Group Strategy

Strategic goals and activities

Our overarching goals derived from our purpose and our vision are directional of our Group strategy. This incorporates the changing world inside and outside the company, and reflects the new influence of our vision. Three strategic chapters are particularly important to Covestro. We want to “Become the best of who we are,” while we “Drive sustainable growth,” and “Become fully circular.” Our strategy is based on a solid foundation; its implementation is being enabled by the acceleration of Covestro’s digital transformation and expansion of our “We Are 1” culture.

Group strategy

Group strategy (graphic)

“Become the best of who we are”

“Becoming the best of who we are” is the first strategic chapter to transform our company in the best possible way to exploit its full potential, thus creating the basis for sustainable and profitable growth. The first strategic chapter is driven by a clear understanding of our business: We deliver a broad portfolio of standard and specialty products and, at the same time, stand out with our strong innovation, research, and development capability. We want to focus even more on the factors that make our core business a success.

Our customers are our top priority in this process. We will optimize the processes that make our customers successful, improve workflows within our organization, and concentrate entirely on the needs of our customers. Depending on each customer’s focus, we will deliver high-quality standard products fast and at competitive prices, or assist our customers with our technical expertise in improving or developing (specialty) products. It is also our aim to considerably simplify, optimize, and digitalize our internal processes.

During the reporting year, we launched the “LEAP” global transformation program to implement the first strategic chapter. This program is intended to realign structures, processes, and control mechanisms to position our company to the best extent possible. To implement this, we aim to restructure our organization, workflows, and responsibilities. Our plans include structuring our business into standard products on the one hand and specialty products on the other. Furthermore, the program aims to bundle certain areas of competence across the company with the primary objective of improving our business, especially with a view to sustainability and the . The measures under the transformation program are scheduled to start in mid-2021 and be completed by the end of the year 2023.

Another important core element of the first strategic chapter is the “Customer Centricity” concept, with which we intend to focus even more on the needs of our customers. At Covestro, “Customer Centricity” is based on three pillars:

  • Knowing the Customer: we need to know our customers so well that we understand exactly what added value we can provide for their business activities.
  • Thinking Customer-first: every single function in our organization must be focused on what our customers need.
  • Co-Creating Customer Value: we must join forces with our customers to create added-value in the marketplace.

“Drive sustainable growth”

“Driving sustainable growth” – and therefore bringing together sustainability and economic success – is part of the second strategic chapter of our Group strategy. To ensure that our portfolio is fit for the future, we intend to invest in market segments that are attractive and sustainable for the long term. For this reason, we not only aim to make our investment portfolio sustainable, but also analyze and manage it based on profitability criteria to generate value with the capital we invest. We support investment projects with a return on () above certain thresholds to sharpen our focus on value-oriented growth.

In the future, we will orient all activities that promote organic and inorganic growth, i.e., investments, acquisitions, research and development (R&D) activities, and our strategic venture capital initiative (Covestro Venture Capital, COVeC), even more strongly toward sustainability. The majority of our new, innovative products already contribute to meeting the United Nations Sustainable Development Goals (), and we pursue the clear goal of expanding our portfolio of circular products.

Sustainability formula

Sustainability formula (graphic)

In addition to our responsibility for the environment, we also want to fulfill our social responsibility within society in accordance with our purpose “to make the world a brighter place.” This is why our strategy is focused on adding value equally at the social, environmental, and economic levels. Our decisions and our actions always take into account the three Ps of sustainability: people, planet, and profit (PPP). We are oriented toward a positive impact on at least two of the three Ps, while at the same time ensuring none of them is negatively impacted. Every decision, every action we take, and the resulting consequences are considered holistically at Covestro, that is, throughout the entire value cycle.

We plan to build plants faster and cheaper to increase the efficient use of our investment capital without sacrificing the reliability or safety of our facilities. For this reason, we will expand our global network of partners specializing in plant construction, equipment, and services; optimize in-house processes and the use of resources; accelerate internal approval processes; and increasingly apply a blueprint approach – i.e., we want to use completed construction projects as a template for future projects.

With the recently announced acquisition of the Resins & Functional Materials (RFM) business of Koninklijke DSM N.V., Heerlen (Netherlands), Covestro is expanding its sustainable business units to implement its long-term strategy. The planned completion of the acquisition and integration of RFM into the CAS segment will make Covestro one of the world’s leading suppliers of sustainable coating resins. Closing is planned for the first quarter of 2021.

In the interest of accelerating the development of our circular product portfolio, we decided in the reporting year to allocate a significant portion of our investment budget for circular economy projects in the coming years.

Greenhouse gas emissions are considered to be the main driver of progressive climate change, which is why – in line with our goal of operating sustainably – we are working to continuously reduce our greenhouse gas emissions. In light of this, it was resolved during the reporting year to review the compensation system to create long-term performance incentives to hone the company’s focus on sustainability. In particular, starting in the year 2021, the existing long-term variable compensation system for the Board of Management and eligible employees will be expanded to include a sustainability component that covers Covestro’s direct greenhouse gas emissions. This will link long-term variable compensation to an absolute reduction in greenhouse gas emissions. There are also plans to include indirect greenhouse gas emissions in the future.

“Become fully circular”

The third strategic chapter comprises our vision to “become fully circular.” It describes our efforts to contribute to accelerating the transition to a climate-neutral and resource-efficient economy. We see this orientation as an opportunity for Covestro to add solutions to global challenges – our circular products – along the entire value chain.

Limited natural resources and advancing climate change are two key drivers of the circular economy. Our activities aim to close material and carbon loops, and thus achieve climate neutrality and reduce the use of resources in the company itself, and in upstream and downstream stages of the value chain. To this end, we are aiming for non-fossil-based polymer production, i.e., in the long run we want to replace fossil-based raw materials such as crude oil entirely with alternative raw materials. By realigning our production processes, we will be able to use raw materials derived from sustainable biomass, CO2 or recycled materials, or obtained using electrochemical processes. Our goal is clear: In the future, we want to produce 100% of our products from alternative raw materials.

Completely climate-neutral production processes also require a rigorous stepwise transition of the electricity supply to renewable energies at competitive prices while maintaining a secure supply. In the future, we aim to obtain 100% of the electricity required by all of our sites from renewable sources of energy.

We also want to drive the circular economy by developing and using innovative recycling options. In this context, we consider chemical recycling particularly promising.

We are aware that shifting our production activities and our product portfolio to circular economy is a major, long-term undertaking that we cannot accomplish alone. For this reason, we will increasingly work on establishing collaborative partnerships and networks with our customers, suppliers, research institutes, and other solution providers throughout the value cycle.

Implementation of the third strategic chapter, and thus our vision, is driven by our global strategy program .”

Digitalization and corporate culture

Our strategy consists of three strategic chapters resting on a solid foundation. Digitalization and our corporate culture are key elements of our company and our new strategy.

We plan to use an extensive program to take better advantage of the opportunities arising from digitalization. To achieve this goal, Covestro encourages the use of digital technologies and ways of working along the value chain, in corporate functions, and at all points of contact with the customer. The digital transformation of our core business aims to generate competitive advantages for Covestro. We intend to use digital business models to discover strategic options and new business areas. These include the expansion of our digital R&D activities and collaborations with major corporations such as Google.

We want to embed our culture firmly in the company in order to fully exploit our internal potential and achieve our business goals. The key to this is our employees, who live the “We Are 1” culture. We work consistently on promoting our culture, developing it, and making implementation easier by defining specific conduct based on the four cultural dimensions.

Circular economy
A regenerative economic system in which resource input, waste production, emissions, and energy consumption are minimized based on long-lasting and closed material and energy cycles.
Capital employed
Capital employed is the sum of noncurrent and current assets less non-interest-bearing liabilities such as trade accounts payable
ROCE/return on capital employed
Ratio of operating result after imputed income taxes to the capital employed
The 17 United Nations Sustainable Development Goals were ratified by all UN member states and entered into force on January 1, 2016. Their objective is to combat global poverty, protect the planet, and secure peace and prosperity for all.
Circular economy
A regenerative economic system in which resource input, waste production, emissions, and energy consumption are minimized based on long-lasting and closed material and energy cycles.