Note 8: Human rights

At AkzoNobel, we understand that through our roles as employer, manufacturer, business partner and member of many communities, we can potentially both directly and indirectly impact the lives of millions of people. While we’re committed to making a positive impact through our products and programs, we are also aware of the potential negative impact we may cause, contribute to or be linked to. We recognize our responsibility to respect the human rights of all stakeholders across our value chain and are committed to actively and systematically assessing (potential) human rights impacts, taking action where needed to ensure that any impact on people’s lives is as positive as possible.

Commitment

As part of our core principles of safety, integrity and sustainability – and in line with the United Nations Guiding Principles on Business and Human Rights (UNGPs) – we are committed in our operations and across our value chains to respecting all internationally recognized human rights, as set out in the International Bill of Human Rights (consisting of the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights) and in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.

We support the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises and we are a member of the UN Global Compact. We expect all our business partners to respect human rights and apply equivalent principles, seeking to support them actively in their implementation where needed.

Governance

Our commitment is led from the top. The Executive Committee is responsible for ensuring that the company operates in line with our core principles of safety, integrity and sustainability. Since 2016, a cross-functional Human Rights Committee (reporting directly to the Executive Committee) has been in place, with responsibility for implementing and maintaining the company’s human rights framework. The Compliance function oversees day-to-day human rights compliance and due diligence.

Salient human rights issues

While we respect all human rights equally and take all human rights impacts seriously, we have prioritized (potential) human rights impacts in accordance with the UNGPs. These are the so-called salient human rights issues; the human rights that are potentially at risk of the most severe negative impact through our activities or business relationships. After an internal and external stakeholder consultation process, we identified four salient issues on which our human rights due diligence is focused (listed below). Our salient human rights issues have not changed following the sale of our Specialty Chemicals business.

In 2017, we developed a “human rights indicator dashboard”, which reflects multiple indicators – based on data available internally – that are relevant to our salient human rights issues. This dashboard helps us monitor whether we are achieving our targets, or if we need to make interventions.

1. Health and safety in our value chain and connected communities
   Being a manufacturing company, we have made the health and safety of people one of our core principles. We strive to deliver leading performance in health, safety, environment and security (HSE&S) with a vision to deliver zero injuries, waste and harm through operational excellence. Based on our human rights risk assessment, we were aware that we needed to conduct further due diligence into our products. Due to the nature of our products, we acknowledge there is an inherent risk of impacting the human rights of end-users. In 2018, we reached a milestone with our Priority Substance Program by completing 100% of priority substances identified (269 substances), screening thousands of raw materials in the process. Our Priority Substance Program has kept us ahead of chemical legislation and helped us make our portfolios safer and more sustainable (see Note 7). For example, we were the first major paint company to stop adding lead-based pigments and drying agents to paint.
   
   We’ve also conducted due diligence into the possible impact on communities surrounding our production sites, as part of the audits and self-assessments used in our HSE&S management system. We’ve analyzed the results on community engagement of our production sites and interviewed our regional manufacturing directors. This information helped us identify locations where we could run a higher risk in terms of impacting surrounding communities. We will continue this due diligence in 2019 and conduct in-depth reviews of these locations.
2. Working conditions for our employees
   As an employer, we believe that people are crucial to the success of our company. We won’t achieve leading performance unless employees believe AkzoNobel is a great place to work, are engaged and feel valued (see Note 4). We must therefore offer decent working conditions, including fair working hours, reasonable salaries and appropriate bathroom and restaurant facilities.
   
   To emphasize our commitment, we’ve signed the Safe Water, Sanitation and Hygiene Pledge (WASH) of the World Business Council for Sustainable Development (WBCSD).
   
   In 2018, we continued due diligence into the sanitary conditions of our locations, using the WASH Pledge implementation material. The results of our 2018 assessments showed an average satisfactory score of 1.8 out of a possible score of 2.0 – meaning that 90% of the sites scored satisfactory. The 2018 assessment results reflect the same score as 2017. This assessment is now integrated into our processes and will be monitored and acted upon accordingly.
   
   With respect to working hours, we conducted an International Labour Organization (ILO) gap analysis of working hours in the countries where we’re active. ILO statistics on countries with long working hours was included in this assessment. It identified several countries where we run a higher risk of excessive working hours, possibly impacting the health or safety of our workforce. We also assessed the working hours of our locations in those countries against the ILO standards on working hours. Based on these results, the Human Rights Committee has decided that global guidance and rules on working hours are necessary to ensure proper working hours at our sites. In 2019, these will be developed.
   
   We’ve conducted due diligence into fair wages in our own operations. First, we assessed the legal minimum wages – if in place – of the countries where we’re active against the three international poverty lines of the World Bank. We also took into account national poverty lines and the percentage of the populations under the poverty lines. This analysis has provided us a list of countries we should take a closer look at. Human Resources colleagues in those countries provided (anonymized) salary information on the lowest paid employees and assessed those against public available living wages. We carried this out as an initial analysis. In parallel, we engaged with two organizations that are experts in the field of living wages, to learn more about the methodology behind the comparison between salaries and living wages. This work will continue in 2019.
3. Discrimination and harassment in our operations
   At AkzoNobel, we strive to foster a culture of dignity and respect, free of any kind of harassment or discrimination. Currently, 26.5% of the reports received through our grievance mechanism (SpeakUp!) relate to some form of discrimination and/or harassment. While this category of case is typically large for other companies, it is also a reason for us to do more. In 2018, we took multiple actions, including the improvement of our current anti-discrimination and anti-harassment directive; development of new rules that clarify what’s expected from employees and managers; development and testing of a dilemma-based training; and optimizing a coaching framework. This work will continue in 2019.
4. Modern slavery in our supply chain
   We believe that modern slavery should be eradicated from a moral, political, logical and economic point of view. We therefore have zero tolerance for modern slavery of any kind and feel highly motivated to combat it. As an outcome of the human rights risk assessment which resulted in our salient issues, we recognize there is an inherent risk of modern slavery in global supply chains, including our own, particularly in the case of indirect suppliers. Definitions of modern slavery often vary, but at AkzoNobel, we have defined modern slavery as child labor, debt bondage, forced labor, human trafficking, servitude, slavery and slavery-like practices.
   
   In 2017, we initiated a due diligence program for several raw materials in our supply chain identified as high risk materials impacting human rights, and forms of modern slavery in particular. These materials are prioritized and brought in scope using information provided by NGOs. We continue to work on this due diligence program. In addition, we carried out awareness training on sustainability including human rights for 60% of our buyers, which will be completed in early 2019.
   
   We also strengthened our Supplier Sustainability Framework in terms of human rights due diligence by including the EcoVadis sub-theme score on labor and human rights in the determination of the risk levels of our current suppliers. In addition, during 2018, we improved the compliance element of the Supplier Sustainability Balanced Scorecard by adding the EcoVadis sub-score on labor and human rights, and by monitoring the human rights controversies reported by the EcoVadis 360° report. New suppliers also now have to take part in an evaluation program, as described in our Supplier Selection process under ALPS. This program includes elements on labor and human rights (see Note 6).

Stakeholder engagement

We understand that identifying salient human rights issues is an ongoing process. While undertaking due diligence – and providing remedies where needed – on the salient human rights issues, we continue to analyze and monitor our potential impact on human rights across our value chain, paying extra attention to vulnerable groups. We continuously engage with both internal and external stakeholders, such as employees, human rights experts, NGOs and society at large, and use feedback to align our initiatives. Frank and open dialog with all our stakeholders enables us to go further and faster than we could alone.

Grievance mechanism

We promote a feedback culture through communication and training. An open atmosphere helps to identify issues, including concerns relating to respect for human rights. The SpeakUp! grievance mechanism offers our employees, business partners and the general public a confidential environment in which they can raise concerns relating to breaches of our Code of Conduct, including the human rights reflected therein. The results are reported annually (see Compliance and integrity management).