In 2017, Clariant focused closely on enhancing its relationship capital. Although it did not conduct a customer satisfaction survey, Clariant engaged directly with customers to learn about their unmet needs. It also maintained strong contacts with the chemical industry and policy-makers. Through its ongoing collaboration with suppliers, customers, and other leading chemical companies, Clariant continued to improve the whole industry’s value chains with a strong focus on sustainabililty.

2.1. Customer relationship

Customer engagement is key to profitable growth and is thus at the core of Clariant’s commercial strategy. This clear focus reflects a cultural change in the company over the past years, turning from a product-driven into a customer-centric business. Clariant gained a significantly better understanding of the customers’ perspectives with this transformation, enabling tailor-made value propositions that meet pressing needs. Since 2014, a total of 88 Marketing Excellence projects have been carried out, of which 34 in 2017 alone. The additional margin generated from Marketing Excellence projects increased from CHF 9.3 million in 2016 to CHF 12.3 million in 2017, of which 50% was accounted for by the Asia and Pacific region. Clariant expects to double the commercial margin to CHF 24 million in 2018.

003 Commercial margin in CHF m

Customer focus is also reflected in the increasing number of customer interactions. For example, in 2017, Clariant conducted 515 customer interviews and 59 interviews with industry experts in the Marketing Excellence projects only. On top of that, Clariant also concluded 46 customer interviews in the context of an outside-in assessment of its sales organizations in the Business Units and regions and organized twelve customer workshops for dedicated Innovation Excellence projects. Additional interviews were conducted for specific projects. For example, Business Unit Masterbatches interviewed 150 customers, aiming to improve its customer retention.

To further strengthen commercial capabilities, Clariant comprehensively restructured its marketing organization in 2017, see Marketing Advances. As part of the Leading Marketing Organization initiative, new marketing structures and functions were defined for each Business Unit, tailored to their individual business needs. By the end of 2017, all Business Units had developed detailed organizational blueprints with a clear allocation of marketing activities and defined key roles and responsibilities. In total, Clariant will add 94 FTEs to its Commercial Organization by 2020, with 59 positions to be filled in 2018.

At the end of 2017, the recruiting process for key positions in the new marketing organizations was initiated. As part of the Leading Marketing Organization initiative, clear career paths for marketing professionals have been determined. In 2018, Clariant plans to launch a dedicated marketing training curriculum. Overall, Clariant expects an increase of CHF 90 million in profitability by 2020 from its Leading Marketing Organization initiative. In order to achieve this objective, commercial targets were included in the 2018 goal-setting process and Annual Performance Cycle.

GRI Online Report
Management Approach Ethics and Compliance

2.2. Ethics and compliance

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 and therefore implemented several measures in 2017 to emphasize the importance of Ethics and Compliance issues throughout the company.

First, Clariant launched an ethical journal that discusses real cases from its businesses and 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. Of the 80 questions and allegations regarding ethics and compliance issues that were reported in 2017 through Clariant’s anonymous Integrity Line, 16 were fully or partially substantiated and 46 cases were closed by the end of the year.

In 2018, Clariant will 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.

GRI Online Report
Management Approach Policy and Stakeholder Relations

2.3. Policy and stakeholder relations

Maintaining an open and trustworthy dialog with all stakeholders and participating in relevant public policy development processes are important aspects of Clariant’s corporate responsibility. Besides its engagement in business and trade associations, such as the International Council of Chemical Associations (ICCA), the European Chemical Industry Council (Cefic), and China’s Petroleum and Chemical Industry Federation, Clariant contributes to public policy making in several areas such as chemical management and substitution, bio-economy, circular economy, competitiveness, innovation, and trade. In 2017, Clariant implemented advocacy campaigns on regulatory dossiers of strategic interest including, for example, the revision of the Renewable Energy Directive of the European Union. In this context, Clariant specifically advocated for an ambitious blending target for second-generation biofuels. Clariant also promoted the chemical industry’s Responsible Care™ program in several countries.

GRI Online Report
Management Approach Sustainability Performance in the Supply Chain

2.4. Sustainability performance in the supply chain

Clariant sources over 36 500 types of raw materials from around 7 000 suppliers. Spending on raw materials accounted for CHF 2.7 billion in 2017, which represents the largest portion of Clariant’s total expenditure. Given the importance of suppliers in Clariant’s value creation, they also have a substantial impact on the company’s overall sustainability performance. Clariant believes that true leadership in sustainability extends beyond the company’s own operations – that businesses should manage their environmental, social, and governance impacts and leverage sustainability opportunities across the entire value chain. Customers, employees, consumers, and the public expect companies to understand their wider impacts and drive sustainable change and growth.

Fully committed to this vision, Clariant selects and manages its suppliers, outsourcing partners, and service providers based on a comprehensive set of criteria. They include not only the economic and product-specific performance, but also non-financial and sustainability considerations, such as environmental and safety standards, social and governance aspects, complaint management, working conditions, and respect for human rights.

Adding value with sustainability is one of Clariant’s five strategic pillars. Therefore, Clariant expects its suppliers to uphold ethical and sustainable business practices and embeds sustainability in the selection and management of suppliers. Since the launch of the Sustainability Supplier program in 2012, it has been rolled out across the procurement organizations of all regions and spend areas, underscoring the strategic relevance that sustainability has for the entire business.

The Supplier Code of Conduct outlines Clariant’s strategy, scope, and expectations regarding the sustainability engagement and performance of its suppliers. Suppliers and their subsidiaries are required to agree to and fully comply with the Supplier Code of Conduct. It 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. The Supplier Code of Conduct is also included in Clariant’s General Terms and Conditions of Purchase incorporated in every purchase order issued by the procurement organizations.

To monitor and improve adherence with the principles laid out in its Supplier Code of Conduct, Clariant relies on the assessments and audits conducted by »Together for Sustainability« (TfS), a joint initiative of major chemical companies to assess and steer sustainability in the supply chain. Clariant joined TfS in 2014 to accelerate the deployment of these assessments and audits. Founded in 2012 by six companies, TfS today lists 20 members representing a combined yearly spend of more than CHF 200 billion. As an active TfS member, Clariant contributes sustainability performance assessments and audits of its suppliers. In turn, it gains access to the assessments generated and shared by the other TfS members.

TfS supplier assessments and audits are conducted according to a standard approach by best-in-class service providers to guarantee both independence and consistency of results. Sustainability assessments are run by EcoVadis. Applying a state-of-the-art methodology, EcoVadis generates sustainability scorecards, which provide an overall score as well as a sub-score for the performance on Environment, Labor Practices, Fair Business Practices, and Sustainable Procurement. In 2017, TfS members assessed 2 309 of their suppliers, compared to 1 773 conducted in 2016. Since its inception in 2012, TfS members have assessed a total of 8 692 suppliers. Clariant regularly maps all sustainability assessments generated by TfS members against its supply base to identify which portion of its total spend is covered by the evaluations. The last mapping in 2017 revealed that 65% of Clariant’s spending on raw materials was covered by TfS assessments. This is considered a big success, given that TfS was only launched in 2012. By 2019, Clariant aims to reach a direct spend coverage of over 70%.

In order to carry out the on-site sustainability audits, TfS selected Intertek, SGS, DSQ Group, and ERM – all globally renowned and specialized service providers. The number of new audits increased from 403 in 2016 to 441 in 2017, for a total of 1 187 audits conducted since 2012. By 2019, TfS aims to achieve 1 400 audits.

In 2017, based on the EcoVadis scorecards, Clariant segmented its supply base and began a program of Corrective Action Plans (CAPs) to reduce the identified sustainability risks. It launched almost 200 supplier CAPs, of which more than half were completed by the end of 2017. In 2018, the suppliers for which a CAP has been launched will undergo a reassessment in order to evaluate whether the required progress was made. Fellow TfS members contribute to Clariant’s risk reduction even further by also running CAPs with some of Clariant’s suppliers. Corrective Action Plans are also prescribed based on TfS audit reports.

Third-party supplier assessments and audits are complemented by active supplier communication and support, including, for example, sharing a regularly updated information package (Supplier Toolkit) and hosting sustainability events in key sourcing markets. To increase awareness and enhance the capability to evaluate sustainability performance in the supply chain, Clariant organizes yearly internal trainings. In 2017, all procurement associates participated in Capability Building Program webinars.

Clariant’s supply chain sustainability performance received external recognition over the last three years. It received the prestigious EIPM (European Institute for Purchasing Management) Award for Sustainability Leadership in Supply Chain. It also received the highest EcoVadis assessment score (78 points) across the entire chemical industry. The score of 70 points received for its sustainable procurement practices put Clariant in the 99th percentile of the ranking.

GRI Online Report
Management Approach Human Rights

2.5. Human rights

Clariant respects and supports human rights, both in its own operations and supply chains, and recognizes the protection of human rights as a key element of sound business governance and a prerequisite for any company’s license to operate. Clariant likewise expects suppliers and business partners to maintain the same high standards regarding human rights in order to promote socially sustainable growth.

In 2016, Clariant conducted a human rights due diligence assessment with the support of external human rights experts to evaluate the potential human rights impacts in its operations and the effectiveness of the management and monitoring systems in place. The assessment concluded that Clariant’s potential human rights impacts primarily relate to contract labor and the supply chains for natural raw materials, particularly in geographies with weak national legal frameworks. Building on this assessment, in 2017, Clariant carried out a review of the legal requirements, conditions, and control measures related to contract labor in India. The review found that the country organization is well-aware of the legal requirements and had already implemented a clear and comprehensive process, which was supported by detailed evidence, checklists, and regular exchanges with authorities. In the future, Clariant will continue mapping the origin of raw materials to gain a better understanding of its potential human rights impacts along the supply chain.

In 2017, the Clariant Global Employment Standards Policy was fundamentally revised. The updated policy sets binding key principles and applies to all companies of the Clariant Group, which are fully financially consolidated by Clariant International AG (Switzerland), as well as to employee agencies and contractors that collaborate with Clariant or engage on behalf of Clariant.