Managing our values

Strategic focus

The importance of sustainability to running our business is firmly integrated into AkzoNobel’s strategy. In 2008, we set ambitions for 2015 for sustainable value creation in order to support our overall goals:

  • Remain in the top three on the Dow Jones Sustainability Index (DJSI)
  • Achieve top quartile safety performance
  • Deliver a step change in people development

During 2010, these ambitions were updated and we reviewed our sustainability programs to bring greater focus to our efforts:

  • 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

For 2011, we will strengthen our safety peer group for external benchmarking.

The Board of Management (as of January 1, 2011, supported by the other members of the Executive Committee) monitors the company’s financial and sustainability performance using a special 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 milestones are set at business level. Performance against these ambitions are described in the following pages.

Sustainability framework

The AkzoNobel sustainability framework maps out a progression towards sustainability. It has three levels (Invent, Manage and Improve – explained in detail in this section) which include environmental, economic and social aspects. The focus has shifted away from an emphasis purely on risks – working on integrity, governance and compliance – towards creating opportunities for value creation through process excellence, innovation and talent development. This framework covers issues and topics that are material for the company and support our strategic agenda.

Management structure

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 includes representatives from the Executive Committee, General Managers from our businesses, Corporate Directors of Strategy, Research, Development and Innovation (RD&I), Sourcing, Human Resources (HR), Communications and Sustainability, as well as the Managing Director of Technology and Engineering. The Corporate Director of Sustainability (including Health, Safety, Environment and Security) reports directly to the CEO and has a small team, including an expert group focusing on lifecycle assessment.

The General Manager 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.

A Compliance Committee also exists to foster awareness of, and monitor compliance with, the Code of Conduct. Members include the General Counsel, Secretary to the Executive Committee, and Corporate Directors of Internal Audit, Control, Compliance and HR. Each business has appointed a member of its management team to act as the Compliance Officer to manage the roll-out of compliance projects and to monitor compliance with the Code of Conduct. Meanwhile, each element of the value chain has identified focus areas for sustainability, with targets where appropriate. Functional management teams, such as HR, Sourcing and RD&I, which comprise corporate and business representatives, are in place to support the implementation of functional strategy, including the sustainability elements.

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.

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. The current level of definition within the self assessment leads to some interpretation differences, but the results provide useful trends.

The 2010 results indicate that sustainability processes are in place, or mostly in place, in all businesses, except one that merged in 2010 and which is still developing common processes. The highest level of embedding is at the Improve or compliance level and processes such as risk management and reporting. Integration in the value chain, or Manage level, is making steady progress, but continuing focus is required in all areas. The Invent topics are making progress, but are a clear focus for improvement in 2011.

We strive to empower all employees to contribute and be accountable for our sustainability performance. This responsibility is increasingly 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 DJSI over a three-year period. The main corporate monitoring processes for sustainability items are:

  • Non-financial Letter of Representation. At the end of the year, the General Manager 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: during 2010 control awareness and training got special attention
  • 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 2010 external assurance activity.

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