Managing sustainability

Materiality assessment

We use the principle of materiality to review strategic priorities and determine the most relevant and important sustainability topics material to our company. We focus on topics with the biggest impact in terms of accelerating our strategy and their importance for stakeholder decision-making. We review the topics based on input from internal and external stakeholders. The materiality assessment is based on key risks and opportunities, as they relate to the acceleration of our business agenda and approach to sustainable business. The key topics identified are validated annually and assessed on relative importance.

Materiality matrix

Reporting principles

We use our internally developed reporting principles to make our reporting more precise and better aligned with our business and operations. They are aligned with the Global Reporting Initiative (GRI) standards. The complete reporting principles are on our website, along with an index of the GRI indicators.

Compared with 2019, the only significant change in our reporting methodology is in Scope 3 upstream and downstream.

The preparation of our Sustainability statements requires management to make judgments, estimates and assumptions that affect amounts reported. The estimates and assumptions are based on experience and various other factors believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis. In general, Scope 3 upstream and downstream and eco-premium solutions have a higher degree of judgment and complexity, for which changes in the assumptions and estimates could result in different results than those recorded.

The main and most important elements of these are highlighted below. More details on the methodology and significant assumptions can be found in the reporting principles on our website.

Organizational health score

The overall percentile score is used in external reports. In 2020, two quarterly surveys were conducted, with results in Q1 and Q3. For the annual report, the Q3 score is reported.

Results from the organizational health score (OHI) are collected in the OHI database and reported by McKinsey. Due to anonymity, we have no access to these data, and the data review, authorization and audit are the responsibility of McKinsey.

Cradle-to-grave carbon footprint (Scope 1, 2 and 3), Scope 3 upstream and downstream

Cradle-to-grave carbon footprint – including Scope 1, 2 and 3 upstream and downstream – is calculated annually in accordance with the Greenhouse Gas Protocol Corporate Value Chain Accounting and Reporting standard, and the WBCSD Chemical Sector Working Group Guidelines. We include the climate change impact from VOCs in our measurements due to their impact within the paints and coatings industry.

• Upstream: Category 1 – purchased goods and services
• Downstream: Category 10 – processing of sold products; Category 11 – use of sold products; Category 12 – end-of-life treatment of sold products and VOC in processing/use

The methodology for calculating Scope 3 carbon emissions was further improved in 2020 on the following:

• Impact of Category 12 and VOC are linked to raw material data where possible
• Refinement of raw material impact by integrating the formulation data (upstream impact)

The reporting period for Scope 3 upstream and downstream is October 1 to September 30. Scope 1 and 2 is reported for the calendar year.

External data sources: CEPE and Ecoinvent databases for carbon footprint data of raw material; International Energy Association (IEA) world average electricity grid mix and DEFRA natural gas conversion factor. Internal data sources: We conduct lifecycle assessments which are used as input for the calculation and includes models on amount of power and heat (natural gas), typical VOC levels and percentage of VOCs incinerated.

Eco-premium solutions

A measure of the sustainability of our products compared with competitive products, which have customer/consumer benefits, as a percentage of our actual revenue over the period November 1, 2019, to October 31, 2020. For Powder Coatings, segment growth to previous year revenue is applied.

An eco-premium solution is significantly better than competing offers in the market in at least one eco-efficiency criterion (toxicity, energy use, use of natural resources/raw materials, emissions and waste, land use, risks, health and well-being), and not significantly worse in any other. In determining the KPI, AkzoNobel product groups are reviewed against a mainstream product in the market which delivers the same function. This can be an AkzoNobel or competitor offering. The assessments are performed to the best of our abilities by internal experts, based on either quantitative or qualitative aspects, of which the latter is subject to inherent subjective considerations.