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Note 1: Managing our values


Strategic focus

The importance of sustainability to running our business is firmly integrated into the AkzoNobel strategy. In 2010, we updated our ambitions for 2015 for sustainable, accelerated growth in order to support our overall goals:

  • Top quartile safety performance
  • Top three position in sustainability
  • Top quartile performance in diversity, employee engagement and talent development
  • Top quartile eco-efficiency improvement rate

The Executive Committee monitors the company’s financial and sustainability performance using a strategy dashboard, which specifies indicators – both leading and lagging – against each objective. For most key performance indicators we have announced 2015 ambitions; other short and long-term ambitions are set at business level. Our performance against these ambitions is described in the following pages.

Sustainability framework

The AkzoNobel sustainability framework maps out a progression towards sustainability. It has three levels, which include environmental, economic and social aspects.

  • Invent: integrate sustainable value propositions
  • Manage: include sustainability in all aspects of the value chain
  • Improve: continue to comply and ensure our license to operate

The focus has shifted away from an emphasis purely on risks – working on integrity, governance and compliance, which are now integrated in the compliance framework – towards creating opportunities for value creation through process excellence, innovation and talent development.

Sustainability framework (graphic)


Management structure

Sustainability

We have established a Sustainability Council, which advises the Executive Committee on strategy developments, monitors the integration of sustainability into management processes and oversees the company’s sustainability targets and overall performance. The Council, which meets quarterly, is chaired by the CEO and includes representatives from the Executive Committee (Supply Chain, HR and RD&I), Managing Directors from our businesses, a Country Manager, and the Corporate Directors of Strategy, Sustainability & HSE, Sourcing and Communications.

The Corporate Director for Sustainability and HSE reports directly to the CEO and has an expertise team for HSE and Sustainability, including a group focusing on lifecycle and sustainability assessments.

The Managing Director of each business defines their respective non-financial targets and reports on progress every quarter. All businesses have also appointed a sustainability focal point to support the embedding of sustainability throughout their operations. They bring together an appropriate team to develop and implement the sustainability agenda for the business. Focal points from across the company have regular meetings to exchange best practices and identify opportunities for further development.

Meanwhile, each function in the value chain has identified focus areas for sustainability, with targets where appropriate. Functional management teams, such as HR, Supply Chain and RD&I, which are made up of both corporate and business representatives, are in place to support the implementation of functional strategy, including the sustainability elements.

Compliance

A Corporate Compliance Committee monitors processes associated with the compliance framework and makes sure that compliance is embedded and enforced in our business. Members include the General Counsel, Secretary to the Executive Committee and Corporate Directors of Compliance, Internal Audit, Control and HR. The Committee reports to the Executive Committee. The Executive Committee compliance reports are presented to the Audit Committee.

We have set up Compliance Committees in each of our businesses. Compliance is a responsibility of the business unit management team and a Compliance Officer assesses the main risks, improves and monitors compliance and its effectiveness, and trains employees. At the request of the Corporate Compliance function, the Compliance Officers investigate and report on alleged breaches of the Code of Conduct.

Management processes

We include key sustainability issues in our corporate and business planning processes, as well as in our risk management and compliance processes. Where there are specific sustainability risks or issues of concern to stakeholders, we develop position papers and an improvement plan owned by a corporate staff member.

Overall progress in embedding sustainability is monitored using an annual self-assessment benchmark, which reflects the content of the sustainability framework and management processes. The assessment results are reviewed at corporate level. This year we have improved guidance and clarified the definitions of the performance levels to improve comparability of results.

The 2011 results indicate that sustainability processes are “in place” or “mostly in place” in all businesses. The highest level of embedding remains in the compliance aspects and processes, such as risk management and reporting. Integration in the value chain remains steady, while there has been progress in the newer areas, such as eco-premium solutions and carbon measurement.

We strive to empower all employees to contribute and be accountable for our sustainability performance. This responsibility continues to be anchored in the personal targets and remuneration packages of managers and employees. From 2009, half of the conditional grant of shares for Board members and all executives is based on AkzoNobel’s performance in the SAM (Sustainability Asset Management) assessment over a three-year period (see Remuneration report).

The main corporate monitoring processes for sustainability items are:

  • Non-financial Letter of Representation. At the end of the year, the Managing Director of each business signs the non-financial Letter of Representation to confirm compliance with the Code of Conduct and other corporate non-financial requirements, as well as indicating any material non-compliance. The outcome is reviewed with the responsible Board member and General Counsel and the results are reported to the Board of Management and the Audit Committee. Outstanding actions are followed up in each business and progressed in quarterly reviews
  • In-control process. An annual, in-depth in-control process informs management whether business processes are in control. Shortcomings are reported and remediated
  • Corporate audits, which include sustainability and compliance issues. The outcomes are shared with the Compliance Committee and Sustainability Council.

Our processes for managing sustainability were again reviewed as part of our 2011 external assurance activity.

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