Disclosure 308-1 New suppliers that were screened using environmental criteria

Clariant selects and manages its suppliers, outsourcing partners, and service providers based on a comprehensive set of criteria. The selection of suppliers is not only based on economic and product-specific performance aspects, but the non-financial aspects and sustainability considerations are explicitly taken into account as well. Clariant’s sustainability standards are incorporated into its procurement strategies and activities, policies, and general guidelines (such as the Code of Conduct for Suppliers). Therefore, sustainability at Clariant does not begin and end with its own manufacturing operations, but extends across its entire supply chain as well. Through its procurement organization, Clariant is actively engaged in ensuring that the most sustainable products and services are sourced from its supply base in order to continuously increase the sustainability profile and the performance level of its entire supply chain and product portfolio.

Clariant assesses suppliers through an extensive program based on sustainability factors such as working conditions, respect for human rights, complaint management, safety standards, and creditworthiness. Clariant’s approach to managing sustainability in its supply chain goes well beyond the existence of supplier selection criteria and certified management systems and policies. In fact, it extends to their implementation and to the monitoring and improvement of the results obtained.

Clariant expects all of its material suppliers and service providers to commit to and comply with the same high legal, ethical, and moral standards it applies to its own processes and operations. These standards form the basis for the Code of Conduct for Suppliers. Clariant expects its suppliers to abide by this 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 these standards are not embraced by its business partners, Clariant retains the right to end its business relationship with these suppliers.

By joining the »Together for Sustainability« (TfS) initiative, Clariant has taken the sustainability monitoring and improvement of its suppliers to a new and much higher level. In fact, 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 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 anti-trust and competition law. Clariant prioritizes the assessment and audit of suppliers according to country and business risks, global category priorities, and purchase volumes.

Through the TfS program, 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 provide 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.

Through TfS, more than 8,600 (2016: 6,300) assessment scorecards – each representing an individual supplier – and more than 1,100 (2016: 700) audit reports have been generated, available to, and shared among all TfS Members on an online platform. This serves as a basis to drive improvements in sustainability performance across the respective supply chains. In 2017 alone, 441 new TfS audits were conducted through the TfS Audit Program, and 1,794 new supplier assessments were conducted. PwC

By mapping the scorecards generated by all TfS Members and available on the EcoVadis platform against Clariant’s supply base, we already cover more than 65 % (2016: 63 %) of our yearly CHF 2.7 billion (2016: 2.2 billion) direct spend with a sustainability evaluation of our suppliers. This evaluation, based on a state-of-the-art methodology and global standards such as Global Compact, GRI, and ISO 26000, not only provides a quantitative rating of the overall ESG performance, but also a specific score for each of the relevant dimensions of environment, labor practices, fair business practices, and procurement. These results are significantly higher than the 20 % reported in 2014. Both the rapid growth in TfS membership from 8 to 20 members and acceleration in the number of scorecards generated and shared facilitate Clariant’s transparency and mapping efforts. PwC

Disclosure 308-2 Negative environmental impacts in the supply chain and actions taken

These numbers are based on mapping the suppliers from the EcoVadis platform to Clariant's own database

With 17% of the 785 suppliers identified as having significant actual and potential negative environmental impacts 2016, Clariant began in 2017 a program of Corrective Action Plans (CAPs) to reduce the identified sustainability risks.