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

Clariant believes that true leadership in sustainability extends beyond the company border, taking into account sustainability impacts and leveraging sustainability opportunities across the value chain and in broader society. Customers, employees, community members, and other stakeholders, including the public, expect companies to understand their wider impacts and drive sustainable change and growth. Clariant’s sustainability strategy thus also includes its comprehensive and complex supply chains. In order to be a true sustainability leader, it is imperative for Clariant to go beyond its own operations and include the entire yearly spend on materials and services.

Disclosure 103-2 The management approach and its components

As part of Clariant’s full commitment to identifying and continuously reducing potential risks and therefore enhancing the sustainability performance across its entire end-to-end supply chains, Clariant proactively engages with suppliers to monitor and improve sustainability performance of the sourced materials and services.

Clariant Procurement has rolled out the sustainability strategy across all regions and spend categories covering the entire CHF 4 billion yearly spend. Sustainability is an integral part of Clariant’s procurement practices – irrespective of material, geography, or risk potential. Suppliers, outsourcing partners, and service providers are selected and managed based on a comprehensive set of criteria. These benchmarks include not only economic and product-specific performance, but also non-financial and sustainability considerations, such as complaint management, creditworthiness, safety standards, working conditions, and respect for human rights.

Supplier Code of Conduct
The cornerstone of Clariant’s sustainable procurement approach, the Supplier Code of Conduct, is based on UN Global Compact and Responsible Care® principles and was rolled out in 2014 across the entire supply base of more than 22,000 suppliers through written communication and via face-to-face meetings with top suppliers in each region. It is also incorporated in the General Terms and Conditions of Purchase incorporated in every purchase order issued by the procurement organizations. Clariant expects its suppliers to abide by this Supplier Code of Conduct and to make every effort to keep the environmental impact and negative social effects arising from business activities to a minimum. If the Code of Conduct is not embraced by business partners, Clariant retains the right to end its business relationship.

Procurement Sustainability Roadmap
Every year, Clariant develops a Procurement Sustainability Roadmap based on insights and feedback gathered in the previous years. The roadmap defines focus areas, strategies, and indicators and is deployed across the entire organization, consisting of 180 procurement officers. Roadmap development and delivery processes are coordinated and steered by the Group Procurement Service’s Strategy Initiatives and Sustainability Team, which directly reports to the Chief Procurement Officer.

Targets and Trainings
Sustainability criteria play a central role in assessing Clariant’s performance in supply chain management. Four out of eight key performance indicators relate to sustainability aspects. They include the number of new sustainability assessment scorecards and sustainability audit reports generated, the number of Corrective Action Plans completed on high- and medium-risk suppliers identified through assessment scorecards, and the number of sustainability projects implemented by suppliers. Each employee working in procurement has assigned targets that are tracked and evaluated at the monthly Procurement Management Committee meetings. To further build skills in supplier sustainability management and to make sure sustainability is a critical part of the state-of-the-art procurement expertise, Clariant conducts a Sustainability Capability-Building Program with yearly waves of training sessions.

Supplier Sustainability Assessments and Audits
By joining the »Together for Sustainability« initiative, Clariant has taken the sustainability monitoring and improvement of its suppliers to a new, higher level. The TfS evaluation of suppliers – both with regard to materials and services – is based on a standard best-in-class methodology and approach jointly developed by the procurement leadership of six multinational chemical companies. It is managed through leading external global service providers specialized in sustainability, such as EcoVadis for assessments and DSQ Group, ERM, Intertek, and SGS for on-site audits. The approach developed and implemented by TfS leverages synergies among the participants and delivers an independent, standardized, and quantitative evaluation of suppliers’ sustainability performance and risk profiles. The outsourcing to third-party service providers guarantees process robustness, independence, confidentiality, and conformity with antitrust and competition law. Clariant prioritizes the assessment and audit of suppliers according to country and business risks, global category priorities, and purchase volumes.
Through TfS, Clariant is able to generate assessment scorecards and audit reports providing a quantitative evaluation of the sustainability performance of its suppliers. In addition to an overall score, suppliers receive an individual score for the critical dimensions of environment, labor practices, fair business practices, and sustainable procurement. Further, scorecards and reports provide detailed feedback on specific improvement areas and guidance on where and how to address the identified gaps. This comprehensive approach and outcome provides Clariant with the basis to engage with its suppliers and agree on ad hoc corrective action plans and, therefore, mitigate sustainability risks and improve sustainability performance in its supply chain.

Disclosure 103-3 Evaluation of the management approach

Clariant’s yearly Procurement Sustainability Roadmap is based on insights and feedback gathered through evaluations such as the DJSI RobecoSAM Company Sustainability Benchmark Report and EcoVadis Scorecard Improvement Areas as well as industry benchmarking and conference participation. Thus, breadth and depth of the roadmap are continuously enhanced.

In addition to the Dow Jones Sustainability Index ranking, Clariant Supply Chain Management was nominated as one of the top ten best supply chain organizations in sustainability across 60 industries by RobecoSAM and received the highest EcoVadis score of the global chemical industry for the second time in a row. Furthermore, Clariant received the prestigious EIPM Award for sustainability leadership in supply chain in 2017.

In the future, Clariant plans to develop a monitoring system to better monitor and measure supplier performance and identify improvement opportunities against the principles laid out in the Code of Conduct.