (pyrolysis) in laboratories in Antwerp (Belgium) and Dormagen (Germany). These facilities can break down polycarbonate as well as rigid foam into high-quality molecules that can then be recycled and integrated into production processes as raw materials. Our low-temperature pyrolysis process enables us to eliminate several steps and therefore to considerably cut carbon emissions compared with conventional high-temperature pyrolysis.
Both pyrolysis and depolymerization are being investigated and enhanced as possible chemical recycling technologies for polycarbonates and rigid polyurethane foams. In depolymerization, polymers are turned back into materials such as monomers and intermediates using solvents, catalysts, and heat, and under pressure if necessary. CIRCULAR FOAM, an EU project to research circular solutions coordinated by Covestro, was launched to this end in October 2021.
Another strategic option for Covestro is enzymatic recycling, which involves using enzymes to very selectively break down plastics into smaller fragments (monomers) at low temperatures. These monomers can then be reused to produce new, equally high-quality plastics. Enzymatic recycling is still in the early phase of development, but due its high selectivity (generating few to no by-products) and low processing temperatures, this technology is very promising. Covestro has identified this potential and, in addition to our own research, has entered into key partnerships to deploy this innovative technology in recycling and take it closer to an industrial scale.
Furthermore, in the year 2022, Covestro made progress in the chemical recycling of flexible polyurethane foam from mattresses. After commissioning a pilot plant in Leverkusen (Germany) at the end of fiscal 2020, we continued to research detailed process parameters in the reporting year and were therefore able to confirm the laboratory results to date. This innovative technology enables us to supply high-purity recycling polyol that meets customer specifications and recycled toluylene diamine (TDA), which can in turn be processed into toluylene diisocyanate (TDI). We forge alliances along the entire value chain to close product loops on an industrial scale. The convergence of the chemical and recycling industries is aimed at creating new value cycles for the circular economy.
Covestro also provides solutions to support the expansion of wind energy, which is a crucial technology for generating power from renewable sources and for decentralizing energy supplies. The recyclability of wind turbine rotor blades is currently one of the remaining challenges on the road to a more sustainable energy industry. We are working on developing a solution to this problem on the basis of a unique polyurethane structure.
Market Design for Alternative Raw Materials
We want to be a pioneer in the circular economy of plastics and play an active role in shaping the market transformation. A key aspect in this regard is to continuously expand our product portfolio by adding sustainable products based on the use of alternative raw materials.
In addition to Covestro’s own production of recycled and biogenic raw materials, the strategic alignment of our raw material and energy procurement activities is vitally important to our corporate vision. We aim to continually increase the share of alternative raw materials used in production and reach 100% in the long term. Covestro defines alternative raw materials as all raw materials made from biomass, CO2, or waste, or manufactured on a nonfossil basis using renewable energy.
In the fiscal year 2022, Covestro further stepped up the procurement of alternative raw materials. In total, we purchased over 55,000 metric tons of alternative raw materials (previous year: over 20,000 metric tons) for use in production activities in Antwerp (Belgium), Changhua (Taiwan, Greater China), Dormagen (Germany), Filago (Italy), Leverkusen (Germany), Krefeld-Uerdingen (Germany), Map Ta Phut (Thailand), and Shanghai (China). The goal here is to be able to offer a broad market a steadily growing portfolio of sustainably manufactured materials.
We have begun to have our production sites audited and certified to the ISCC PLUS process to reflect the certification of these raw materials for further use along the entire value chain. International Sustainability and Carbon Certification (ISCC) is a recognized system for certifying the sustainability of biomass and bioenergy. The standard, which covers all stages of the value chain, is widely used worldwide.
Labeling of Circular Solutions in the Product Portfolio
To enhance the transparency of circular solutions in the market, Covestro introduced a new product label, Circular Intelligence (CQ), in the reporting year. The purpose of the CQ label is to identify new products, for example, that have minimum alternative or recycled raw material content. The minimum threshold is 25%, although some products receive the cradle-to-gate* assessment on the path to climate neutrality. The “climate neutral” label is the result of an assessment of a segment of the product’s entire life cycle based on ISO standard 14040.
In the reporting period, the business entities identified various products to be established under the CQ label.
*The “climate neutral” label is the result of an assessment of a segment of the product’s entire life cycle. In this case, we analyzed the period from resource extraction (cradle) to the factory gate based on ISO standard 14040. The analysis was then critically evaluated for plausibility by TÜV Rheinland AG, Cologne (Germany). The analysis takes into account biogenic carbon sequestration on the basis of provisional data from the supply chain and the use of renewable electricity in the production process. Electricity usage was allocated based on what are known as guarantee-of-origin certificates. Carbon offset credits were not used.
Global and Regional Promotion and Advocacy of the Circular Economy
We also promote the circular economy by participating in regional and global initiatives. When we engage in dialogue with politicians and the public, we advocate for structuring the required regulatory environment for establishing a circular economy with room for innovation and, in addition to established recycling methods such as mechanical recycling, also recognizing chemical recycling processes as complementary methods. Another aim is to remove other regulatory hurdles to the integration of alternative raw materials and the gradual substitution of fossil-based raw materials.
As a founding member of the Alliance to End Plastic Waste, Covestro actively campaigns for regulated systems for disposing of and recycling plastic waste to stop it from entering the environment. The Alliance to End Plastic Waste is a global, nongovernmental, nonprofit organization established by companies representing the entire plastic value cycle. The Alliance supports specific, sustainable, and scalable collaborative projects that prevent plastic waste from entering the environment, collect and recycle plastic waste, and use it as a raw material. The projects focus in particular on locations and waste streams that are majorly impacted by incorrect plastic waste disposal. They comprise the creation of local infrastructure, piloting and scaling of innovative solutions, partnership development, and training, as well as local cleanup campaigns. The Alliance provides financial support to these projects and shares with them the expertise of the entire value chain of its more than 75 sponsoring members. According to data provided by the Alliance, projects supported by the Alliance channeled 33,670 metric tons of plastic waste to a new regulated waste management process and recycled 20,370 metric tons of plastic waste in the year 2022, while gradually increasing the relevant capacities for future years. Its members had undertaken to invest USD 1.2 billion (around €1.1 billion) in the Alliance and their own waste-related projects by the end of the year 2022; the Alliance is moreover using these activities and investments to mobilize additional private and institutional capital to promote a circular economy and reduce the amount of plastic entering the environment. The Alliance therefore entered into a new partnership with Lombard Odier Investment Managers in the year 2022 with the aim of launching an investment fund with a volume of USD 500 million (around €465 billion).
Covestro provides financial support to the Alliance and its mission through active involvement in different projects and working groups as well as through our own partnerships and internal projects accepted by the Alliance, which are aimed at gradually reducing the amount of plastic entering the environment.
Under the Low-Carbon Emitting Technologies initiative led by the World Economic Forum and the various Chief Executive Officers (CEOs) of a number of global chemical companies, Covestro is committed to finding solutions jointly with industry partners. For example, in a collaborative approach with other partners from the chemical industry, the industrial-scale use of waste streams as a raw material for the chemical industry is being investigated and research projects to facilitate plastic waste processing are in the planning.
In addition to various research & development (R&D) projects on the circular economy, Covestro participates in other circular economy projects at the sociopolitical level in Europe. Covestro is a founding member of the Circular Plastics Alliance, whose goal is for European industry to use at least 10 million metric tons of recycled plastics annually from the year 2025 onward. Recommendations for value-chain-specific action items are developed here in individual working groups. Covestro is an active member in the automotive, packaging, construction, electronics, and monitoring groups.
In Germany, Covestro is a member of organizations such as the Circular Economy initiative of the Federation of German Industry, which is working on a political framework for the transition to the circular economy. The CEO of Covestro is himself an active member of the board of this initiative.
In China, we were involved in circular economy topics through various associations such as the China Petroleum and Chemical Industry Federation (CPCIF), the China Plastics Reuse and Recycling Association (CPRRA), and the China Circular Economy Association (CCEA). By participating in these associations, Covestro wants to contribute to advancing the closed loop principle for plastics in China and to raising awareness among politicians and citizens of circular options along the entire value chain. As one of the world’s most important producers of plastics, China is taking steps to further domestic plastic recycling and, at the same time, to prohibit or limit the use of single-use plastics.
In the reporting period, Covestro invested in its first own plant for mechanical recycling of polycarbonates at the site in Shanghai (China); the plant has a capacity of 25,000 metric tons per year. In addition, Covestro, together with the China Automotive Technology & Research Center (CATARC), worked on developing the standard for recycled plastics in automobiles and on creating the China Industrial Carbon Emission Information System (CICES).
Covestro and the University of Pittsburgh, Pennsylvania (United States) have launched a new postgraduate academic program, the Covestro Circular Economy Program, in the United States. The research and innovation program teaches students wanting to engage in sustainability issues methods focused on the circular economy to manage global waste streams. The Covestro Circular Economy Program, which is located at the Mascaro Center for Sustainable Innovation and at the Swanson School of Engineering of the University of Pittsburgh, deals with the need to integrate circular design principles into innovation projects – thus closing a gap in academic teaching. The program was launched with a group of doctoral students in the year 2022.
Covestro LLC, Pittsburgh, Pennsylvania (United States), and the Mattress Recycling Council, Alexandria, Virginia (United States), have entered into a long-term research agreement to improve and expand mattress recycling in the United States. The cooperation supports Covestro’s vision of becoming fully circular and promotes innovation in end-of-life processes for mattresses, and in particular for polyurethane foam.