Note 2: Reporting principles

Reporting scope

This Report 2015 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 eco-efficiency.

The information in this Report 2015 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 2015. 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 GHG Protocol standards for our value chain carbon footprint 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, as well as details on all reporting processes, are available on our corporate 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 used in the Sustainability statements section 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 section has been reviewed by independent, external auditors. The Assurance report, including the scope of the audit, can be found in the Independent assurance report at the end of this section.

Reporting policies

Reporting boundaries

This Report 2015 integrates sustainability aspects of our processes and business operations in each section, in particular the How AkzoNobel created value in 2015, 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 relating to the calendar year 2015 and comparative data for 2014, 2013 and 2012. We report on consolidated data from entities where AkzoNobel is the majority shareholder (more than 50 percent) and joint ventures where we have management control, but exclude all data from entities 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:

• 2015 data includes Paper Chemicals until it was divested in May 2015
• 2014 data includes updated definitions on regulatory actions and executive potential. See also Note 11 and Note 12 respectively. It also includes the result of the divestment of our Building Adhesives business
• 2013 data excludes Chemicals Pakistan as it was divested at the end of 2012. We include data from Decorative Paints North America until April 1, 2013, when it was divested
• 2012 data includes the Boxing Oleochemicals acquisition and our new facilities at Ningbo, China

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. Previous years’ data have been restated on the same basis, so there was no impact on the percentage change in carbon footprint. 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 VOCs 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 based on comparable 2012 data, and include “as reported” data for each year in this Report 2015. The changes to GHG Protocol guidance in 2015 do not impact comparability – we have applied the market-based method since before 2012.

We identify issues that affect comparability in the text or footnotes.

Materiality

We have used the principle of materiality for assessing the topics to include in this Report 2015, 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:

• Shareholders
• Customers
• Employees
• AkzoNobel strategy
• AkzoNobel Report 2014
• Sustainability organizations such as the World Business Council for Sustainable Development (WBCSD), Forum for the Future and the International Integrated Reporting Council
• 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 Carbon Disclosure Project
• Peer reporting
• Media analysis

This long list was then reduced by reviewing the dominance of the topics in the above-mentioned key sources and ranking them. The highest ranked topics were then clustered into 20 final topics, prioritized and plotted in the matrix. The topics marked as high importance are included in the Consolidated Sustainability statements. 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 Strategic performance section.

A full explanation of each topic featured in the matrix can be found on the next page.

For further information please go towww.akzonobel.com/sustainability

Materiality matrix