Strategic goals and activities
“To make the world a brighter place” is our overarching goal in line with our purpose. To this end, Covestro provides innovative products, technologies and application solutions. Our activities are aligned with the UN Sustainable Development Goals (SDGs) in support of global progress in environmental, economic and social issues. Experts agree that these goals have significant economic potential and could lead to profound changes and above-average growth worldwide in the industrial sectors important to Covestro.
Our current strategy was developed with a view primarily to taking full advantage of business opportunities resulting from global megatrends and sustainability issues. This is all part of our efforts to continue growing profitably in the years to come and to exceed global economic growth rates overall. We intend to achieve this using six strategic pillars.
Investing to strengthen the core business
Covestro expects to continue to see strong growth in its core markets and plans to optimally leverage this development to our benefit. We will therefore further expand production capacities in our core lines of business and, to this end, invest in excess of the depreciation level in the years to come. As a rule, this applies to production facilities across all product groups and at all major sites. We are adding the skilled staff and resources required to ensure optimal technical implementation of corresponding projects.
Innovating to promote greater sustainability
Sustainability is a central concern, and it shapes our activities along the entire value chain. We consider sustainability particularly as an economic opportunity benefiting all interest groups. In the years to come, we intend to focus our research and development even more on sustainability issues such as electromobility as well as energy- and cost-efficient construction. Accordingly, we plan to invest even more heavily in R&D projects oriented toward the SDGs and the requirements of the circular economy.
Acquiring to create value and accelerate growth
We are actively reviewing acquisition options in order to strengthen our portfolio. Acquisitions represent another way to participate in the rapid market growth that we anticipate in the years to come stemming from issues related to the future and sustainability. We carefully evaluate potential acquisitions to determine – with regard to our stockholders – whether they increase Covestro’s enterprise value and the impact they may have on other stakeholders. Furthermore, acquisitions must also suit our existing lines of business, our entire company and our corporate culture. Our acquisition strategy also includes investing in start-ups. In this respect, we also ensure that we can contribute to the development of the company, which extends beyond making a financial investment.
Becoming more efficient and effective
To increase effectiveness and efficiency throughout the entire company, Covestro rolled out a Group-wide performance program in 2018 entitled Perspective. The program’s primary objectives are to further refine work methods and cross-divisional processes, in addition to continually improving our competitive and cost position. These measures are expected to generate a long-term cost savings of approximately €350 million by 2021 at the latest, which in turn will be used to limit an increase in operating costs.
With an extensive program, we aim to increasingly take advantage of the opportunities arising from digitalization. To achieve this goal, Covestro anchors digital technologies and work activities in production, along the supply chain, in research and development, in administrative functions and at all points of contact with the customer.
Further developing our corporate culture
In the coming years we intend to improve our corporate culture in such a way that it bolsters our efforts to successfully address future trends and meet market requirements. The purpose here is to tap into our internal potential to the fullest extent and reach our business goals by more intensively promoting innovative ideas and short chains of command, for example. Influenced by the responsible conduct of our managers, our culture provides our employees with the framework for their day-to-day activities and ensures that all employees internalize our C3 values by integrating Covestro’s newly defined conduct guidelines into their everyday activities. In this way, we aim to put every employee in a position to be able to achieve their best performance.
Strategy of the individual segments
In the years to come, demand for polyurethanes is expected to grow at an above-average rate compared to the global economy. In the Polyurethanes segment (PUR), we aim to provide the precursors needed to tap into this development.
The construction industry is one of the strategic industries where we are already strongly represented, and we intend to further expand this position. At the same time, we plan to take into account the growing need for sustainable solutions. In the future, our range of products should satisfy the demand for energy-efficient and affordable living spaces, mainly in the emerging economies. Considering the SDGs, there are some not yet fully developed segments that also warrant our attention – such as wind energy, where we provide materials for generation.
The PUR segment manufactures largely standardized products and the focus there is thus on increasing efficiency through cost management as well as product and process innovations. To achieve this, we are continually evaluating the potential for optimizing facilities and sites. In addition, we plan to develop new business models and improve existing ones.
New forms of mobility call for innovative solutions. In the Polycarbonates segment (PCS), we are continually improving our product portfolio to address these new requirements. After all, materials with low weight, high-quality optics, and transparency are particularly in demand in the automotive industry, such as in the promising electromobility market.
We intend to further increase the share of stable-margin business by focusing on the applications with more stringent materials requirements, particularly in the automotive, health and electronics/LED areas. Furthermore, through innovations such as fiber-reinforced composite materials, we plan to consolidate the technological position of the PCS segment and generate even more growth in differentiated areas. With its distinct application expertise and global alignment, the segment should grow at a higher rate than that of the global economy.
Coatings, Adhesives, Specialties
The Coatings, Adhesives, Specialties (CAS) segment specializes in manufacturing precursors for coatings and adhesives that are used in sectors such as the automotive, construction and furniture industries. We aim to secure and further build on our strong position. Of particular importance in achieving this are consistent cooperation along the entire value chain, the efficient expansion of our capacities and customer-oriented product development. Furthermore, we are working on products that are as environmentally friendly as possible, do not require the use of solvents and utilize alternative raw materials such as plant biomass.
Our specialties business produces high-quality films, specialty elastomers and precursors for cosmetics, textiles and medical products. As in past years, Covestro also plans to grow at an above-average rate in this area thanks to our superior technological knowledge and our expertise in chemical formulations. In this way, we aim to achieve new and profitable application areas for our products.
With increasing urgency, some segments of the public are demanding sustainable solutions to acute global problems such as advancing climate change. People expect industry to adapt business activities and ensure they are set up to be sustainable. On the one hand, this trend will increase demands on our business practices. On the other hand, it also unlocks new business opportunities. We intend to master both challenges while also equally taking into account all three dimensions of sustainability: people, planet and profit.
Leveraging business opportunities
We are continually replacing conventional products with sustainable solutions. To this end, we developed an assessment methodology that was integrated into our innovation portfolio management system this reporting period. This methodology is now applied to all new projects without exception and enables us to identify all kinds of approaches, including unusual and novel ones, that help our products and technologies contribute to meeting the SDGs. Examples are solutions such as solar dryers or sanitation systems for developing regions.
We intend to also focus particularly on the necessary conditions for facilitating innovation in a number of key strategic issues. One example is the circular economy, which will bring major opportunities for the plastics industry in the long term, as well as harboring risks. We will identify particular action items to focus on advancing further in line with a strategy program launched in the 2019 reporting period.
Optimizing business practices
Continually maintaining our sophisticated existing management systems is a key priority for garnering societal acceptance for the continuation of our business activity (license to operate). Examples are safety, environmental protection and product stewardship systems. We also proactively address new and increased requirements in various areas and work on continually improving Covestro. A particular focal point in the year under review was due diligence on human rights. We also made progress on a systematic approach to water risks by implementing our risk-based water approach at all sites exposed to major risks relating to water availability, quality or accessibility.