Note 2: Reporting principles

Reporting scope

This Report 2016 integrates our financial and sustainability reporting and is addressed to readers interested in both areas. In particular, we seek ways of linking sustainability performance to business results in areas such as resource efficiency, carbon emission reduction, eco-premium solutions, safety, people development and engagement, and operational .

Our reporting principles are based on the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines, supported by internally developed guidelines as described in this Note.

The information in this Report 2016 offers an update on our implementation of the ten principles of the United Nations Global Compact (UNGC). More sustainability information is available on our corporate website, including an index of the Global Reporting Initiative G4 indicators and a summary of our UNGC communication of progress.

Reporting process and assurance

The reporting period is 2016. Data has mainly been obtained from our financial management reporting systems, corporate HR information management systems, corporate compliance information reporting systems and the AkzoNobel corporate reporting systems for health, safety and environment performance indicators, each of which have associated approval and verification processes. These processes continue to be updated and improved. Data collection for the newer value chain reporting aspects is carried out using standard templates and procedures.

We follow Protocol standards for our value chain metric and have applied the market-based method for our Scope 2 emissions (GHG Protocol Scope 2 Guidance). More details on Scope 2 emissions according to the location-based method, and details on all reporting processes, are available on our website.

We are confident in the overall reliability of the data reported, but recognize that some of the information is subject to an element of uncertainty, inherent to limitations associated with measuring and calculating data. Senior managers approved the content and the quantitative data relating to their respective areas of responsibility. The integration of sustainability in day-to-day business is part of our routine internal audit process.

The Sustainability statements and the Compliance and integrity management chapter of the Governance and compliance section have been reviewed by independent, external auditors. We have also requested reasonable assurance to be provided on Note 1: Managing our sustainability agenda. See Independent assurance report at the end of these Sustainability statements.

Reporting policies

Reporting boundaries

In 2016, 49 percent of our sites improved their relative footprint with regards to energy use, compared with 2015. (photo)

In 2016, 49 percent of our sites improved their relative footprint with regards to energy use, compared with 2015. In total, 40 percent of the energy we use now comes from renewable sources.

This Report 2016 integrates sustainability aspects of our processes and business operations in each section, in particular the How AkzoNobel created value in 2016, Strategic performance, Business performance and Governance and compliance sections.

This Sustainability statements section summarizes the global, cross-business elements of the sustainability agenda and company performance. It includes quantitative and qualitative information on the calendar year 2016 and comparative data for 2015, 2014, 2013 and 2012.

We report on consolidated data from entities (more than 50 percent ownership) and joint ventures where we have management control, but exclude all data from entities in which we participate, but where we have minority ownership, or no management control.

Comparability

Since 2010, we report acquisitions from the date of purchase, recognizing that reporting improvements may be required at these facilities. Recent significant changes:

  • 2016 data excludes the acquisition of BASF’s Industrial Coatings business, which was completed on December 14, 2016
  • 2015 data includes Paper Chemicals until it was divested in May 2015
  • 2014 data includes updated definitions on and executive potential. See also Note 15 and Note 11 respectively. It also includes the result of the divestment of our Building Adhesives business
  • We include data from Decorative Paints North America until April 1, 2013, when it was divested

A change in process safety management (PSM) KPIs in 2016 lowered the impact thresholds for reporting, so a higher number of (LoPC) are reported compared with the prior reporting thresholds. This was done to align AkzoNobel for comparability with other leading PSM companies. See Note 13.

Our value chain (cradle-to-grave) carbon footprint is measured per metric ton of product sales leaving AkzoNobel. In 2012, the definition of product was clarified to reduce variability in the indicator. It now excludes sold by-products and sold energy. For our own operations, environmental impact and improvements are quoted relative to production quantity, i.e. the product volumes leaving every manufacturing plant.

Since 2013, we include the climate impact of in our overall carbon footprint targets. This increased our Scope 3 downstream CO2(e) by about three million tons. The 2012 data have been restated to provide a sound baseline for our 2012 to 2020 targets. There continue to be minor changes in models and raw material data. We calculate the percentage improvement against our 2020 targets (per ton of sales) based on comparable 2012 data.

We include “as reported” data for all previous years and use these numbers to compare our absolute emissions. The changes to the GHG Protocol guidance in 2015 on Scope 2 reporting do not impact comparability – we have applied the market based method since before 2012. We have developed a restatement policy, which is available on our website.

We identify issues that affect comparability in the text or footnotes. More information can be found in the Global Reporting Initiative (GRI) G4 additional information document, which is available on our website.

Materiality

We have used the principle of materiality for assessing the topics to include in this Report 2016, which are current and important for the company and key stakeholders. In order to determine the materiality of topics, we made a long list of all (more than 200) possible material topics, using the following as our key sources:

  • Shareholder discussions
  • Customer discussions and surveys
  • Employee discussions and surveys
  • AkzoNobel strategy
  • AkzoNobel Report 2015
  • Sustainability organizations such as the World Business Council for Sustainable Development (WBCSD), WWF and Oxfam
  • Issues raised in discussions with thought leaders
  • Issues raised by investor associations such as the VBDO
  • Reporting guidelines and frameworks such as GRI G4 and SASB
  • Sustainability ratings agencies such as RobecoSAM and CDP
  • Peer reporting
  • Media analysis

Materiality matrix

Consolidated Sustainability statements – Materiality matrix (graphic)Consolidated Sustainability statements – Materiality matrix (graphic)

This long list was then reduced by reviewing the dominance of the topics in the key sources and ranking them. The highest ranked topics were then clustered into 16 final topics, prioritized and plotted in the matrix.

The topics marked as high importance are also included in the integrated materiality diagram and are covered by the AkzoNobel strategic focus areas and core principles. See also the Risk Management chapter in the Strategic performance section and the Integrated Materiality Analysis chapter.

A full explanation of each topic featured in the matrix can be found below.

Sustainability topics (alphabetical within importance categories)

 

Economic

Impor­tance internal

Impor­tance external

Qualitative information

Quantitative information

Reported

1

Economic performance and strategy

High

Low

Market segmentation; Description of economic performance

Economic performance and strategy

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements: Creating shared value across three dimensions

2

Fair taxes

Low

Medium

Responsible tax policy

Geographic tax reconciliation

Report 2016: Consolidated financial statements Note 6; Corporate website

3

Innovation for sustainable customer solutions

High

Medium

Value chain assessments; Innovation process; Commercial excellence process; Product portfolio assessment

Value creation across three dimensions; Eco-premium solutions with downstream benefits; Eco-premium solutions; VOC in product; Customer efficiency index

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements: Creating shared value across three dimensions, Notes 4 and 6

4

Integrity

Medium

Medium

Insight on policies and procedures

Code of Conduct reporting; Code of Conduct investigation; Compliance monitoring; Code of Conduct training

Report 2016: Compliance and integrity management; Sustainability statements Notes 11 and 16; Corporate website

5

Resource scarcity/material availability risks

Low

Medium

Risk description and mitigation actions; Renewable energy and raw material programs

Bio-based raw materials; Renewable energy

Report 2016: Risk management, Business performance; Sustainability statements Notes 4, 7 and 8

6

Sustainability in the supply chain

High

Medium

Supplier sustainability framework programs; Human rights commitment program

Third party assessments and audits; Supplier Support Visits; Business Partner Code of Conduct compliance; Environmental and social supply chain aspects

Report 2016: Sustainability statements Notes 7 and 16

 

Environmental

 

 

 

 

 

7

Biodiversity

Low

Low

Climate change; Pollution control

Report 2016: Sustainability statements: Environmental value creation, Notes 8 and 9

8

Climate strategy

High

High

Insight on impacts throughout the value chain; Climate change risk management, mitigation and adaption policies

Environmental value creation; Resource Efficiency Index; Cradle-to-grave carbon footprint; Bio-based raw materials; Energy use; Renewable energy; Greenhouse gas emissions

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements Notes 4, 5, 8, 9; Corporate website

9

Operational eco-efficiency

Medium

High

Insight on impacts in our own operations

Environmental value creation; Energy use; Renewable energy; Fresh water use; Sustainable fresh water management; Emissions to air, land and water: Greenhouse gases, VOCs, NOx, SOx, total waste, hazardous waste, COD

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements Notes 8 and 9; Corporate website

10

Radical resource efficiency across the value chain

High

High

Value chain descriptions; Insight on impacts throughout the value chain; Environmental value creation; Renewable energy and raw material programs; Waste reuse; Carbon pricing

Environmental value creation; Resource Efficiency Index; Cradle-to-grave carbon footprint; Bio-based raw materials; Renewable energy

Report 2016: How AkzoNobel created value in 2016, Stategic performance, Business performance; Sustainability statements: Creating shared value across three dimensions, Notes 5 and 8

 

Social

 

 

 

 

 

11

Community involvement

Low

Low

Human Cities initiative; Community Program; Business activities; Social value creation

Projects involved; Volunteers; Donations; Social value creation

Report 2016: Our purpose, Case studies, Strategic performance; Sustainability statements: Social value creation, Note 17; Corporate website

12

Employee engagement

Medium

Medium

Insight on policies and procedures

Employees by level and region; Employee engagement score; Engagement score by level

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements: Social value creation, Note 11

13

Human rights

Medium

Medium

Insight on policies, governance, issues and due diligence; Social value creation

Code of Conduct reporting; Code of Conduct investigation; Compliance monitoring; Code of Conduct training

Report 2016: Compliance and integrity; Sustainability statements: Social value creation, Notes 11 and 16; Corporate website

14

People, process and product safety

Medium

High

Insight on policies and procedures; Priority substance management; Regulatory affairs; Social value creation

Social value creation; Reportable injury rate; Lost time injury rate; Behavior-based safety program; Life-Saving Rules; Regulatory actions; Loss of primary containment; Priority substances with management plan; REACH compliance

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements: Social value creation, Notes 12, 13 and 14; Corporate website

15

Stakeholder engagement

Medium

Low

Framework activities

Sustainability ratings; Agency rankings

Report 2016: Sustainability statements Note 3; Corporate website

16

Talent management

High

Low

Insight on policies and procedures; Social value creation

Social value creation; Employees by level and region; Employee engagement score - learn and grow; Female executives; Female executive potential pool; Gender diversity by level; Executives from key regions; Executive vacancies filled internally; High potential turnover

Report 2016: How AkzoNobel created value in 2016, Strategic performance, Business performance; Sustainability statements: Social value creation, Note 11

Eco-efficiency

Eco-efficiency means doing more with less; creating goods and services while using fewer resources and creating less waste and pollution.

GHG

Greenhouse gases, including CO2, CO, CH4, N2O and HFCs, which have a global warming impact. We also include the impact of VOCs in our targets.

Carbon footprint

The carbon footprint of a product is the total amount of greenhouse gas (GHG) emissions caused during a defined period, of the product lifecycle. It is expressed in terms of the amount of carbon dioxide equivalents CO2(e) emitted.

Regulatory action

We have defined four categories of regulatory action, from self-reported issues (Level 1) to formal legal notifications with fines above €100,000 (Level 4).

Loss of primary containment

A loss of primary containment is an unplanned release of material, product, raw material or energy to the environment (including those resulting from human error). Loss of primary containment incidents are divided into three categories, dependent on severity, from small, on-site spill/near misses up to Level 1 – a significant escape.

VOC

Volatile organic compounds.