PPG is a leading global supplier of specialty coatings.


Its product portfolio ranges from architectural paint for home improvement, to high performance coatings, used in demanding marine, automotive and aerospace applications. The nature of a chemicals business creates challenges in managing sustainability risk factors. PPG offers a good example of the need to embrace complexity when assessing ESG, which is part of our approach at Cerno.

Optically it is easy to categorise the global chemicals industry as ‘grubby’. The base feedstock is crude oil, and the manufacturing process can be resource intensive. As an operator in a sensitive industry, PPG and its peers face inexorably tightening global regulations. 40% of the group’s manufacturing sites are in EMEA, where regulations for carbon-based industries are the most demanding. Specifically, we can identify business risks from water scarcity, hazardous waste, and green-house gas emissions. PPG has built out a range of measures to reduce these risks, including specific timetables and targets. The company has very good data disclosure and this points to an open attitude to ownership of its challenges. Within the Chemicals industry, PPG ranks in the top 15%, according to Sustainalytics*.

There are also two sides to the ledger. We must consider the impact of PPG’s products. PPG produces functional materials, which means its products deliver a value case for its customers. These superior characteristics can often contribute to the improved sustainability performance of its customers’ products. The more innovative the product the more characteristics it has related to reducing customers own energy consumption. For example, a new biocide-free release foil reduces drag on ships by 10%, which lowers fuel consumption. Electric vehicles depend on PPG’s coatings for the proper functioning of the battery pack. So, there is complexity. PPG’s products can be enablers of a cleaner world.

Innovation is a thread which runs through many portfolio companies. Key risks for these businesses lie in retaining talent and developing a culture than ensures adaptability to future challenges. PPG’s hard work on diversity and inclusivity points to an understanding of the criticality of its workforce.

When considering ESG we are not looking for perfect, but we do want progression. PPG has successfully installed a solid policy base but there is more to do, and we have communicated as such. We would like the company to show more ambition when it comes to setting environmental targets, while acknowledging that the nature of the business limits the scope of what can be achieved. While we understand the company’s arguments for a combined CEO/Chairman role, it is a suboptimal structure, in our view. The issues around ESG are complex. We acknowledge that resources need to be mobilised to create products and services. A one-dimensional, reductive approach risks missing the interplay between product and operations, as well as the trajectory of the business in the context of its industry.

*Sustainalytics is Cerno Capital’s research partner for ESG screening.

Learn More About Our Philosopy