Dutch coatings and chemicals leader Akzo Nobel has significant operations in China. It runs a coatings site in Suzhou and will spend US$337 million on two new chemical plants in Ningbo. It is also a leader in corporate social responsibility practices, and is listed on the Dow Jones sustainability index. Akzo's Asia president, Dr Anders Brostrom, discussed the company's future plans.
Q: Why did you choose Suhzou for your coatings operations?
A: At the time, we were testing our multi-site concept. Akzo Nobel's business model is very decentralized; business units operate their own lines on a global basis and report directly to the board. That means here in China, we have a kind of scattered approach. The business unit goes where it fits best, so it will choose a location either close to customers, or for other reasons. Suzhou was a first test to see whether we can do something on a "multi" scale, bringing several business units together.
Q: Akzo Nobel advocates corporate social responsbility; how is that implemented in China?
A: We are participating in a HIV/AIDS awareness program with the Red Cross. The target groups are students, migrant workers and our own employees. We know that AIDS is a taboo topic… but the reaction from our own employees is positive.
Q: What moved Akzo Nobel to take part in the AIDS program?
A: [The Chinese government projects that] if it does nothing, there may be 10 to 20 million people infected [in China] over the next 10 to15 years. You could end up in a situation like India, Bangladesh, where whole communities are wiped out. China has acknowledged the seriousness of AIDS and is grasping for help, because most of [the solution] is awareness about how this disease spreads, and for historical reasons, it has been taboo to discuss it.
Q: How much does it cost to implement these CSR policies?
A: The only thing I can see is that the benefits are very often higher than the cost. If you think about pollution, it is very often because your technology is not good enough. If you can improve the process, your yield goes up, your effluent is lower and your cost goes down. The benefits are not only an issue of image and reputation, but also sound economics. Administering these things is a burden, but we think it is worthwhile.
Q: What products are showing good growth potential from the domestic market?
A: In general, you can say that the coating industry is a growth engine for us. We have ambitions to become the number one in China. We see an enormous potential because of the low consumption per capita – pulp and paper consumption in Western countries is 300 kilograms per capita, in China it's 42 – it's easy to get carried away, so we should keep in mind the growth is from small numbers.
Q: What about the consolidation in the coatings industry?
A: The structure of the industry is very fragmented. We believe here in China there will be a consolidation process. In decorative coating, there's something like 7,000 companies, so we can see [the market consolidation] in the US and Europe will also happen in China.
Q: So do you have any acquisition plans?
A: We always have, yes, but I cannot disclose it! We have primarily relied on organic growth so far – [although] we have made some acquisitions – but there are two vehicles for growth here, both from acquisition and from the sheer volume of demand for our products.