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

Clariant aspires to be perceived by its stakeholders as a world-class, high-performance company and a reliable partner that acts with the utmost integrity. Clariant believes that sustainable business success is closely linked to compliance with laws, regulations, and ethical standards. Clariant’s stakeholders and society at large do not tolerate bribery and corruption from a reputable and sustainable company. Also, the cost of noncompliance has significantly increased. Massive fines and fees combined with the loss of reputation and business can bring a company close to bankruptcy. Applying the highest standards of diligence and compliance with all rules and regulations is thus essential for long-term business success, not only in Clariant’s own operations, but also with respect to the third parties acting on behalf of Clariant.

Disclosure 103-2 The management approach and its components

Clariant’s business units, Group Compliance, and Group Legal Services are responsible for managing business ethics and compliance. Clariant seeks to avoid reputational damage and financial costs associated with noncompliance. The Strategic Integrity Roadmap with its five-pillar approach provides guidance to achieve this objective by combining a leadership program, legal and compliance risk management, training and communication, standards and controls, as well as program measurement, auditing, and monitoring.

Another central instrument to ensure ethical behavior is Clariant’s Code of Conduct, which contains ten compliance principles. They require all employees to refrain from conflicts of interest, active or passive bribery, insider trading, anti-trust violations, money laundering, account fraud, disclosure of confidential information, and abuse of business assets for private interests; to prevent environmental hazards; and to abstain from discrimination and harassment. Clariant does not tolerate any violation of the Code of Conduct. All employees are encouraged to confidentially report noncompliant behavior to the compliance organization. An important channel through which all violations against the Code of Conduct and any workplace-related compliance issue can be reported is the »Clariant Integrity Line.« In close collaboration with the Compliance Team, the global Human Resource Case Manager organization within Group Human Resources takes care of any substantiated concern.

Besides its Anti-Bribery and Corruption Policy and the Gift Policy, Clariant introduced local policies regarding gifts, entertainment, and community engagement work. This was introduced for Japan in 2017 and will continue with Indonesia and Brazil in 2018. Clariant focuses on advancing the implementation of its policies and procedures related to bribery and corruption and ensuring adherence by third parties acting on behalf of or representing Clariant.

To make ethics and integrity more tangible, Clariant launched a number of internal communication measures, including an ethics journal that illustrates real cases from its businesses and discusses how they were resolved. Through the campaign »Excellence through Integrity, « the members of the Executive Committee and the regional heads stated what integrity means to them and further raised awareness for ethical behavior. Clariant also continued its mandatory compliance trainings to avoid violations of the Code of Conduct, both via e-learning and in-person courses. Certain target groups received specific trainings on competition and anti-trust law. Furthermore, a resource center was established, serving as a one-stop-shop for all questions around ethics and integrity.

In 2018, Clariant will fully roll out the Strategic Integrity Roadmap. Furthermore, it will offer basic e-learning courses on bribery and corruption, data privacy, and risk-based anti-trust law. Lastly, Clariant plans to launch leader-led compliance sessions, in which senior managers discuss ethical dilemmas with their teams.

Disclosure 103-3 Evaluation of the management approach

To evaluate the effectiveness of the management approach, Clariant designed a five-pillar strategy with a detailed three-year plan, including key performance indicators that are tracked as of 2018. Both the Executive Committee as well as the Audit Committee were involved in the final revisions and formally approved the strategy.

Furthermore, the screening of suppliers and contractual language obligations regularly gives an indication of Clariant’s progress in the implementation of the Compliance Program.

Clariant has a due diligence process in place to vet distributors, agents, and lobbyists.

Clariant investigation and remediation process applies to all reported breaches of the Code of Conduct. Corporate Functions (Group Compliance, Group HR, Corporate Auditing, ESHA and other functions, where appropriate) are responsible for the investigation and Compliance Committees (Regional or Group level) are responsible for remediation. In 2017, Clariant received 80 reports of alleged breaches of the Code of Conduct in the following categories:

• Health & Safety, Environmental Violations: 2
• Business Integrity: 26
• Treatment of Employees: 31
• Reports with no content or no allegations (including “Ask a Question”): 21