Note 2: Reporting principles

Reporting scope

This Report 2016 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.

Our reporting principles are based on the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines, supported by internally developed guidelines as described in this Note.

The information in this Report 2016 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 2016. 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, and details on all reporting processes, are available on our 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 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 and the Compliance and integrity management chapter of the Governance and compliance section have been reviewed by independent, external auditors. We have also requested reasonable assurance to be provided on Note 1: Managing our sustainability agenda. See Independent assurance report at the end of these Sustainability statements.

Reporting policies

Reporting boundaries

This Report 2016 integrates sustainability aspects of our processes and business operations in each section, in particular the How AkzoNobel created value in 2016, 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 on the calendar year 2016 and comparative data for 2015, 2014, 2013 and 2012.

We report on consolidated data from entities (more than 50 percent ownership) and joint ventures where we have management control, but exclude all data from entities in which we participate, but 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:

• 2016 data excludes the acquisition of BASF’s Industrial Coatings business, which was completed on December 14, 2016
• 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 15 and Note 11 respectively. It also includes the result of the divestment of our Building Adhesives business
• We include data from Decorative Paints North America until April 1, 2013, when it was divested

A change in process safety management (PSM) KPIs in 2016 lowered the impact thresholds for reporting, so a higher number of loss of primary containment (LoPC) are reported compared with the prior reporting thresholds. This was done to align AkzoNobel for comparability with other leading PSM companies. See Note 13.

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. 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 against our 2020 targets (per ton of sales) based on comparable 2012 data.

We include “as reported” data for all previous years and use these numbers to compare our absolute emissions. The changes to the GHG Protocol guidance in 2015 on Scope 2 reporting do not impact comparability – we have applied the market based method since before 2012. We have developed a restatement policy, which is available on our website.

We identify issues that affect comparability in the text or footnotes. More information can be found in the Global Reporting Initiative (GRI) G4 additional information document, which is available on our website.

This long list was then reduced by reviewing the dominance of the topics in the key sources and ranking them. The highest ranked topics were then clustered into 16 final topics, prioritized and plotted in the matrix.

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 Risk Management chapter in the Strategic performance section and the Integrated Materiality Analysis chapter.

A full explanation of each topic featured in the matrix can be found below.