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Note 1: Managing our values

Strategic focus

Our sustainability agenda incorporates economic, environmental and social aspects. We consider the drivers to be the global mega-trends, population growth and the new middle class, long-term scarcity of natural resources and the impact of climate change.

The importance of sustainability to running our business is firmly integrated into the AkzoNobel strategy. It helps us enhance our existing business, create new business opportunities and minimize risks. 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

These are underpinned by the company value of integrity in all that we do.

During 2012 we reviewed and updated the company and sustainablity strategies (see Strategy section and 2020 Sustainability strategy in this section for details).

The Executive Committee monitors the company’s financial and sustainability performance using dashboards, which specify indicators – both leading and lagging – against strategic objectives. For most key performance indicators we have announced 2015 ambitions. Other short-term and long-term ambitions are set at business level.

The Notes in the Sustainability statements and other elements of this report illustrate our performance against these goals.

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

Sustainability framework (graphic)

The focus has shifted away from an emphasis purely on risks – working on integrity, governance and compliance with our standards and applicable laws and regulations, which are now integrated in the compliance framework (see Governance and compliance section) – towards creating opportunities for value creation through process excellence, innovation and talent development.

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, 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 and the Corporate Directors of Strategy, Sustainability and 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.

The compliance framework and the management structure for integrity and compliance aspects is detailed in the Governance and compliance section under Compliance and integrity management.

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 subject matter expert. 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.

In 2012, we have taken these results together with functional management review processes to form our view. The results indicate that sustainability processes are “in place” or “mostly in place” in all businesses. Embedding of sustainability processes continues to be highest in the compliance aspects such as risk management, Code of Conduct, health and safety and reporting. During the year, there were encouraging improvements in product stewardship and the newer areas of carbon and eco-premium solutions, due to concerted company level programs, and in marketing and sales through specific business activities.

We strive to empower all employees to contribute and be accountable for our sustainability performance, using training and other engagement processes, including site level activity, web-based resources and, in 2012, a Global Sustainability Day. This responsibility continues to be anchored in the personal targets and remuneration packages of managers and employees. Since 2009, half of the conditional grant of shares for Board members and all executives has been based on AkzoNobel’s performance in the SAM (Sustainability Asset Management) assessment over a three-year period (see Remuneration report chapter in the Governance and compliance section).

The main corporate monitoring processes for sustainability items are:

Non-financial letter of representation (NFL)

The outcome of the NFL process, in combination with the internal control self-assessment process, forms the basis for the Statement of the Board of Management in this Report 2012 (for more information see Compliance and intergrity management chapter in the Governance and compliance section).

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

These include sustainability and compliance issues. The outcomes are shared with the Audit Committee and Sustainability Council. Our processes for managing sustainability were reviewed as part of our 2012 external assurance activity. At functional level, these are supplemented by specialist audits, for example compliance and HSE.

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