SHAPING THE GREEN TRANSITION

Violence in the Middle East, the ongoing war in Ukraine, more and more people fleeing their homes – the world continued to be dominated in 2023 by many acute crises. But the long-term risks have not diminished either: According to one study, six out of nine of the Earth's limits have now been exceeded. That includes the increasing concentration of greenhouse gases in the atmosphere. The Intergovernmental Panel on Climate Change has once again issued an urgent warning: This decade will decide the future of humanity.

Circular economy as guiding principle

It is therefore clear that the green transformation, which has already been initiated in many areas, must be continued with the utmost intensity. This requires innovative technologies and materials – a case for the chemical industry, and for Covestro. In 2023, we therefore expanded our range of sustainable plastics for numerous industrial sectors, also enabling them to improve their own carbon footprint. That is how we are laying the foundation for sustainable growth. But it takes more than individual products! To make the world more sustainable, smarter and fairer, comprehensive and consistent systemic change is essential, which is why Covestro is committed to making the circular economy a guiding global principle.

CIRCULARITY AS GUIDING PRINCIPLE

The chemical and plastics industry accounts for roughly six percent of global greenhouse gas emissions, equivalent to the combined contributions of Germany, France, the UK and South Korea. This substantial environmental impact is primarily attributed to the industry’s continued heavy reliance on crude oil as the starting point for its products, which primarily releases CO₂ during processing and utilization. This must and can change! Covestro sees itself as a driving force and is fully focused on the circular economy. This must become the global guiding principle to put a stop to the waste of resources, environmental degradation, and climate change.

Full speed ahead

As part of our transformation toward circularity, we therefore made further progress in our focus areas in 2023: In the switch to non-fossil raw materials, for example, we are now testing a new process on a pilot scale to produce the important chemical aniline entirely from plant biomass. At the same time, we have expanded the use of renewable energies and concluded a direct contract for the supply of solar power from the provider Ørsted for our site in Baytown (United States). We also achieved a research breakthrough in our work on innovative recycling technologies: The high-performance plastic polycarbonate can now be chemically recycled. But nothing works without strong partners: Together with other international players, we have therefore agreed to establish a research and development center for processing plastic waste as part of the World Economic Forum 2023. These are all important milestones that will bring us closer to our vision of a circular economy, step by step. This journey is a marathon, not a sprint, and we are forging ahead!

SUSTAINABLY ON THE MOVE

Feeding the world's growing population; transforming cities into liveable centers; providing everyone with good education and medical care – the challenges of our time are immense. Despite their diversity, they do share a common thread: the increasing need for innovative, sustainable and smart materials.

This is where we come in! One example? Mobility of the future. It will be shaped by three major developments: electromobility, autonomous driving, and the need for individualization. The number of electric vehicles is expected to rise dramatically this decade – from 26 million at present to a global total of around 240 million in 2030. At the same time, experts predict that around 50 million vehicles worldwide could be on the road, some of them autonomously, while car interiors will increasingly become networked, stylish living and working areas.

Stronger together

Covestrois responding to this with intelligent, lowcarbon material solutions. To this end, we have teamed up with Chinese e-car manufacturer HiPhi, among others, and put a joint laboratory into operation in 2023. But even now, Covestro products are already on the road, for example in a luxury electric SUV from HiPhi. The highlight: Headlight lenses based on the high-performance plastic polycarbonate from Covestro become a projector that displays signs and patterns to pedestrians and other vehicles.

DON’T WAIT, ACT

Climate neutrality is an essential element for becoming fully circular – and important for the goal of limiting global warming to 1.5 degrees Celsius. Energyintensive industries such as the chemical industry are particularly important in this respect: If they reduce their energy requirements and switch to renewable energies, it will save millions of tons of greenhouse gas emissions.

We want to use this leverage and have set ourselves the ambitious goal of being operationally climate-neutral by 2035 – in other words, reducing our own emissions (Scope 1) and those from external energy sources (Scope 2) to net zero.

Taking initiative

To achieve this, we have already concluded a large number of power purchase agreements (PPAs) with a total volume of several hundred gigawatt hours. By the end of 2023, around 16 percent of Covestro's global electricity demand were already covered by renewable sources. We are thus reducing our own CO₂ footprint on the way to climate neutrality, and at the same time supporting the construction and expansion of wind and solar parks. That’s because they gain important planning security through purchase agreements. In turn, our products are used in thousands of end applications, including composite resins for solar panel frames. So the more sustainable our products are, the more sustainable all these end products will be.

THE MISSING PUZZLE PIECE

Covestro has set itself climate neutrality targets for scope 3 emissions: –10m metric tons CO₂-equivalents (–30 percent vs. 2021¹) by 2035 as short-term target and climate neutrality for 2050 as long-term target. A further step towards transformation and its long-term vision of becoming fully circular. Scope 1 emissions originate from Covestro's own production processes, while scope 2 emissions stem from purchased energy. Scope 3 emissions cover all other greenhouse gases generated upstream and downstream in the value chain. They account for roughly 80 percent of Covestro’s total greenhouse gas emissions.

Covestro identified four big levers to reach climate-neutrality for scope 3 emissions:
1. Suppliers reduce their scope 1- and scope 2-emissions
2. Profitable sales of products based on alternative raw materials
3. MAKE projects: investment projects with which Covestro produces alternative raw materials with a lower carbon footprint, such as bio-based feedstock production, e.g. biobased aniline
4. A variety of other supporting factors, e.g. increasing recycling rates to reduce emissions from waste incineration, changes to logistics. By finalizing the scope 3 target-setting and the overall climate neutrality strategy, Covestro reaffirms its ambition to lead the transformation of the chemical industry.

¹ Partially compensation of growth-related emissions included

INVESTING IN A SUSTAINABLE FUTURE

A more sustainable future. We believe that this is something worth investing in! That's why we continued to invest in the expansion of our global production capacities and innovative technologies in 2023. A total of around 800 million euros. In 2023, we have also further strengthened our European production network for MDI (diphenylmethane diisocyanate), a precursor for the production of rigid foam, which is used to insulate refrigerators and buildings: The construction of a plant for the production of aniline in Antwerp (Belgium) is progressing, and we have commissioned a new chlorine plant in Tarragona (Spain). Thanks to the use of state-of-the-art technology, this saves up to 25 percent more energy compared to existing processes.

Ongoing investments

We also have our sights firmly set on future investments: By 2025, for example, we want to further strengthen the sustainability and competitiveness of our TDI (toluene diisocyanate) production for the manufacture of flexible foams in Europe and modernize our production plant in Dormagen (Germany) to achieve this. This is great news as the plant expected to consume up to 80 percent less energy and reduce greenhouse gas emissions by a further 22,000 tons per year after the modernization. However, it is not only the production of materials that is important, but also their recyclability, as too many plastic products still end up as waste at the end of their useful life.

We are therefore driving forward the development of innovative recycling processes and testing various solutions in parallel. In 2023, for example, Covestro started planning the construction of a pilot plant for the chemical recycling of polycarbonate in Leverkusen (Germany), and commissioned a plant for the compounding of mechanically recycled polycarbonate at its site in Shanghai (China). A collaboration with potential

GETTING THE MOST OUT OF IT

Energy efficiency. An absolute key issue for Covestro. The aim is to obtain as much energy from renewable sources as possible, while reducing the total amount of energy required.

How does that work? For example, through the intelligent use of energy that is already generated at the plants. We reached further important milestones in 2023, like at our site in Brunsbuettel (Germany): A steam pipeline was completed here that allows high-pressure steam from aniline production to be used in the neighboring MDI plant. This significantly reduces the amount of steam that has to be generated for MDI production. And that saves energy: around 40 gigawatt hours, which is more than 2,000 average households need per year. A great achievement, for which we were awarded the VCI Nord (German Chemical Industry Association) sustainability prize.

Increasing energy efficiency

Energy is also being saved at our sites in Leverkusen and Uerdingen (Germany). Equipment has been installed at two plants that allows waste process heat to be used for internal steam generation. Together, the two plants save around 60 gigawatt hours of primary energy. We are also working intensively at our site in Dormagen (Germany) to increase the efficiency of our TDI production there. By 2035, we aim to reduce our specific energy consumption in North Rhine-Westphalia by 25 percent compared to 2020 through efficiency measures. A further step toward the circular economy.

MAXIMIZING OUR POTENTIAL

Artificial intelligence (AI) is developing rapidly. And that also opens up farreaching opportunities for the chemical industry! Covestro has recognized and is successfully exploiting this opportunity. Where exactly? In production, research & development, or administration, for example. Sustainability also plays a major role here. Because, with the help of AI, we can continue to pave the way toward a fully circular economy and create more innovations.

Small changes with great potential

The impact on the world of work is extensive: Assistance systems, chatbots, and autonomously controlled systems will fundamentally change our everyday working life as we know it today. That is why humans and artificial intelligence are working ever more closely together at Covestro: AI-controlled production systems are already ensuring greater energy efficiency in our plants and increasing production capacity, among other things.

And the journey continues: Covestro employees will have a virtual assistant at their side in the future. The aim is to improve knowledge management and make day-to-day work more effective. And all of this shows just a fraction of the activities with which we are playing a leading role in shaping a sustainable chemical industry. Sounds exciting? We think so too!

A STRONG FOUNDATION FOR STRONG PARTNERSHIPS

The world is constantly changing. And we are actively shaping this change – for example through strong, innovative partnerships, as with Team Sonnenwagen. Around 50 students from RWTH Aachen University and Aachen University of Applied Sciences are developing solar cars that will pave the way for more sustainable mobility in the future. They generate energy while driving, using only the power of the sun.

And that's not all: The racing cars regularly prove themselves in international competitions, above all the Bridgestone World Solar Challenge, the toughest solarrace in the world. We share this enthusiasm, which is why we are supporting Team Sonnenwagen as the main sponsor with our innovative material solutions and as a professional sparring partner.

A strong foundation

Our employees worldwide are a strong foundation for such successful partnerships. Together, they are driving forward the vision of a circular economy. That requires a comprehensive transformation. To enable our colleagues to actively shape this transformation, Covestro launched “Expedition C”, a holistic training initiative, in 2023. The focus is on six core topics, which are explored in depth using a variety of different learning formats. The topic include sustainability, digitalization and innovation as key areas of transformation at Covestro. We are convinced that only a strong workforce can shape a more sustainable future together with partners!