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Monday, 23 September 2019

The key to Sustainability is innovation, but are Coatings companies spending enough on growth oriented R&D?

Wednesday, 20 November 2013 | Posted by: Tony Mash, TMA Consulting Inc.

This blog says ‘No’!

First, the good news!

Plaudits to AkzoNobel for being ranked in first place in the Dow Jones Sustainability World ranking for the Superchemicals sector for 2013 as well as 2012. This is a significant achievement given the strength of interest and commitment expressed by many large multinational chemicals and coatings companies in Sustainable Development. 

Congratulations also to the Decorative Coatings sector of CEPE, the Europe-wide trade association representing the interest of the Coatings Industry, for being one of the 17 successful applicants out of 90 across all sectors of European industry to be selected to join the first phase of a 3 year Product Environmental Footprint (PEF) pilot programme. This programme is designed to assess and validate a standard procedure for defining and measuring Sustainability in a way that is objective, is capable of balanced comparison of different products/systems, and is simple to understand and use.

It is evident that the Coatings Industry is in the public as well as the political eye in Europe when it comes to Sustainability.

Now the bad news.

At a recent ICIS Chemicals and Coatings conference, Thomas Rings of A T Kearney reviewed the intensity of investment in R&D by the Coatings Industry  (2.1% of sales revenue) and compared this performance with that of the Speciality Chemical Industry (3.5% of sales revenue). While recognising that this measure of R&D effectiveness is not necessarily ideal, there is a view shared by many that the majority of investment in R&D made by the Coatings industry is being spent in defensive projects aimed at meeting existing regulations. In comparison, the Specialty Chemicals Industry, while having to cope with regulations such as REACH, appears to be devoting considerably more funds to the kind of innovative new materials development which would lead to improved product sustainability.

There are those who believe that the Coatings sector is relying too heavily on its upstream suppliers to create the next generation of coating formulations and that it could invest more in technical innovation to drive business growth.  

A T Kearney shares this blog’s view that innovation is key to future competiveness and sustainable growth, and offers some critical questions that all coatings companies need to consider.

-          Are R&D expenditures at the right level to drive growth?

-          Are R&D efforts balanced between "defensive” and growth-oriented?

-          Are R&D efforts focused on product/market segments with sufficient scale?

The last question prompts consideration of further consolidation within certain sectors of the Coatings Industry’. Just another situation that demonstrates how Sustainability has a direct bearing on company corporate strategy and cannot be ignored.

As always, your comments are most welcome?

Tony Mash

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Tony Mash
TMA Consulting Inc.
Tony Mash
President
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