Note 1: Managing our sustainability agenda

Strategic focus

Our sustainability agenda incorporates economic, environmental and social aspects across the value chain.

The importance of sustainability to running our business is firmly integrated into the AkzoNobel strategy, both in the strategic focus areas and the core principles underlying our new company values (safety, integrity and sustainability). Sustainability helps us to enhance our existing business, create new business opportunities and minimize risks.

In 2012, we developed a new focus to our sustainability strategy by reviewing our sustainability risks and opportunities against global trends – population growth and the new middle class, urbanization, long-term constraints of natural resources and climate change – and how these will impact our key market segments by 2050. We express the outcome as a commitment to creating more value from fewer resources across the value chain. We are using Planet Possible as an overall description of our related programs. We are committed to making our products and operations more sustainable. As well as driving our own success, putting sustainability at the heart of everything we do means our customers and employees – not to mention the planet – will also benefit. For details, see the Strategy section of this Report 2013.

Our 2020 targets are based on creating more value from fewer resources (measured by a new Resource Efficiency Index):

  • Sustainable business: Creating business value through products and solutions which provide both functionality and other sustainability benefits, as well as cost savings from operational efficiencies. Target: 20 percent revenue from eco-premium solutions with a downstream benefit by 2020
  • Resource efficiency: Accelerating material and energy efficiency across the value chain. Target: reduction in cradle-to-grave carbon footprint per ton of sales of 25–30 percent from 2012 to 2020
  • Capable, engaged people: Engaging our people and partnering with our suppliers and customers to deliver significant changes. Overall objectives being defined

These targets are underpinned by strong programs for safety (people, process and product safety/stewardship), employees (employee practices/development and community involvement), environmental management and integrity management.

We have specified key performance indicators with 2020 targets to supplement or replace our 2015 targets. Other short-term and long-term ambitions are set at functional and business level. The Notes in the Sustainability statements and other elements of this report illustrate our performance against these goals.

By focusing on the full value chain, we will drive business, resource and engagement benefits (graphic)

Sustainability framework

Our new sustainability strategy is a natural next step from our sustainability framework, which maps out a progression towards sustainability. The framework 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 Improve level, with an emphasis on risks – working on integrity, governance and compliance with our standards and applicable laws and regulations – is now part of the compliance framework (see the Governance and compliance section).

The current strategy focuses on creating opportunities for value creation through process excellence, innovation and talent development, alongside continued integration of sustainability in all aspects of the value chain.

Management structure

The Executive Committee has overall responsibility for sustainability. They monitor the sustainability performance of each Business Area through the operating and control cycle using dashboards, which specify indicators against strategic objectives.

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 representative Managing Directors from our Business Areas, as well as the Corporate Directors of Strategy, Supply Chain/Research and Development, Sourcing, Human Resources, Sustainability and HSE, and Communications. The Council maintains an external perspective, with input from value chain partners and thought leaders during regular meetings, in addition to company involvement in leading external organizations.

The Corporate Director of 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. In 2012, we formed a team of senior Business Area representatives to work with the central group and the business teams to ensure effective roll-out of the new strategy.

The Managing Director of each business defines their respective non-financial targets and reports on progress every six months. 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, business and functional processes – strategy and planning, risk management and internal control, compliance, the operational review cycle, as well as in our internal audit and external assurance processes. Each year there are two dedicated sustainability sessions in the Operational Review Meetings.

We set global standards for health and safety, environmental protection, product stewardship and compliance, including social and labor aspects. Corporate compliance and audit processes are supplemented by specialist functional audits. These standards are also the basis of our supplier management processes and investment assessments. 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 completed by each business, which reflects the content of the sustainability framework and management processes. In 2013, we added performance requirements to this assessment. Three businesses each year are reviewed by an internal audit team, with all assessment results being reviewed at company level.

The results show that sustainability management process and performance levels are “in place” or “mostly in place” apart from a couple of elements in two businesses which are undergoing significant organizational change. During the year, there were encouraging improvements in the areas involving R&D/eco-premium solutions and in our carbon management activities. Processes around Code of Conduct, people/process and product safety, manufacturing and risk management remain at a high level, though businesses need to maintain focus in order to achieve the performance levels set by our targets.

We strive to empower all employees to contribute and be accountable for our sustainability performance, using training and other engagement processes, including business and site level activity, as well as web-based resources. This responsibility continues to be anchored in the personal targets and remuneration packages of managers and employees. Since 2009, half (from 2013 onwards 30 percent) of the conditional grant of shares for Board members and all executives is based on AkzoNobel’s performance in the RobecoSAM assessment over a three-year period. (See Remuneration report in the Governance and compliance section).