Veneman: For Akzo Nobel, CSR means "doing the right thing at the right time for the right reasons." CSR is the full integration of business integrity, environmental protection, talent attraction and our contribution to society from our day-to-day business operations. As such, CSR is part of our corporate governance framework. At the end of the day, CSR is about good management, and a company's ability to integrate Principles, People, Planet, and Profit. In that sense, it is about balancing short- and long-term interests, and building trust among all stakeholders.
At SEPTON Company of America, we are actively working on the impact of transportation on the environment by reduction of CO2, NOx. Each year, we report on CO2 emissions by calculating the total volume transported by distance, weight tons and mode. This is tracked year to year to monitor if actions are effective in the reduction of CO2. Some of the efforts are made by finding ways to maximize the utilization of trucks - reducing the total number of truck movements, changing distribution patterns to reduce the number or distance of warehouse transfers, and changing modes, if possible, from truck to rail or to ship.
Veneman: At Akzo Nobel, CSR is considered a strategic issue and a key to our long-term economic success. CSR objectives are part of our regular management cycle, such as the planning letter, operational planning, scorecard, remuneration system, audit and annual letter of representation. At the same time, substantial, non-financial issues - such as energy savings, waste reduction, soil management, management development, the development of new emerging markets for our healthcare products, high standards of business integrity, global HSE standards and so forth - have to be managed like any other business process. We are convinced that CSR is the watershed between the companies with a future and those without.
Eco-efficiency is a business tool that is used to measure the economic and environmental benefits of two alternatives, irrespective of whether they are investment decisions, research strategies, marketing decisions or a review of product-market combinations. The eco-efficiency analysis enables us to select the best of two alternatives, thus delivering competitive advantage. Purchasing, research, marketing and manufacturing are directly involved in the eco-efficiency approach, which strengthens the process of full integration of planet and profit in our day-to-day business process.
Veneman: About 30% of our sales volume is related to products with clear eco-efficiency benefits: powder coatings, which do not contain solvents; antifouling agents in marine and protective coatings, which do not contain biocides and which improve the fuel efficiency of big ocean steamers; and essential, chlorine-free bleaching products in our pulp and paper chemicals.
Some of our businesses currently combine their margin management processes with eco-efficiency. By reviewing the entire product portfolio (e.g., surfactants), only those products with strong economic and environmental benefits will pass the staged review process. The result is a strong product portfolio both on the basis of profit and planet criteria. Once again, integrating environmental criteria into our product portfolio is sound business.
Veneman: One challenge is to create a clear picture of CSR in the minds of all employees. CSR is, in fact, an unfortunate abbreviation for a simple concept: all employees have a role to play in creating a profitable business based on business integrity, environmental care, good teamwork and their contribution to society. CSR represents nothing less than the collective values of each and every employee.
Another challenge is to find the right balance between short- and longer-term interests. In our effort to practice what we preach, it is not always simple to find the right balance between the P's of People, Planet and Profit. Payback on sustainable innovations with respect to raw materials, energy efficiency, water treatment, research and technology may have a longer time horizon than short-term investors appreciate.
This brings us to another challenge. CSR performance should become key in the decision-making process for analysts, investors and pension funds. CSR is about the management of substantial, non-financial issues. Some issues can easily be expressed in monetary terms: environmental liabilities and legislation (e.g., REACH), return on eco-efficient innovations, cost of absenteeism and serious incidents. Other substantial, non-financial issues - such as creating a talent factory, and our reputation - might be more difficult to value. I personally would not be satisfied if my pension assets were invested in unsustainable companies!
Veneman: We are in the process of identifying further opportunities to reduce our oil addiction. Since 1990, our energy efficiency has improved by 19%. Of the energy we use, 72% is derived from low-carbon and zero-carbon energy sources. We want to further improve these indicators. However, the low-hanging fruit has been picked. Further improvements require investment decisions in such areas as the construction of combined heat and power plants. The cost of energy, carbon emissions, taxes, legislation, scarcity of raw materials, pollution, water consumption, transport of fuels and so forth are, of course, an integral part of such decisions.
As the world's largest coatings company, we produce waterborne coatings, powder coatings, high-solids and solvent-based coatings. Product stewardship is an integral part of coatings businesses, as we continue to search for more environmentally friendly products. We use eco-efficiency analysis to ensure that we develop the best product/market combinations for a range of customers.
Veneman: On the one hand, CSR reporting is important to ensure open and transparent communications to our external stakeholders. For external benchmarking and communication purposes, we do report on our progress vis-à-vis GRI guidelines. GRI is doing a good job in constructing one global reporting standard, which brings consistency in the company CSR reporting processes.
On the other hand, CSR reporting strengthens transparency and benchmarking within the company. We have chosen the approach of Sustainable Asset Management / Dow Jones Sustainability Index as our internal standard. It provides us with a clear year-on-year update of our strengths and weaknesses in the areas of governance, risk management, customer relations, HSE, and human resources. We highly appreciate this standard both as an internal benchmark for our business units as well as an external benchmark for our peers in the industry.