The Importance of ESG Integration in the Paints and Coatings Industry

Sustainable and innovative solutions, underpinned by ESG goals, have garnered immense traction in the paints and coatings industry. Substituting hazardous substances and minimizing energy demand have posed challenges to stakeholders. Needless to say, paints and coatings offer essential coatings for offshore wind power plants, add color to the spaces, boost durability and underpin the transportation and hygienic production of food. The substance has had a vital role in helping minimize the environmental footprint, largely due to its innate ability to boost recyclability and bolster the life cycle of several products. 

Lately, key players have explored opportunities in waste management and efficient production processes. However, several companies in the paint industry have been accused of greenwashing—using sustainability as a marketing gimmick—to hide their environmental lapses. The UN chief has been vocal in pushing for zero tolerance for net-zero greenwashing. According to the competition regulator in the U.K. Competition and Markets Authority, 40% of green claims made online could be misleading. 

The paints and coatings industry is one of the highly demanded markets; the products have high applicability across various ranging from automotive to infrastructure markets. EU’s corporate sustainability reporting directive (CSRD) will compel companies to disclose comprehensive data to enhance the assessment of their sustainability efforts. It is worth noting that the EU Council gave a nod to CSRD in November 2022, a buoyant step to curb divergent sustainability standards, propel the company’s accountability and ease the transition to a sustainable economy. In March 2022, the British Coatings Federation (BCF) rolled out the “Green Claims Guide to Decorative Paints” to tackle greenwash claims in decorative paints. BCF asserted that the use of the terms “VOC free” and “Zero VOC” are false claims and should be avoided in the paint industry. 

The U.S. Federal Trade Commission initiated a set of Green Guides to help marketers ensure their claims are not deceptive. Prominently, Green Guides were first issued in the U.S. in the early 1990s. In December 2022, the FTC sought public comments—on the term “recyclable,” “recyclable content,” need for additional guidance and carbon offsets and climate change—on the likely updates to the Green Guides. 

Leading companies that have propelled their ESG strategies are delineated below: 

1. Sherwin-Williams Pits on Environmental Targets to Gain Ground

The environmental profile has garnered prominence as sustainability continues to steer the growth across business verticals. Companies are pushing to the limit and finding ESG as a pivotal portfolio to contain carbon emissions and reduce waste in their value chain. Sherwin-Williams laid down its 2030 environmental footprint targets—to minimize waste disposal intensity by 25%, curb absolute Scope 1 and 2 greenhouse gas emissions by 30%, boost operational energy efficiency by 20% and expedite electricity from renewable sources to 50% of total electricity usage. The company notes that failure to mitigate environmental impact and emissions or respond to shifting consumer behavior and preferences could have repercussions in the form of reduced demand for products and services.

2. AkzoNobel Propels Carbon Neutrality Commitment

Companies, such as AkzoNobel have recognized the significance of ESG and underpinned their sustainability quotient. The Netherlands-based company committed to becoming carbon neutral by 2050 and has used a holistic Sustainable Product Portfolio Assessment (SPPA) framework. The chemicals firm is on course to becoming a zero waste company by 2030—77% reduction in waste to landfill was witnessed in 2021 vis-à-vis the preceding year. It has also developed wood coatings to foster manufacturing efficiency and energy-saving powder coating to provide 30% more output. 

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3. PPG Industries Banks on Diversity, Equity and Inclusion to Stay Ahead of the Curve

Paints and coatings manufacturers have exhibited an unwavering commitment to further a culture of diversity, equity and inclusion. Chemical companies are leaving to stone unturned to propel the leadership roles for women and under-represented ethnic or racial groups. Not to mention, leading players have furthered their investments in bullish initiatives to strengthen accountability and engagement. In essence, PPG mentioned in its 2021 ESG report that an infusion of USD 7.4 million was made to underscore racial equity with educational pathways for people of color and black communities. It also injected USD 13 million to foster education and community sustainability in communities globally, while it is also committed to pouring USD 20 million from 2020 through 2025 to boost educational opportunities and social justice in underrepresented communities. 

4. Nippon Paint Holdings Emphasizes Occupational Health & Safety

Global watchdogs have pushed for increased health measures as chemicals manufacturing is prone to accidents and health hazards. Investments in workplace safety have become pronounced to undergird the social profile.  In 2022, Nippon Paint embraced the Group-wide Global Code of Conduct that considered stakeholder and employee safety in its activities. Meanwhile, in FY 2020, the Japanese behemoth updated the risk assessment lists to identify and address serious risks, including explosions and fire that lead to operation suspension. It has also put the spotlight on safety training programs. The company offered an online ISO internal auditor training course to 113 participants, online follow-up training to 78 new employees and online entry training to 89 new employees. 

5. BASF Navigates Opportunities in Corporate Governance

Transparent and effective corporate governance has become indispensable to supervising and managing organizations and enthusing the confidence of financial markets, investors, employees, customers and other stakeholders. BASF has a two-tier corporate governance system with an effective and transparent separation of company supervision and management between its Board of Executive Directors and the Supervisory Board. As of December 2021, the German multinational company had six members on the Board of Executive Directors. It has also taken a giant stride in compliance management, emphasizing audits and participation in training. In the 2021 report, BASF inferred that 77 internal audits were conducted on adherence to compliance standards and over 53,000 employees participated in compliance training.

6. RPM Prioritizes Diversity in Board Vacancies 

Concerted efforts from RPM towards corporate governance and ethical practices & programs have placed the company in a solid position. It has deployed Route 168 training program and promoted transparency, balanced decision-making and diversity & inclusion across its operations. The Governance and Nominating Committee of RPM reports to the full Board on developing and recommending a set of corporate governance principles, overseeing ESG strategy, and identifying diverse candidates for Board members, among others. In January 2020, the company gave a green light to the Rooney Rule to fill Board vacancies, suggesting a mandate to include diversity in ethnicity and gender in the selection pool. 

Companies of all sizes have envisaged ESG as tailwinds that can open avenues of growth and innovations. Leading players are gearing to underpin effective governance frameworks for fairness of the management, objectivity and transparency, and most importantly—to earn trust. A sustainable solution, waste management and a renewed focus on health & safety are some of the underlying factors that can take the ESG goals to a whole new level. The paints and coatings market size was pegged at USD 146.17 billion in 2019 and could witness a 4.3% CAGR between 2020 and 2027. Bullish ESG strategies will be pivotal to tapping into the global landscape. 

About Astra – ESG Solutions By Grand View Research

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Astra offers comprehensive ESG thematic assessment & scores across diverse impact & socially responsible investment topics, including both public and private companies along with intuitive dashboards. Our ESG solutions are powered by robust fundamental & alternative information. Astra specializes in consulting services that equip corporates and the investment community with the in-depth ESG research and actionable insight they need to support their bottom lines and their values. We have supported our clients across diverse ESG consulting projects & advisory services, including climate strategies & assessment, ESG benchmarking, stakeholder engagement programs, active ownership, developing ESG investment strategies, ESG data services, build corporate sustainability reports. Astra team includes a pool of industry experts and ESG enthusiasts who possess extensive end-end ESG research and consulting experience at a global level.

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