How Can Continued Buy-In to Sustainability Throughout the Coatings Supply Chain be Achieved?
Back in March, I wrote a blog for the PCI website that reflected on the rout in the oil markets of the world and discussed how this might impact the commitment of the coatings industry to sustainable development.
Six months later, those concerns are still there and, if anything, have been magnified by recent economic developments in both Europe and Asia. Ton Büchner, the CEO at AkzoNobel, recently warned that “China is not the constantly growing construction market that it has been for the past 10 years.” The resultant reduction in economic activity has had a significant impact on the global pricing of many raw materials. In the case of oil, the situation has been intensified by the fight for revenue and market share amongst the oil- and gas-producing countries of the world.
Although the coatings trade press is reflecting worries about variability of sales revenue and profits in the months ahead as a result of the turbulent economic situation, the industry has recorded some encouraging results over the past couple of years. Stock market performance is generally ahead of market averages, and industry growth above that of GDP. This has been achieved through a mix of organic growth and innovation supplemented by green field investments particularly in Asia, and acquisitions on other parts of the world. The coatings industry has the strength to sustain itself through these troubled times and invest for the long term.
The coatings industry also has a solid record of achievement when it comes to sustainable development. Manufacturing efficiencies have significantly improved while emissions, waste and shipments to landfill have been reduced. There are many examples of improvements across the three pillars of sustainability, but one begins to wonder if the majority of the ‘low hanging fruit’ has now been picked off. The paint industry in the developed world has successfully transitioned from solvent-based to waterborne architectural coatings. However, the cost of that transition was significant and demanded 10 years of investment, development, trial and error, together with sensitive marketing. While the specialty chemical and bio-based industries are continually presenting exciting innovations to the coatings sector, any further major technology transitions may well take just as long to assess, and reach full commercialisation well after the current economic mêlée is over.
With coatings companies expected to deliver ever-improving short-term financial returns while at the same time pressured to make progress towards sustainable development, the question for each company then becomes one of where to place investment dollars?
While many company CEOs and leading politicians, such as President Obama, publically support the vision of environmental change and sustainable development, it is the people within companies and governments that have hands-on control of the infrastructure and can impact the rate of change. While organisation leaders may have a clear long-term vision, it is always left to middle management and government civil servants to translate that vision into actions. These people very often have shorter-term goals driven by ambition based around career advancement and lifestyle improvement. While the environmentally committed members of any community will always support the concept of sustainable development and are prepared to act accordingly, some way has to be found to address the interests of those who do not buy into environmentalism for its own sake and need to be persuaded of its economic and social benefits.
To increase momentum for sustainable development, companies need to adopt a change process similar to the quality initiatives of the 1980s and 1990s. To reach the hearts and minds throughout organisations, one has to focus at least initially on short-term projects that deliver ‘early wins’ and then seek buy-in for more challenging and multi-disciplinary longer-term projects.
The hot button for anyone in manufacturing is operational cost reduction, and this function is often the first to take the sustainable development message on board.
Regulatory managers have the opportunity to exercise strong internal leadership when it comes to ensuring that companies meet existing environmental legislation and contribute to the formulation of new regulations and standards.
Finance and planning are always central to major investment decisions. A growing number of governments (such as France and China) have instituted taxes to encourage improved environmental performance. What is often missed is that a public commitment to sustainability can lead to improved stock market ratings. Banks and investment houses can offer favourable terms on loans. Some governments permit levies on paint sales to fund waste paint recycling operations, and emissions credits can be sold in open markets, thereby providing tangible incentives to invest in clean technologies.
Key to longer-term success is the achievement of a consensus between R&D (driven by innovation) and procurement (driven by cost reduction). New products and technologies are often rejected by the coatings industry because they are more expensive than the materials they are designed to replace. The reality is that new materials have to deliver both technical advantages and financial savings. Suppliers can reduce costs through further investment in manufacturing capacity, by streamlining existing production processes, and by promoting materials that have more than one application to support economic volumes of production at an early stage of development.
When it comes to the assessment by coatings companies of technical advantages in novel formulation ingredients, it is not only a question for R&D but will also raise issues for marketing and manufacturing. All need to be satisfied with a proposed change before it can be implemented.
Understanding these key influences within an organisation is critical not only to coatings company CEOs who are committed to delivering a more sustainable future, but also to the industries that supply the coatings world. Bonuses geared to sustainable achievements can be effective motivators for some, but company leaders and suppliers need to appeal to a wider range of objectives within an organisation to make long-term sustainable change happen.
Change is never easy, and sustainable development in the coatings industry, especially in these volatile times, is no exception.
