Foreword
How we pushed forward our transformation in 2023
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Dr. Markus Steilemann
Chief Executive Officer
Message from Markus Steilemann
Building a sustainable and, above all, climate-neutral world must continue intensively, despite all the acute crises and problems. One key to this is the circular economy. Covestro intends to be fully circular and achieved success again at all levels in 2023.
Christian Baier
Chief Financial Officer
Message from Christian Baier
Sustainable growth is a central element of Covestro’s “Sustainable Future” strategy and crucial for becoming fully circular. Covestro also set a decisive course for this in 2023, and once again became faster and more efficient.
Dr. Thorsten Dreier
Chief Technology Officer
Message from Dr. Thorsten Dreier
One thing is essential on the path to climate neutrality: a safe, reliable and energyefficient production for which sufficient renewable energy is available.
Sucheta Govil
Chief Commercial Officer
Message from Sucheta Govil
Plastics are the key to a climate-neutral world, be it in daily life, construction, or mobility. As a leader in the transformation, Covestro is the best possible partner for our customers to speed up the transition to a circular economy.
Dr. Markus Steilemann, Chief Executive Officer
SHAPING TRANSFORMATION
Building a sustainable and, above all, climate-neutral world must continue intensively, despite all the acute crises and problems. One key to this is the circular economy. Covestro intends to be fully circular and achieved success again at all levels in 2023.
Ambivalent. That's how I would summarize my view of 2023. A mixture of consternation and concern, but also confidence. Dismay at the increase in violence, hatred and division in the world. Concern that a global spiral of pessimism is accelerating, as the latest Global Risk Report suggests. I counter this with critical optimism. Because the past year has once again shown that humanity is making progress in solving many major tasks. For example, the annual report of the International Energy Agency made me sit up and take notice. According to the report, renewable energies could account for almost half of global electricity generation by 2030. And the COP28 climate summit paved the way for this: by then, global capacities for renewables are to be tripled and energy efficiency doubled. This reinforces two of my convictions. Firstly, because a better, sustainable future does not have to remain a utopia. And secondly, because we must continue the green transformation with all our might – regardless of all the acute crises and problems. The best lever for this is the circular economy as the key to resource conservation, environmental protection and climate neutrality. And a driving force here is the chemical and plastics industry.
We at Covestro see ourselves as pioneers by completely aligning the entire company with circularity. Here we were successful again at all levels in 2023 – which also fuels my fundamental optimism. We have made further progress in converting our production to renewable energy. We are also turning our backs on the fossil era with regard to raw materials. We have reached another milestone here by setting up a pilot plant to produce the chemical aniline from plant biomass in future. Another sustainable source of raw materials is used plastic, which is still not recycled enough. Covestro wants to change that. Our contribution of the year 2023: a research breakthrough to chemically recycle the high-performance plastic polycarbonate. So there are many successes that show that our company is strategically on the right path. And not just in the long term, but also with regard to immediate challenges. We are counteracting the weak economy by setting numerous levers in motion that noticeably improve our performance: improve plant utilization, increase margins, save costs. Consistent digitalization helps us with everything, as does a workforce that demonstrates special commitment and solidarity, especially in difficult times. This reinforces my third conviction: There is no way around Covestro in the transformation to a sustainable world.
»There is no way around Covestro in the transformation to a sustainable world.«
Christian Baier, Chief Financial Officer
FOCUS ON SUSTAINABLE GROWTH
Sustainable growth is a central element of Covestro’s “Sustainable Future” strategy and crucial for becoming fully circular. Covestro also set a decisive course for this in 2023, and once again became faster and more efficient.
When I took up the position of Chief Financial Officer at Covestro in October 2023, I was particularly impressed by the company’s ”Sustainable Future” strategy and its clear focus on sustainable growth. This forwardlooking orientation has proven to be a central pillar of its resilience in a year that was again characterized by economic challenges, subdued demand in all regions, and high inflation. Covestro continues to stand on a stable foundation with a solid balance sheet. Our Group sales of around EUR 14.4 billion and EBITDA of around EUR 1.1 billion for fiscal 2023 were within the expected range that we had already forecast in the first half of 2023. We therefore invested around EUR 800 million in our plants, the expansion of innovative technologies, and the development of sustainable projects in the past year. At the same time, we are becoming significantly more efficient in all areas of the company in line with our strategic alignment. One important success in 2023 was the reduction of our fixed costs in the mid three-digit million euro range compared to the previous year. We will continue this cost consciousness in 2024 and consistently tap into further efficiency potential.
One component of this is integrating artificial intelligence and digital solutions into our processes. In 2023, forexample, we were able to improve the accuracy of our liquidity forecasts through machine learning and thus deploy our resources more effectively. We also made further progress in continuously linking our financing and sustainability strategy, for example by fully allocating the financing funds from our green bond, issued for the first time in 2022, to sustainable projects such as the expansion of alternative raw materials. So, when I look back on 2023, I see the approximately 17,500 colleagues around the world who have consistently driven Covestro’s transformation forward. This is one of the reasons why I am full of energy as we look ahead to 2024. I am convinced that now is the time for us to set the course for future success. In particular, the ongoing demand for sustainable materials in growth areas such as electromobility and energy efficiency offers huge opportunities. I am therefore looking forward to continuing Covestro’s transformation journey with our dedicated employees around the world and to growing sustainably together.
»I am full of energy as we look ahead to 2024. I am convinced that now is the time for us to set the course for future success.«
Dr. Thorsten Dreier, Chief Technology Officer
RELIABLE FOUNDATION, ENERGY-EFFICIENT FUTURE
One thing is essential on the path to climate neutrality: a safe, reliable and energyefficient production for which sufficient renewable energy is available.
Full steam ahead toward climate neutrality – that’s how I would summarize the year 2023 in one sentence. After all, our goal is clear: We want to achieve climate-neutral production at Covestro by 2035. Admittedly, this is an ambitious plan, but I am convinced that we will achieve it. And a look back at 2023 confirms my view, because we made great strides last year toward this goal. Firstly, by significantly increasing the proportion of renewable energy used in our production, with several major power purchase agreements for electricity from wind and solar power that we concluded in all regions. Since 2023, 45 percent of our electricity for the site in Shanghai has come from renewable energy sources, and we have also significantly increased the proportion of renewable energy used at production sites in Europe and the United States. Secondly, by using innovative process technology that significantly reduces our emissions during production. At our site in Tarragona, Spain, for example, we commissioned a large-scale chlorine production plant that uses the innovative oxygen depolarized cathode (ODC) technology developed by Covestro and our partners. It is the world’s first plant with ODC technology on this scale, and the technology enables us to save up to 25 percent electricity during the production process.
However, at Covestro we not only think about our sustainability goals in terms of production processes, but also have our vision to become fully circular and climate-neutral in mind with every step and every decision. Sustainable growth is our strategy for the long-term success of the company. We also base our investment decisions on that. In the fall of 2023, for example, we completed a new production facility for water-based polyurethane dispersions in Shanghai. This will meet the growing demand for more sustainable coatings and adhesives for industries such as automotive, construction, furniture, shoes and packaging and help our customers reduce their carbon footprint. At the same time, we are constantly working hard to develop new recycling technologies and bio-based raw materials. With success: In 2023, we were able to develop a process for the chemical recycling of polycarbonate, which is currently being tested on a pilot scale. And we are making great progress in preparing our innovative bio-based alternatives for the raw materials HMDA and aniline for large-scale production. The year 2023 proved that transformation is not a future scenario. We are right in the middle of it. And we’re making really good progress!
»With our significantly increased share of renewable energy and our leading innovative process technology we reduced our emissions in production in 2023.«
Sucheta Govil, Chief Commercial Officer
DRIVING INNOVATION TOGETHER
Plastics are the key to a climate-neutral world, be it in daily life, construction, or mobility. As a leader in the transformation, Covestro is the best possible partner for our customers to speed up the transition to a circular economy.
There is a headline from the year 2023 which immediately springs to mind: Grow through constant change and challenges. The power to take on global challenges like climate change or the persistent ripples of economic fluctuation lies in our commitment to make the world a brighter place. As I reflect on the past year, we have taken a step forward in steering Covestro toward greater efficiency and resilience. Our dedication to aligning ourselves more closely with the evolving needs of our customers has been paramount. We recognize that today, more than ever, the pursuit of innovative high-performance materials is not just a choice but a necessity. Plastics are core for a climate-neutral global economy, embodying a unique value proposition for both our customers and stakeholders: Covestro materializes the circular economy.
During the year, we reached significant milestones in sustainability and innovation. Notably, our investments and collaborations led to a wider range of cutting-edge CQ materials containing renewable feedstock – proof of our commitment to reducing carbon footprints and advancing the circular economy. Take, for instance, the inauguration of our mechanical recycling facility for polycarbonate, an embodiment of our commitment to meeting the rising demand for recycling grades across various industries. The development of Makrolon® RE, comprising around 90 percent recycled content, underscores our dedication to reducing our customers’ carbon footprints. The joint innovation doesn’t stop there. Our contributions to the automotive industry – like the development of lightweight, durable, and esthetically appealing components for autonomous driving – underscore our commitment to sustainable mobility solutions. But this journey isn’t one we embark upon alone. It is together, through unwavering collaboration with industry pioneers, scientific communities, and, above all, our customers, that we can accelerate progress. An example close to my heart is our continued partnership with Team Sonnenwagen: The students are extremely motivated and have the know-how to develop and optimize new ideas for solar-powered, light-weight electric vehicles. Together with the young minds, customers, and innovative partners, we foster creativity and an entrepreneurial spirit. Together, we have the power to catalyze change, to shape an environment where sustainability and innovation interact harmoniously. Let’s accelerate together.
»Plastics are the key to a climateneutral world economy, embodying a unique value proposition for both our customers and stakeholders.«
