Managing sustainability

The Executive Committee is responsible for incorporating our sustainability agenda into the company strategy and monitoring the performance of each business through the Operational Control Cycle. Given our focus on sustainability, overall ownership of sustainability is with the CEO.

Materiality assessment

We use the principle of materiality to review our strategic priorities and assess the topics included in the Sustainability statements of this Report 2021. During 2021, we updated the methodology to determine and prioritize those topics most material to our company and our stakeholders. We’ve determined the most material topics for a company in our industry, based on the material topics identified by reporting frameworks (e.g. GRI and SASB) and sustainability indexes (e.g. EcoVadis, Sustainalytics). The internal and external importance for each of these material topics are determined and validated annually and reported in our annual report. More details can be found on our website.

Based on the assessment to determine the most material topics for our industry, biodiversity and land use do not show as a material topic. Nevertheless, we recognize the importance of this in society. We continue to disclose metrics related to biodiversity – such as emissions (carbon, NOx, SOx, and ) and pollutant emissions (COD) – on our website and in our annual report. We continue to further investigate the materiality of biodiversity and land use.

Materiality matrix

Managing sustainability – Materiality matrix (graphic)

 

Topic

Report 2021

A

Climate change adaptation

Climate change adaptation and water risk

B

Diverse, inclusive and healthy organization

Employees

C

Emissions and energy

Carbon emissions in own operations and carbon emissions in our value chain

D

Health and safety employees and customers

Health and safety

E

Human rights

Human rights

F

Sustainable product portfolio

Sustainable solutions

G

Community involvement

AkzoNobel Cares

H

Materials and waste

Waste and water management

I

Responsible procurement

Responsible procurement

J

Water and wastewater

Waste and water management

Reporting principles and frameworks

When combining disclosures in this Report 2021 with disclosures on our website, we report in accordance with 2021 GRI standards. We’re also in the process of fully implementing the recommendation of the Task Force on Climate-Related Financial Disclosures (TCFD) and the World Economic Forum (WEF). In addition to an index table for GRI, TCFD and WEF, we provide an index table on the Sustainability Accounting Standards Board (SASB) on our website.

We use our internally developed reporting principles to make our reporting more precise and better aligned with our business and operations. They are aligned with the Global Reporting Initiative (GRI) standards. The complete reporting principles can be found on our website, while a summary is included in the Appendix of this Report 2021.

The preparation of our Sustainability statements requires management to make judgments, estimates and assumptions that affect amounts reported, especially for sustainable solutions and Scope 3 . The estimates and assumptions are based on experience and various other factors believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis. More details on the methodology and significant assumptions can be found in the reporting principles on our website.

EU taxonomy disclosure

The Taxonomy Regulation establishes the framework for the EU taxonomy by setting out four conditions that an economic activity must meet in order to qualify as environmentally sustainable. A qualifying activity must:

  • Contribute substantially to one or more of six environmental objectives, being:
    1. Climate change mitigation
    2. Climate change adaptation
    3. Sustainable use and protection of water and marine resources
    4. Transition to a
    5. Pollution prevention and control
    6. Protection and restoration of biodiversity and ecosystems
  • Do no significant harm to any of the other environmental objectives
  • Be carried out in compliance with minimum (social) safeguards
  • Comply with technical screening criteria. The technical screening criteria specify the performance requirements for any economic activity that determine under what conditions that activity makes a substantial contribution to a given environmental objective and does not significantly harm the other objectives

The above environmental objectives are/will be further detailed out with technical screening criteria for determining the conditions under which an economic activity qualifies as contributing substantially to the six objectives. For the financial year 2021, two of the six objectives listed above have been further detailed out and are applicable for reporting in 2021: climate change mitigation and climate change adaptation. Companies are required to report on the proportion of turnover (revenues), (Capex) and operating expenditures (Opex) that is associated with environmentally sustainable economic activities. For the purpose of the calculation of eligible activities, the following financial information has been derived from AkzoNobel’s 2021 financial statements:

  • Revenues is consolidated external revenues as reported in our consolidated statement of income
  • Capital expenditures is the sum of additions in property, plant and equipment, intangible assets and right-of-use assets from both investments and acquisitions resulting from business combinations. Note that capital expenditures as included in the 2021 financial statements excludes the impact from right-of-use assets, as well as the impact from acquisitions resulting from business combinations
  • Operating expenditures is calculated in accordance with the EU taxonomy as direct non-capitalized costs incurred for the day-to-day servicing of assets, consisting of research and development costs, short-term leases, maintenance and repair costs and other similar costs. This definition differs from operating expenses as included in our consolidated statement of income. As the operating expenses in accordance with the EU taxonomy are not significant for AkzoNobel, we make use of the exemption in the EU taxonomy and disclose 0% eligibility for Opex

The core activities of AkzoNobel, being the manufacturing of paints and coatings, are not considered to be among the largest potential contributors to climate change mitigation and climate change adaption by nature, as these activities are not considered to be significantly polluting. Therefore, AkzoNobel’s core activity (manufacturing of paints and coatings) is not defined as an eligible activity for EU taxonomy by the legislator. As a result, the company does not have any eligible revenues under the EU taxonomy.

The outcomes of the EU taxonomy assessment for 2021 in relation to the climate change mitigation and climate change adaptation environmental objectives can be summarized as follows:

  • Revenues: Per the EU taxonomy definitions, AkzoNobel does not have any eligible activities and therefore no eligible revenues
  • Capex: Eligible activities amount to 3% of Capex
  • Opex: Eligible activities amount to 0% of Opex

Although we have limited eligible activities under the current EU taxonomy, which mainly consist of investments in water treatment units and solar panels, around 39% of our revenue comes from sustainable solutions (see Paint section) and our current total share of renewable electricity use is 45% globally (see Planet section). In addition, our innovation investments are focused around increasing sustainable solutions in our product portfolio.

In addition, in 2021, our carbon reduction target of 50% reduction by 2030 for the full value chain was assessed and validated by the Science Based Targets initiative. Our ambition is in line with the 1.5˚C pathway, as defined in the Paris Agreement and demonstrates our clear commitment to climate change mitigation. For our own operations, we have already reduced our relative carbon footprint by 21%, closing in on our 2025 interim target of 25% (see Planet section).

We also continued to monitor the risks and opportunities related to climate change following the recommendations of the TCFD (see Planet section).

VOC

Volatile organic compounds.

Carbon footprint

The total amount of greenhouse gas (GHG) emissions caused during a defined period of a product’s lifecycle. It is expressed in terms of the amount of carbon dioxide equivalents CO2(e) emitted. Greenhouse gases include CO2, CO, CH4, N2O and HFCs, which have a global warming impact. We also include the impact of VOCs in our targets.

Circular economy

An economic system which is restorative and regenerative by design, and which aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.

Capital expenditures

The total of investments in property, plant and equipment and investments in intangible assets.