For Covestro, innovation as a driver of greater sustainability in line with our corporate vision of becoming fully circular 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 Chief Executive Officer (CEO), who is 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 has split innovation activities into three core areas. 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. Issues of strategic importance, such as chemical recycling or applications of alternative raw materials for our product portfolio, are promoted on what we refer to as innovation platforms. Group Innovation is also responsible for providing a globally harmonized R&D infrastructure as well as providing the business entities with support for research and development. In addition, the corporate Process Technology function is responsible for short-, medium-, and long-term developments. It acts firstly by improving existing production processes with R&D projects that have a short or medium-term focus and secondly by promoting process developments related to sustainability, the circular economy, and digitalization, many of which are medium- to long-term in nature. Group-wide steering committees chaired by the CEO network and coordinate the three innovation areas. To ensure that innovation is coordinated with sustainability and digitalization issues, the head of the corporate Group Innovation function is a member of the relevant cross-functional steering committees, such as the ESG Governance Body (ESG GoB).
By managing innovation across functions 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. For example, at Innovation Celebrations (innovation events held in the regions), 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. Furthermore, innovation management covers the systematic establishment and control of local and global alliances for acquiring skills that are strategically relevant and complementary to Covestro.
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 United Nations Sustainable Development Goals (SDGs). Attaining this goal means continually changing over our product range to 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, research, and test unconventional and unique approaches early on, thus contributing to meeting the SDGs with our R&D products and technologies.
OUR INNOVATION GOAL
of project expenditure
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 of committing 80% of R&D project expenditure to areas that contribute to meeting the SDGs and therefore only consider projects that make an additional contribution to the SDGs when measuring our progress. Since fiscal 2020, we have 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 internal interviews with experts in which we ask specific questions to evaluate the impact of a 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. This assessment matrix was again applied to Covestro’s R&D portfolio in the reporting year 2022. In this portfolio, 51% and therefore €39 million (previous year: 54% and €40 million) of R&D project expenditure now exceeds our defined threshold. A change in the project portfolio can be identified since more projects can be attributed to the indicator, although the costs they generated in fiscal 2022 were lower than in the previous year. Many of the R&D projects of the Resins & Functional Materials (RFM) business acquired from Koninklijke DSM N.V., Heerlen (Netherlands), in the year 2021 were already evaluated in accordance with the above assessment process in fiscal 2022. It was, however, not possible to capture the RFM-specific R&D project costs in the system for the full reporting year 2022, with the result that these projects were not yet included in determining target attainment for the reporting year.
In fiscal 2022, our total R&D expenditure amounted to €361 million (previous year: €341 million). This mainly went toward developing new application solutions for our products and refining products and process technologies. As of December 31, 2022, 1,477 employees* worked in research and development around the world (previous year: 1,477), most of them at the three major R&D sites in Leverkusen (Germany), Pittsburgh, Pennsylvania (United States), and Shanghai (China).
*The number of permanent or temporary employees is stated in full-time equivalents (FTEs). Part-time employees are included on a pro-rated basis in line with their contractual working hours. The figures do not include employees in vocational training.
Strategic Partnerships and Collaborations
Research and Teaching
Covestro wants to increase the efficiency of its research with in-house activities and strategic collaboration with industrial and scientific partners. 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.
Covestro maintains long-standing and strategic partnerships with various universities. These include RWTH Aachen University (Germany), Tongji University in Shanghai (China), or the University of Pittsburgh, Pennsylvania (United States). On our path to becoming fully circular, we need cooperation partners that pursue this goal in terms of content and technology. RWTH Aachen University, for example, is above all known for its work in chemical process development. This benefits especially our collaboration in the CAT Catalytic Center, a cooperative research organization that allows us to combine catalysis and process research and use it as a basis to develop new chemical processes that can be implemented on an industrial scale. Our cooperation with Tongji University involves in particular materials for sustainable building and city planning. At the University of Pittsburgh, Covestro’s involvement in the Covestro Circular Economy Program is in turn centered on (further) training on the circular economy. In addition, we are expanding our expertise in the chemical recycling of polymers. To this end, we cooperate with the Shanghai Institute for Organic Chemistry (SIOC) of the Chinese Academy of Sciences in Shanghai (China) and Tohoku University in Tokyo (Japan).
The QuinCAT – Quick Incubation in Catalysis incubator, which is subsidized by the German state of North Rhine-Westphalia and supported by Covestro, is under construction at RWTH Aachen University; it is expected to begin operating in the year 2023. 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.
To establish the circular economy in the plastics industry, various recycling technologies have to be developed in parallel to make better processes available. Here, Covestro cooperates with RWTH Aachen University in the area of enzyme and biotechnology, focusing on three topics. The first is to develop enzymatic polymer recycling to convert plastics into usable monomers at the end of the lifecycle without effort or side effects. The second is to achieve a manageable breakdown of plastics released into the environment so that they decompose fully in a natural environment (programmed biodegradation). The third topic involves enzymatic methods for processing wastewater from plastics production to allow materials to be recovered and returned to the production cycle. For the next five years, the partnership will be subsidized by the German Federal Ministry of Education and Research.
Other Collaborative Projects
As part of the collaborative PUReSmart project, Covestro has developed an innovative process for chemical recycling of flexible polyurethane foam from used mattresses. This new technology can be used to make both recycling polyol, which allows reuse at the customer, and recycled toluylene diamine (TDA), which can in turn be processed into toluylene diisocyanate (TDI). Both materials are used to make flexible foams such as those in mattresses. In this way, we want to substitute fossil-based resources in production, reduce the carbon footprint of our materials, and create new solutions for handling plastic waste. Covestro operates a pilot plant in Leverkusen (Germany) for recycling flexible polyurethane foams to confirm laboratory results and gain findings to increase the scale further. These activities are taking place under the banner of Evocycle® CQ Mattress.
Our alliances cover the entire value chain, linking the chemical and recycling industries. For example, we collaborate with environmental services provider Interzero Circular Solutions GmbH, Cologne (Germany), on innovative plastic waste recycling, and together with the French environmental organization Éco-mobilier – SAS, Paris (France), we are engaged in efforts to improve the recycling of waste from mattresses and upholstered furniture so that it can be reused in production.
Covestro is also working on ways to close the material loop for rigid polyurethane foams, which help to increase energy efficiency when used as insulation material in refrigerators and buildings. Along with 22 partners from nine countries, the collaborative CIRCULAR FOAM project was launched in fiscal 2021 with Covestro as its coordinator. In the next four years, experts from science, business, and society are expected to come up with comprehensive solutions for coordinated waste management and develop suitable methods for recycling these types of foams. The aim here is also to reclaim the raw materials used originally – polyols and an amine that is used as a precursor for diphenylmethane diisocyanate (MDI). Two official meetings were held in the reporting year already, giving all partners regular opportunities to discuss the research findings and project progress.
Covestro continued its cooperation with Circularise, The Hague (Netherlands), DOMO Chemicals, Leuna (Germany), and Asahi Kasei, Tokyo (Japan) in the reporting year to develop an open blockchain standard for establishing a data exchange protocol. The aim is to allow materials to be tracked along the value chain while protecting sensitive product information. Covestro expanded pilot projects in the reporting year to allow the traceability, determination of the origin of materials, and calculation of the carbon footprint and other sustainability metrics to be tested along the entire value chain. Covestro is currently working with the ISCC sustainability certification system and Circularise on rolling out ISCC PLUS certifications along complex supply chains. In addition to Covestro, other suppliers of materials, original equipment manufacturers (OEMs), and the trading company Itochu, Tokyo (Japan), are taking part in the ISCC pilot project.
We are committed to 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 R&D, in administrative functions, and at all points of contact with customers as well as in the development of new business models. One focus in the reporting year was on migrating all key applications to a cloud-based environment.
Cooperation with customers resulted in an example of how digital technologies can be used. By digitalizing the prototyping process for one of our business entities and using virtual copies of physical materials, the process from design to production can be accelerated at our customers. This also facilitates cooperation among members of cross-site teams. These digital components allow product designs to be realistically visualized at the early stages of development. They are also intended to make the existing product portfolio more accessible to customers.
Moreover, we use machine learning and artificial intelligence to obtain insights from data available in the company. Based on a Group-wide data analytics platform introduced in fiscal 2021, application cases are developed, operationalized, and scaled up. One example of successful application is the polyester production facility in Dormagen (Germany), where artificial intelligence was used in processing large volumes of process data of the facility, resulting in an estimated increase of 2% in the quantity of usable product.
Data science approaches used in the R&D departments of our business entities are also advancing our efforts to achieve full digitalization of these departments. Our high-performance computing cluster at the Leverkusen (Germany) site provides successful support to R&D in solving application cases. Computing capacity is also used, for example, to train complex machine learning models, develop algorithms and techniques in the area of quantum computing, and create photorealistic 3D renderings of materials made by Covestro. Here, we continued our cooperation with Google Ireland Ltd., Dublin (Ireland), as well as startups and universities. Covestro and its research partners have jointly published several important contributions on the development of quantum algorithms.
Computer simulations continue to be used on a comprehensive scale at all levels in R&D – from chemical quantum mechanics to the macroscopic level. A new digital simulation tool allows us to conduct large-scale analyses for different properties and scenarios, such as for catalyst performance, solvent-based properties, or polymer solubility. Examples include a newly developed digital tool that helps our customers detect the effects of changes in the formulation on foam properties or to obtain formulation suggestions that depend on the properties required. Initial application cases have also been conducted with the aim of becoming fully circular.
In an effort to fully digitalize the R&D processes in our laboratories we combine different complementary concepts. For example, the first fully digitalized research laboratories are already in use; they use a high degree of automation to generate detailed R&D data, which can in turn be stored on our global R&D knowledge platform. In this way, for example, properties and formulations can be forecast based on machine learning, which help our employees to develop products faster and more efficiently. In addition, we offer our R&D employees around the world digital collaboration opportunities as well as training programs that use augmented or virtual reality technology. By guiding them realistically through the scenarios to be taught, we can achieve higher safety standards in laboratories and production facilities.
In addition, a data-based centralized standard system (Covestro Monitoring Platform) was created to analyze on a permanent basis the condition of our production facilities and provide support, including for cost-efficient and predictive maintenance of machinery and plants. We moreover make large-scale use of our own process models, e.g., for the design of new plants and to train our employees with training simulators to ensure our plant operations are optimized.
Process Technology Innovations
Another key driver of innovation at Covestro is process technology. The designated corporate function is responsible for process technology in Covestro’s production activities and supports operations in the segments. The key objectives are to optimize existing production processes, develop new process technologies, implement leading technologies in the process design for new production facilities, and take the production processes of newly developed products to industrial scale.
The optimization of existing production processes is a key element for meeting our sustainability target of becoming climate-neutral by the year 2035. For Covestro, this means reducing greenhouse gas (GHG) emissions in its own production (Scope 1) and from the provision and use of energy produced outside the company (Scope 2) and to reach net-zero GHG emission* at all environmentally relevant sites by the year 2035. One focus is on reducing laughing gas emissions in the production of nitric acid by using innovative catalysts, which are currently being implemented in relevant projects at our sites in Baytown, Texas (United States), and Shanghai (China), with commissioning intended for fiscal 2024. In addition, the use of hot phosgene generation is intended to increase energy efficiency. Covestro already uses this technology, e.g., in isocyanate production in Shanghai (China), where it leads to a significant reduction in the amount of external steam required. Use of this process is also planned at other sites in Europe. At the new chlor-alkali production facility in Tarragona (Spain), Covestro’s oxygen depolarized cathode technology is used on a large industrial scale for the first time; this plant’s electricity needs are significantly lower than those of a conventional plant, thus making another contribution to reducing our CO2 emissions.
At the same time, we are working on cutting emissions by increasing production output and reducing waste streams in the process. For example, waste volumes in TDI production in Dormagen (Germany) was reduced significantly by using new technology to process production residues. This technology is also in use at our site in Shanghai (China). We are simultaneously working on a process for reactivating a spent catalyst in making bisphenol A, which plays an important role as a basic building block for polycarbonate. The process is being tested at our site in Map Ta Phut (Thailand).
On the road to climate neutrality by the year 2035, Covestro also aims to switch its production processes completely to renewable energy. A particular focus in this context is on the production of precursors and byproducts in the area of base chemicals (chlorine, caustic soda, hydrogen), which are the basic building blocks for many products in the chemical industry. To make them from saline solution using chlor-alkali electrolysis consumes a lot of energy. Covestro produces these three precursors and byproducts at its sites in Leverkusen, Krefeld-Uerdingen, and Dormagen in Germany. To switch these production processes to renewable energy, Leverkusen and Krefeld-Uerdingen have already been certified to the ISCC PLUS process** for producing chlorine as a precursor.
*Achievement of net-zero GHG emissions is defined as a balance between anthropogenic production of GHG emissions (caused by the company’s own production activities and by the provision and use of energy produced outside the company) and anthropogenic reduction of GHG emissions.
**While for mass-balanced raw materials (TDI and MDI), the use of raw materials is certified to the ISCC PLUS process, the certification in chorine production relates to the use of renewable energy.
Thanks to digitalization, production facilities can be controlled more predictively, while processes can be optimized on an ongoing basis using digital simulations. In polycarbonate production in Antwerp (Belgium), the volume of rejects during the process was significantly reduced by returning them to the process, thus supporting circular production with maximum resource conservation.
The development of new production processes to help us become fully circular also brought success in other respects. As a result, we managed for the first time in fiscal 2022 to produce bulk quantities of aminobenzoate, a biobased aniline precursor produced through fermentation. Covestro is currently working with other partners to take the process to commercial maturity as part of a publicly subsidized project. Success was also achieved in producing initial quantities of biobased hexamethylenediamine (HMDA), an important precursor for manufacturing coating raw materials. The project undertaken in cooperation with the US-based Genomatica, San Diego, California (United States), produced the compound on a pilot scale and thus achieved process development milestones.
In Covestro’s two segments, Performance Materials and Solutions & Specialties, product innovations are under way for a number of industries, in particular our main customer industries.
Automotive and Transportation Industry
The automotive and transportation industry continues to transition to an electrified and autonomous future. We want to be actively involved in shaping and driving this transition with customer-centric innovations. We have developed our concepts for next-generation electric vehicles into technologies and solutions that can be made in standard production processes and presented them at K, the world’s leading plastics trade fair, in Düsseldorf (Germany) in October 2022.
The exterior concept consists of a vehicle front into which functions, such as heat management, lighting, electronics, and new surface decoration, have been fully integrated and implemented on a modular basis. With our transparent near-infrared polycarbonate film from the Makrofol® product family, we additionally support the development of embedded sensors, which are indispensable for autonomous and assisted driving technologies. We therefore supply tinted film for optically measuring distance and speed (light detection and ranging, LiDAR, applications), e.g., for the front modules of electric vehicles. The interior concept is likewise built on modularity – with concealed, nonilluminated displays and seamless multi-material surfaces with touch-activated functions that are embedded in a scaled interior prototype. This allows the development of novel interior designs to meet the needs of passengers in autonomous vehicles. Based on full polycarbonate, both concepts are designed to have closed-loop potential; they are based on Makrolon® RE, a material with a reduced carbon footprint compared with conventional Makrolon®.
Polyurethane applications for the interiors of passenger and commercial vehicles are subjected to continuously increasing requirements to reduce the emissions of all materials used in the process. We drive the requisite improvements with continual enhancements in the different polyurethane product groups, Bayfill®, Bayfit®, Baynat®, and Baypreg®. Covestro provides other sustainable polyurethane products for this sales market as part of the Desmodur® product group, which are assessed according to the mass balance approach. We are moreover investigating the possibility of using chemical recycling on car seat foams to make the polyurethane precursors and their components reusable. Together with external partners, we have also started to look into the recyclability of seat upholstery as a way to obtain raw materials that can in turn be used to make polyurethane products.
The transition from combustion engines to electric drives is also opening up new sales opportunities for Covestro. The introduction of the portfolio of flame-retardant products, including the Makrolon®, Bayblend®, Makroblend®, and Apec® product groups, allows batteries to be charged quickly and safely as a result of versatile housing solutions for batteries.
With the new Dockit® capsule system, customers can manufacture two-component (2C) clearcoats for vehicle repairs within a matter of seconds. The capsule system contains clearcoat and hardener in the required proportions. It is ready for use at the press of a button and can be applied with a spray gun. Previously, car workshops first had to measure, weigh, and mix the raw ingredients for 2C clearcoats. The new system saves time, reduces the probability of error, and is easy and safe to use. What is more, for multi-layer paint protection films, our Desmopan® range provides weather resistance, transparency, and resistance to protect the car paint from environmental influences such as chippings, dust, scratches, and chemical substances. The life of these types of multi-layer films is extended by the physical properties and chemical resistance of our Desmopan® range. Conventionally produced films last one to two years, while Desmopan® can help extend their life to five to ten years. Another development is a new process for producing films with reduced thickness from the Makrofol® product group. These films are used in ultra-thin materials such as membranes, e.g., those found in laboratory diagnostics, at automotive and electronics suppliers, in ventilation systems in industry and the automotive sector, in interior and exterior vehicle lighting, in insulating films, or in loudspeakers.
Furniture and Wood Processing Industry
Our activities for the furniture and wood processing industry are also focused on sustainability. For example, as part of the publicly subsidized PUReSmart project of the European Union (EU), an innovative process is being developed for chemical recycling of flexible polyurethane foam from used mattresses.
The Desmodur® CQ product group already has products available that have been made with a proportion of alternative raw materials of at least 25%. These more sustainable TDI products, which are assessed according to the mass balance approach, reduce CO2 emissions and the use of fossil-based resources; they are used, e.g., in upholstered furniture, mattresses, and thermal insulation.
Arfinio® injection molding technology combines liquid high-performance polymers with minerals, enabling manufacturers of solid surface and injection molding applications to produce extremely light yet durable materials. This combination allows the production of seamless shapes without requiring sheets, while achieving mechanical strength, light stability, reparability, as well as low product weight, rapid production, and improved freedom of design. The molded bodies can be used to make a number of different products, ranging from device housings through interior trims down to building facades.
For the construction industry, our work is centered on our core application – rigid polyurethane foams. Used as an insulation material, it makes an important contribution to energy efficiency. To make the insulating material itself more sustainable, two climate-neutral* products have been added to the Desmodur® product range, each of which is a main component in the production of polyurethane insulating materials. Sustainable recycling solutions for rigid foams are being developed as part of the EU-subsidized CIRCULAR FOAM project, which develops above all chemical recycling to recover the raw materials for Covestro’s production processes.
*Climate-neutral (from cradle to Covestro’s gate) according to internal calculations in accordance with the methodology for ascertaining our ecological footprint, which has been critically reviewed by TÜV Rheinland based on ISO standards 14040 and 14044.
Another new solution developed in the reporting year allows mining sieves with inserts to be mechanically recycled rather than the previous practice of burning or taking them to landfill. Substitution with an insert made in a novel way allows the sieve to be mechanically recycled and turned into fine pellets in the process. In a plant developed by us, these pellets can then be processed in a second step and added to a formulation for making new sieves. Another benefit is that mass-balanced products can be used in these formulations.
Electrical, Electronics, and Household Appliances Industry
In our activities for the electrical, electronics and household appliances industry, new materials were developed in the reporting year, again with a focus on sustainability. For example, new compounding products with a high post-consumer recyclate (PCR) content have been developed, which supplement the PCR portfolio by adding a broad range of applications. A climate-neutral* portfolio has also been created with the Makrolon® RE product group, which provides solutions for all key areas of the electrical and electronics industry. In addition, a portfolio of products with improved flame retardance has been developed, combining improved properties in relation to rigidity and tenacity with easy processing. These products are used for low-voltage applications, such as circuit breakers for switching high currents and smart electricity meters. In the area of heat management solutions, the portfolio has been expanded by adding flame-retardant materials frequently deployed in home automation, power supply, and lighting applications.
*Climate-neutral (from cradle to Covestro’s gate) according to internal calculations in accordance with the methodology for ascertaining our ecological footprint, which has been critically reviewed by TÜV Rheinland based on ISO standards 14040 and 14044.
Our range of offerings also includes more sustainable thermoplastic elastomers, e.g., for consumer electronics. These materials boast properties comparable to those of purely fossil-based thermoplastic elastomers, but have an improved environmental footprint. Since the introduction of partly biobased products in the Desmopan® CQ product group, we have combined alternative raw materials obtained directly from biomass with raw materials with a renewable share allocated via the mass balance approach. In the products made with renewable energy, the mass certified as sustainable accounts for up to 80%, while allowing CO2 emissions to be reduced by up to 52%.
To further boost our offering for the wind industry, a new Wind Technology Center was established in Leverkusen (Germany). At this center, Covestro carries out research into material solutions for sustainable energy generation, such as developing new and optimizing existing polyurethane resins for manufacturing rotor blades for wind turbines. This is done in close cooperation with our customers to ensure that industry-relevant and robust solutions are developed. Another area of application for our products relating to wind energy involves cable protection solutions made of polyurethane elastomers for offshore wind turbines. To reduce the size of the cable protection, Covestro has developed a new formulation with which the material required can be reduced by up to 30% without impairing the properties of the application. This formulation will, moreover, be one of the first to be available in a mass-balanced version.
For the health industry, Covestro has developed an innovative concept for administering medicines, using the Makrolon® or Bayblend® product groups with different properties, such as low frictional resistance or glazing. This polycarbonate-based concept simplifies sorting for recycling compared to conventional devices for administering medicines. Another innovation is a material with a low carbon footprint in the Makrolon® product group for respiratory and medication applications. Since hospital-acquired infections present a problem in the health sector, we are developing materials that can withstand aggressive disinfectants. To this end, new flame-retardant Makrolon® and Makroblend® materials have been developed and introduced for use in durable medical equipment.