Improving sustainability in the coatings and chemicals industry with renewable raw materials

GreenChem Conference 2010

Abstract

Biomass is of considerable interest to AkzoNobel as a potential alternative to fossil resources both in energy (electricity or biogas) and chemical feedstocks.

The use of biomass may offer opportunities to reduce our environmental impact and/or to create improved products through new functionality.

While this is an area of interest there is still considerable uncertainty and a corresponding need to tread carefully – concerns include volatility in fossil and agricultural product markets and the need to ensure that materials are sourced sustainably paying attention to the full range of environmental and social impacts.

Of direct interest are opportunities to obtain current or new chemicals from biomass meeting our needs on:•Environmental and social impact•Volume•Quality•PriceWe are currently engaging with our suppliers and value chains to identify and address the opportunities herein.

Of broader interest are efforts in:•Assessing sustainability (environmental and social impacts) of the bioeconomy (land use change, food versus fuels…)•Economics (supply/demand scenarios – e.g. potential impacts of changing energy markets…)•Widening the feedstock base (moves to use of domestic, industrial, agricultural and sewage wastes as biofeedstocks…)

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© AkzoNobel 2010

AkzoNobel01

Our company in brief

• The world’s largest paint and coatings company and a world leading chemicals producer

• Committed to delivering Tomorrow’s Answers Today

• Global Fortune 500 company

• For five consecutive years listed as one of the leaders of the Dow Jones Sustainability Indexes (Chemical sector)

Values

• Focusing on our customers’ future first

• Embracing entrepreneurial thinking

• Developing the talents of our people

• The courage and curiosity to question

• Integrity and responsibility in our actions

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AkzoNobel key facts

2009• Revenue €13.0 billion• 54,738 employees• EBITDA: €1.7 billion*

• EBIT: €1.1 billion*

• Net income: €285 million• Credit ratings: BBB+ (S&P) and Baa1 (Moody’s)

* Before incidentals. All data after reclassification of National Starch.

Revenue by business area EBITDA* by business area

Performance Coatings

Decorative Paints

Specialty Chemicals

32%

35%

33% 32%

27%

41%

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Organizational overview

• Functional Chemicals• Pulp & Paper Chemicals• Industrial Chemicals• Surface Chemistry• Chemicals Pakistan

• Continental Europe• Northern & Eastern Europe• UK, Ireland & South Africa• United States• Canada• Latin America• China & North Asia• South East Asia & Pacific• India and South Asia

Supervisory Board

Board of Management

Corporate Staff Departments

• Industrial Coatings• Powder Coatings• Marine & Protective

Coatings• Car Refinishes • Wood Finishes & Adhesives

Business areaSpecialty Chemicals

Business areaDecorative Paints

Business areaPerformance Coatings

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Brands and products that...

• Protect the world’s buildings and infrastructure

• Bring color to all aspects of our lives

• Promote safety and good health

• Supply industries worldwide with ingredients for life’s essentials

• Allow us to travel and communicate

• Furnish our homes and offices

• Help society respond to the challenges of sustainability

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Trusted portfolio of global brands

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Sustainability is integrated in everything we do

We have set ambitious sustainability targets:• Remain in the top three in the Dow Jones Sustainability Indexes • Reduce our total recordable injury rate* to 2• Deliver a step change in people development

We focus on long-term performance. By 2015 our ambition is:• That Eco-premium** products will make up 30 percent of sales• To reduce our cradle-to-gate carbon footprint with 10 percent• To achieve sustainable fresh water use on all our sites

We have linked remuneration to these targets and ambitions:• Our executive bonuses are linked to performance in the leading sustainability index (DJSI)

* Total recordable injury rate refers to amount of incidents per million hours worked ** Higher eco-efficiency than main competitive product

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Successful customer focus

Sikkens Autoclear® LV Exclusive – Self-healing clearcoatA high gloss clearcoat that is not only highly resistant to scratches and easy to apply, but also features self-healing properties when exposed to heat.

Ecosense – better for your world and the worldTo be launched in March, the Ecosense paint line offers no addedsolvents making it virtually odor free. It also has an improved ecological footprint reducing waste, water and CO2 with up to 50%.

Dulux® Ecosure™ Matt Light & Space™Uses revolutionary LumiTec technology to reflect up to twice as much light around the room making even the smallest of rooms look and feel more spacious compared to our conventional emulsion paints.

Stickerfix™ Easier than easy!You can repair and protect your car using a unique easy to apply and remove vinyl technology. It’s coated with professional car maker approved repair systems of Sikkens, Lesonal and Dynacoat.

Compozil® Fx – Better performance. Exceptional results A wet end management system for the largest and fastest paper machines helping to deliver top quality paper faster with higherproductivity, better economy and reduced environmental impact.

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© AkzoNobel 2010

What is sustainability for AkzoNobel?02

“Meeting the needs of the present without compromising the ability of future generations to meet their needs.”Gro Harlem Brundtland, 1987

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Social and environmental trends are re-shaping the competitive arena

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Growth in emerging markets

Scarcity of natural resources

Climate change

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Social and environmental trends

are re-shaping the competitive arena,

and thus our customers’ future

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Creating even more value through

sustainability

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Doing morewith less

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In order to create value for our customers, employees,

shareholders, and society at large

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By:

Increasing turnover from eco-premiums

Introducing Carbon reduction program

Reducing VOC’s in products

100% Sustainable water use

Zero waste through operational efficiency

Top 5 in safety performance

Step change in people development

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© AkzoNobel 2010

Renewable raw materials and the chemicals/coatings industry

03

Watching developments in renewables

biomass2nd Generation

WastesAlternative crops

Algae

Non-food crops

Agricultural

Industrial

Domestic

Sewage

Extractives

2nd Generation fermentation

Fermentation

Syngas

Green biotechnology

White biotechnology

Green biotechnology,

white biotechnology

1st GenerationConventional

agriculture (grains, potatoes etc.)

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What can (might?) renewable raw materials offer us?Lower environmental footprint matches to current materials

New materials offering new properties

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What kinds of materials are we talking about?Basic chemicals – acetic acid, methanol, ethylene,…

Epoxy resins

bisphenol A and F derived resins

Acrylate resins and unsaturated monomers

Ethylene (and derivatives vinyl chloride, vinyl acetate…), acrylates, methacrylates, styrene

Polyesters, polyamides, polyurethanes,…

di (and higher functional) ols, acids, amines, isocyanates, anhydrides

Solvents

Alcohols, aliphatics, esters, aromatics, ketones, glycols,…

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Issues - Targeting efforts on products where they will make a real differenceDoes a greener additive (rheology modifier, wax etc.) make

a difference in the context of a whole formulation or product?

Where in the product life-cycle can you make a real improvement in environmental impact?

Going after the wrong targets is a waste of effort and could lead us into problems with greenwashing

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Issues - Understanding of economics and supply issuesDifficult to predict the future – not sure how petro and bio

raw material supply and pricing is going to develop

Unclear what the energy mix for the future will be and how this will impact chemical market (sugar, fatty acids etc. tagged against oil price due to use as biofuels)

Is there simply enough land to go around?

Are there developments to broaden the feedstock base (waste utilisation etc.?) enough to meet chemical and energy needs?

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Issues - Measuring and reporting environmental and social impactsStandards for measuring and reporting renewable content of

materials – is carbon isotope counting really the best way forward?

Assessing sustainability of renewables – waste, water use, carbon footprints all well established but how do we factor in the other environmental and social impacts of renewables in a robust, useful and consistent way

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Issues - Availability of material & representative samplesObtaining samples of match or drop-in materials can be

tricky

Are samples representative of final materials from production?

Evaluating new materials evaluated in-house can be even trickier when neither supplier nor us know quite what it is for and how much it might cost (technology push)

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Issues - Potential costs, timeline to production of significant volumes, LCADifficult to frame discussions unless we can get a grip on:

Time to production

Expectations of prospective supplier (looking for a market, investor, partner,… ?)

Cost estimation (and sensitivity to feedstock, energy, capacity growth,…)

Environmental impact (and how this compares to current material in market)

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Issues - Marketing and getting value for improvements in sustainabilityLots of interest in a green premium…

Not yet clear

How much extra would you (or your company) have paid for your plane, train ticket for a biofueled flight?

Materials will have to be competitive in market or have a really compelling, well thought out sustainability story that can carry through the value chain

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That was a lot of questions…

Any answers?

Any and all suggestions appreciated.

© AkzoNobel 2010