FEATURES Measuring success in sustainable product innovation Roger Jakeman, R&D Director, Decorative Paints, AkzoNobel Evaluating the effectiveness of a company’s innovation effort is a notoriously tricky thing to do. You can look at input measures such as investment in R&D, the number of scientists employed in relation to company sales, or output indicators such as sales of products that are less than five years old. However, these do not tell the full story – in particular whether the new products are actually making a difference in terms of customer benefit or lower environmental impact. €1.83 billion spent on R&D in the last five years4,000 scientists employed in 130 labs worldwide20% of innovations provide distinct sustainability benefits "We work with value chain partners and customers to focus on the development of eco-premium solutions – products that are clearly more sustainable than the most common alternatives on the market." At AkzoNobel, we have made measurement of our product innovation an integral part of our industry-leading efforts in sustainability. We work with value chain partners and customers to focus on the development of eco-premium solutions – products that are clearly more sustainable than the most common alternatives on the market. They are assessed in seven different categories: energy efficiency; use of natural resources/raw materials; land use; emissions and waste; risks (e.g. accidents); toxicity; health and well-being. When assessed across the whole lifecycle and against currently available solutions on the market, the eco-premium solution we offer must be significantly better in at least one of the criteria mentioned above, and not significantly worse in any. Measurement which provides comparison with mainstream is now being recognized as good practice at many companies and organizations, including the World Business Council for Sustainable Development. It’s also an important driver for innovation, since the progress we are able to make each year will not only be impacted by our own improvements, but also by competitor activity and legislation changes. It’s therefore a moving target leading to continuous improvement. An increasing number of our products and services provide sustainability benefits, but they are only classified as eco-premium when they outperform the mainstream product on the market. In 2012, we set a target of 20% of our sales being generated by eco-premium solutions with downstream benefits by 2020. This is a measure of our eco-premium solutions that deliver sustainability benefits in the downstream value chain – directly to customer operations or end-users – be that as a semi-finished product, as a final product, or as a reusable/recyclable material in the end-of-life phase. We actually achieved ahead of schedule in 2016, but we are not standing still. This is a level that we plan to improve on as we proactively drive the development of innovative sustainable solutions ahead of the mainstream in the market. In total, 11% relates to eco-premium solutions with social benefits: health and well-being, risks and toxicity. Revenue from all eco-premium solutions totaled €3.4 billion, or 24% of our total revenue. Companies can consider products with sustainability benefits at a number of levels. Eco-premium solutions represent the most challenging definition – those products and services with benefits clearly ahead of the competition. An increasing number of our solutions provide a distinct sustainability benefit to our customers, but are not market leading and therefore do not qualify as an eco-premium solution. We estimate that around about half our sales – including eco-premium solutions – are covered by the main drivers for carbon footprint reduction. So what are some of our products that qualify as eco-premium solutions? A great example from our Decorative Paints business is Dulux Wood Charm Woodcare. This is a water-based indoor woodcare paint with significantly lower volatile organic compounds (VOCs) than solvent-based equivalents. It has improved flexibility and a balanced performance in chemical resistance and hardness. It also contains polyurethane modified acrylate (PUMA) latex technology, which is helping to drive conversion from solvent-based to water-based paints. An example from our Performance Coatings business is Interpon A550, a powder coating with superior flow and high durability for the truck industry in China. It is a suitable replacement for liquid coatings on load beds, while offering all the performance attributes of liquid coatings. At the same time, it has improved abrasion resistance, improved application efficiency resulting in less overspray, zero VOCs and reduced waste water. And in our Specialty Chemical business, I can highlight Berol DR-B1, a surfactant for outdoor cleaning products which successfully meets stringent US Environmental Protection Agency standards without compromising on performance. It’s suitable for a wide range of outdoor applications where very low environmental impact is a priority. Many of our products help our customers to produce a low carbon product, or contribute to processes that support the transition to a low carbon economy – for example, water-based paint, coatings with new curing technologies and chemicals used in LED lighting. In total, 13% of our 2016 revenue was from these leading eco-premium solutions that avoid greenhouse gas emissions for our customers, compared with the mainstream solution. Some examples include: Interpon ReFlex, a power coating which meets lighting manufacturers’ continuous demand for coatings with a higher reflectance. This means more light is emitted from the lighting unit because less is absorbed by the coating, boosting the effective output of commercial lighting and reducing emissions Dulux Weathershield Keep Cool: Reflects infrared heat, cooling exterior walls by up to 5°C. It means residents use less air conditioning and less energy as a result, leading to independently verified savings of up to 15% Aquasilk: An innovative water-based wood coating with superior hardness and excellent clarity, designed to make it easier for the Chinese furniture industry to make the transition to more sustainable water-based coatings. The product contains substantially lower levels of VOCs than the traditional solvent-based systems they replace Innovations such as these show how we lead by example, by improving the environmental/social performance of our products and processes, and ensuring rigorous measurement to demonstrate our progress. Our eco-premium solutions are a fundamental driver of our Planet Possible agenda for creating more value from fewer resources, of the products we sell and the processes we use to manufacture them.