Will the Rout in the Oil Market Prompt the Coatings Industry to Drag its Feet?
The rout in the oil markets of the world is having an impact in every corner of society. I recently read in the Wall Street Journal that the proportion of U.S. consumers buying light trucks and SUVs compared with other forms of automobile transport is at its highest level in a decade. The old adage that when the price goes down, people buy more seems to be working. In this case, people seem less concerned than they used to be about improving gas mileage.
With the oil price currently around $50/barrel, one could argue that this is good news for all industries that consume petrochemicals and their derivatives. We are seeing substantial reductions in the cost of solvents and resins, which are consumed by downstream industries. However, with no end in sight to oil inventories at global highs, one wonders from an environmental point of view whether the availability of cheap carbon-based materials will not only deter investment in technologies that replace oil derivatives but also encourage increased use of carbon-based materials in a profligate way that will add to the carbon dioxide burden in the upper atmosphere.
The coatings industry over the past 10 years has done much to switch from solvent-based formulations to waterborne ones. It is also looking into the use of bio-renewable sources of raw materials for its products. However, many industrial paint systems continue to be based on solvent technologies, and the consumption of bio-renewable replacements for both solvents and resins is still in its infancy. My fear is that, as the financial pressures reduce with the falling oil price, companies will be tempted to reduce R&D expenditure to develop coatings formulations that have a reduced carbon footprint.
I am now learning about initiatives designed to enhance the degree with which financial pressures can lead to sustainable development. One such initiative comes from Greenpeace and the second from the Bank of America.
Kumi Naidoo, the Executive Director of GreenpeaceInternational, is an impressive speaker. I came across him for the first time at the Sustainability Leaders’ Conference in London last November and again recently in an article documenting a debate between him and Hans Wijers, the former CEO of AkzoNobel. Together, they addressed the need to influence for change to deal with environmental challenges and climate change. (www.egonzehnder.com/naidoo_wijers).
When Naidoo spoke in London at a time just before the oil price crash, he shared his growing concerns that time was running out for humanity, given finite material resources and rising CO?emissions. With the goal to constrain the temperature increase in the oceans to 2 °C, we were informed that last year the temperature increase was already 0.8 °C. He commented that what goes on in the Arctic does not stay in the Arctic, and noted the ongoing decline in marine ecosystems, with some projections suggesting that fish could give way to seas dominated by algae and jelly fish. Naidoo underlined his worries about too much investment in current energy and polluting systems blocking progress and called for a ‘billion acts of contagious courage’.
Greenpeace is engaging with the banking, financial and insurance industries worldwide to redirect resources away from ‘polluting companies’ and lend preferentially to the new economy supported by renewable energy sources. He is also linking with trade unions using the tag line ‘No jobs and a dead planet’.
Recently, Bank of America received the coveted Climate Leadership Award for Organizational Leadership from the U.S. EPA. In the citation for this award, the EPA recognised that “Bank of America was the first major U.S. bank to announce an environmental business initiative, which included a $20 billion commitment to financing efficiency, renewable energy and other low-carbon projects. This 10-year plan was completed in fewer than six years and was renewed with a new commitment of an additional $50 billion. Bank of America developed methodologies to measure the environmental benefits of this environmental business initiative, including reductions in CO2 emissions, water use and waste generation. The bank also established and implemented environmental sustainability goals from 2012 to 2015 including: reduction in energy, global water and paper consumption; increasing LEED certification in the company's corporate workplace portfolio; sourcing 100 percent of paper from certified sustainable forests; and diversion of global waste from landfills.”
Despite the reduced financial burden caused by the dramatic falls in the oil market of late, the pressures on the coatings industry to develop products with lower carbon footprints remain. I am sure it is no coincidence that the last Chairman of the Bank of America had in his past career held the position of Chairman and CEO of DuPont and had a clear vision as to how the chemical and allied industries should address sustainability and climate change.
Naidoo’s link with Hans Wijers is an interesting one and gives support to the path that AkzoNobel has chosen to take concerning sustainability over the past few years. With Greenpeace and the Bank of America looking to influence not only the thinking of consumers and politicians but also the investment priorities of the Banking, Finance and Insurance industries, the coatings industry would be unwise to slow down technology change aimed at delivering reduced carbon footprint from cradle to grave.
