Disclosure 103-1 Explanation of the material topic and its Boundary

Environmental protection and resources encompasses pollution prevention, waste management, energy and water use, and ecosystem protection. Clariant currently focuses on the impacts of its own operations, which can be controlled and monitored directly. Potential effects along the supply chains are also considered.

Pollution Prevention
Clariant is fully committed to sustainability, which is reflected in its persistent efforts to protect the environment by conserving natural resources on one hand and ensuring pollution prevention on the other hand. Its pollution prevention approach includes a clear commitment to reducing air emissions and minimizing the discharge of harmful pollutants into water. It adds value to the company by minimizing the risk of harm to human health and the environment. In turn, this reduces potential liabilities and negative impacts on the company’s brand image.

Waste and Energy Management
Clariant’s waste and energy approach also adds value by reducing the risk of environmental harm associated with waste production, and by minimizing costs, emissions, and greenhouse effects associated with energy use. Together these efforts are in line with Clariant’s commitment to sustainability and lend credibility to our operations around the world.

Water
Water management is a key topic for the chemical industry, as water is used in numerous production processes and as an ingredient for certain products. The majority of production sites are located in areas with sufficient and stable water availability. To ensure continuous operations also in areas under water stress, introducing measures that reduce water consumption and increase water reuse is essential. Clariant always prioritizes actions that increase water use efficiency, ensure proper water management, and address potential risks, particularly in areas under water stress.

Protection of Ecosystems
Ecosystems provide a variety of critical goods and services to companies like Clariant, such as clean water, energy, recreational areas, and protection from flooding. However, companies can negatively impact the ecosystems on which they depend, and must therefore take great care in monitoring and remedying these impacts in order to maintain ecosystem services.

Since most of Clariant’s sites are located in industrial areas, ecosystems are usually not impacted. If impacts occur, Clariant monitors parameters such as air emissions and water quality in areas adjacent to production sites. Where possible, the monitoring is extended along the value chain.

This topic examines Clariant’s use of renewable raw materials, specifically palm oil, and primarily impacts the Business Unit Industrial & Consumer Specialties and the mining activities of the Business Unit Functional Minerals.

Disclosure 103-2 The management approach and its components

The corporate Environmental Safety and Health Affairs (ESHA) unit and the specialized ESHA teams in the business units and country organizations are responsible for managing environmental protection and resources. While they set and monitor the standards, the full operational responsibility lies with each site, which also nominates a responsible person for day-to-day operational ESHA topics.

Corporate Sustainability & Regulatory Affairs also supports the businesses with strategic and operational activities, such as providing input to product screenings and customer requests.

By 2025, Clariant wants to achieve significant improvements on six major parameters compared to the base year 2013. With respect to produced goods (per ton), Clariant aims to reduce energy consumption and direct CO₂ emissions by 30 %, greenhouse gas emissions, water consumption, and waste volume by 35 %, and wastewater volume by 40 %.

Clariant has an environmental management system based on ISO 14001 in place. As required by ISO 14001, Clariant has defined a process landscape, established environmental guidelines, and guides that focus on emissions, waste, and wastewater, and conducts environmental impact and aspect assessments. Clariant also participates in the ISO 14001 audit process. One of the most important aspects of this is the continuous improvement process (CIP), which is supported by the Clariant Excellence program. Clariant follows ISO 50001 guidance for its energy management approach.

Clariant abides by the principles of the Responsible Care® Global Charter, which was initiated by the members of the International Council of Chemical Associations (ICCA) to create a global vision and highlight the commitment of the industry to continuous improvement in the environmental, health, and safety performance of chemical producers worldwide. Furthermore, Clariant adheres to its Sustainability Policy, Code of Conduct, Internal ESHA Management System, ESHA Guidelines and Guides, internal audits, and bylaws of the Executive Committee. The ESHA guidelines contain several common principles for environmental protection, including prioritizing measures that avoid or minimize negative environmental impacts over pollution control (end of pipe) measures.

Pollution Prevention
Under its Portfolio Value Program (PVP), Clariant screens the product portfolio for sustainability performance using 36 criteria that evaluate the entire product life cycle. Clariant awards products that show an excellent sustainability profile with its EcoTain® label. In 2017, 18 products were awarded the EcoTain® label as part of the PVP in 2017. In total, over 80 % of the product portfolio has been analyzed for its sustainability performance since the inception of the program in 2012. Overall, 169 products obtained the EcoTain® label by now.

Clariant implemented several measures to improve its performance with regard to pollution prevention. For example, a project in the Business Area Natural Resources was undertaken to reduce the emissions of sulfur oxides by installing desulfurization devices in many sites. Air emissions and wastewater quality of all sites is monitored closely. The parameters tracked for air emissions include volatile organic compounds (VOCs), sulfur oxides (SO_x), nitrogen oxides (NO_x), and particulates. For assessing the wastewater quality, biological and chemical oxygen demands, as well as total organic content, suspended solids, heavy metals, nitrogen compounds, and phosphorus are measured.

Waste and Energy Management
Clariant’s environmental performance has improved continuously over recent years thanks to ongoing efforts at individual sites and global programs to manage energy use and provide training. These include eWATCH, Clariant Excellence, and the Clariant Production System Yield, Energy, Environment (YEE) initiative. These initiatives also support the continuous local efforts to minimize waste generation.

The eWATCH program is a three-dimensional energy efficiency and management approach that combines an operating system, management system, and employee system to reduce operational costs at production sites. The Clariant Energy Intelligence Guide (CEIG) is a component of the eWATCH Employee System that supports careful management of the company’s energy demand. This guide combines information, advice, best practices, and successful optimization projects, as well as key figures and tools that support energy efficiency, enabling users to systematically improve the energy efficiency of equipment.

An important component of the Operational Excellence program is the Clariant Production System (CPS). The CPS’s goal is to achieve optimal productivity and financial performance in the production units of all business units by helping to identify, develop, and implement good practices across all production sites. Implementing the CPS leads to improvements in safety, productivity, conversion costs, energy consumption, and product quality.

The Clariant Production System Yield, Energy, Environment (YEE) initiative increases yields, improves energy efficiency, and reduces waste streams by analyzing specific production processes or production units to create a comprehensive picture of energy optimization. Since inception in 2012, YEE led to savings of more than CHF 40 million. In 2017, YEE allowed for costs savings of CHF 8.1 million.

Water
Clariant is one of eleven partners in the European INSPIREWATER project, which is exploring innovative solutions for industrial water management. The project includes developing a pilot wastewater treatment plant in the water-limited region of Tarragona, Spain, with the aim of achieving zero liquid discharge. Knowledge obtained from this project can be transferred to other Clariant sites, particularly those located in water-stressed areas. Furthermore, Clariant engaged with internal quality, audits, which are a central element of the ESHA management system, supporting the external environmental management certification according to ISO 14001.

Protection of Ecosystems
To guarantee sustainable sourcing of palm oil-based oleo chemicals, Clariant began certifying the key production sites that process palm oil-derived raw materials under the sustainability certification scheme of the Roundtable on Sustainable Palm Oil (RSPO). By 2016, it achieved its goal of certifying all sites that manufacture products with palm oil-based raw materials (i.e., Clariant’s personal and home care products). In 2017, Clariant worked intensively to further broaden its RSPO mass balance-certified product portfolio for the personal and home care markets in Europe, Asia, North America, and Latin America. Efforts to further extend the portfolio will continue in 2018 to help Clariant’s customers comply with increasing demand for certified palm ingredients in the end-consumer markets.

As a member of the “Sustainable Palm Oil and Traceability in Sabah” (SPOTS) initiative, Clariant also implements specific action plans regarding the sustainability of the palm oil supply chain. These include working on the transparency of the supply chains and providing support services to independent smallholders to increase their income and improve their quality of life.

Disclosure 103-3 Evaluation of the management approach

Clariant annually collects ESHA key figures to monitor ESHA performance and efficiency improvements. Clariant’s Project Tracking Tool (CPTT) is used as a central tool for tracking the progress toward objectives, such as the 2025 targets.

For example, in 2017, Clariant strengthened its water risk management by establishing an annual water risk assessment for sites operating under high water stress by systematically mapping the water risks with a comprehensive tool, the Aqueduct Water Risk Map developed by the World Resources Institute. A facility’s overall water risk score (a combination of the quantity, quality, regulatory, and reputational risks) is calculated and the facilities that rank as medium to high risk are shortlisted. Based on this initial assessment, Clariant refined the Aqueduct analysis by performing a more detailed internal risk assessment. Relevant sites reported on impacts and emerging risks according to certain classifications and categories, allowing Clariant to identify the sites with water risks that could have a substantial impact on operations, revenue, or expenditure.

Clariant established a Target 2025 group to exchange knowledge between stakeholders in the business units and service units on projects undertaken to reduce environmental KPIs. Alongside this, Clariant instituted its Clariant Excellence program, which has clear targets for resource savings. Moreover, ideation workshops were coordinated by Corporate ESHA in collaboration with various business units to identify bottlenecks and generate fresh ideas to achieve the 2025 targets. The participants in these ideation workshops were the operations managers from the production sites, who were the main stakeholders in implementing the strategies at the site level.