Business Model
Creating added value lies at the core of Clariant. The company’s business model is based on three value creation phases transforming diverse resources into innovative, sustainable solutions that create value for all stakeholders. Clariant’s second Integrated Report transparently communicates this comprehensive approach to value creation in the three dimensions of Performance, People, and Planet, which embody the brand’s values.
1. Integrated Reporting
Value creation is a sophisticated process based on a multitude of resources that are both tangible and intangible, financial and non-financial. Integrated reporting represents this complexity by articulating how the company’s strategy, processes, performance, prospects, and governance lead to the creation of value by utilizing and transforming different forms of capital. This supports shareholders and other stakeholders, such as customers, employees, and suppliers, in making more informed decisions about their relationship with the company.
The core ideas of Clariant’s integrated reporting are based on the framework developed by the International Integrated Reporting Council (IIRC). The framework aims to foster sustainable change by promoting a more holistic approach to corporate reporting.
2. Creating sustainable value for all stakeholders
Clariant’s value creation process is fueled by six kinds of capital: financial, intellectual, manufactured, human, relationship, and natural. They are categorized under Clariant’s brand values of Performance (financial, intellectual, and manufactured capital), People (human and relationship capital), and Planet (natural capital). Clariant’s business model illustrates how the company draws on these various capitals as inputs and converts them into valuable outputs, such as products and services, benefitting customers, employees, shareholders, and the environment.
Clariant constantly engages with its stakeholders to stay attuned to their needs and gain feedback on how to best create value for them. In 2017, these engagements included 515 customer interviews conducted in the context of the Clariant Marketing Excellence Initiatives, investor updates and presentations at analyst conferences, and employee dialogs that leaders initiated based on insights from the employee engagement survey in the previous year. Faced with the challenges posed by climate change and environmental degradation, Clariant attaches great importance to conserving natural resources and protecting the environment in all its business activities. Furthermore, Clariant engaged over 450 internal and external stakeholders in the process of determining the economic, social, and environmental topics that offer the highest potential for value creation for stakeholders and for the company.
3. Three value creation phases fuel profitable growth
A well-filled innovation pipeline, customer-centered sales and marketing processes, as well as safe and efficient production and reliable delivery are key factors in achieving profitable growth. Clariant’s business model comprises three key value-creation phases: Idea to Market, Market to Customer, and Customer to Cash. Idea to Market encompasses scouting global trends and ideas, scoping business opportunities and exploring unmet customer needs, executing product development, and commercializing and monitoring product performance. Market to Customer includes identifying market attractiveness, developing a clear value proposition and articulating it to the customers, and capturing the value created through relationship building and the sales process. Customer to Cash encompasses balancing demand and supply, optimizing sourcing for spend effectiveness, constantly monitoring production for high efficiency, and delivering finished goods on time and in full as required by the customer.
Externally, overarching societal trends, market drivers, and economic developments shape the environment in which the business model creates value. By taking an outside-in perspective and viewing stakeholder needs and global challenges as business opportunities, Clariant contributes to solving societal and environmental challenges. In fulfilling this aspiration, Clariant draws on its Five-Pillar strategy with ambitious objectives, an entrepreneurial leadership culture and dedicated employees and four Business Areas that are leading in their respective fields.
Performance
211
R&D spend in CHF m
2 674
Raw material procurement in CHF m
> 370
Active innovation projects
> 125
Scientific collaborations
125
Production facilities
3.14
Raw material procured in mt
People
1 983
New employees hired
192 000
Training hours
515
Client interviews
> 65 %
Raw material supply base by spend covered by sustainability evaluation
Planet
3 245
Energy consumption in m kWh
49
Water consumption in m m3
Performance
6 377
Sales in CHF m
15.3 %
EBITDA margin before exceptional items
2.5 %
Growth through innovation1
6 600
Patents at year end
4.6
Production volume in m t
18
products awarded with the EcoTain® label
1 Contains the contribution to growth from both Top Line Innovation as well as Life Cycle Innovation. Potential cannibalization of existing sales caused by Life Cycle Innovation in certain cases has not been excluded from calculation
People
18 135
Staff in FTE at year end
0.2
Lost time accident rate (LTAR)
Planet
0.97
Greenhouse gas emissions (scope 1 & 2) in m t
13
Waste water in m m3
Performance
211
R&D spend in CHF m (3.3 % of Group sales)
> 125
Scientific Collaborations
> 370
Active Innovation Projects (Class 1 and 2)
8
R&D Centers
> 50
Technical Centers
People
~ 1 100
Employees in R&D
9 522
Training hours in Group Technology & Innovation
Planet
Performance
6 600
Patents at year end
2.5 %
Growth through Innovation 1
People
272
Employees with Innovation Belts (250 Green Belts, 17 Black Belts and 5 Master Black Belts)
Planet
Performance
34
Marketing Excellence projects
People
515
Customer interviews in Marketing Excellence initiatives
80
Sales managers participated in a specific sales training
59
Industry experts interviewed
Planet
Performance
12.3
Additional margin in CHF m from Marketing Excellence projects
169
EcoTain® products at the end of 2017
People
Planet
Performance
248
Investments in property, plant and equipment in CHF m
2 674
Raw material procurement in CHF m
125
Production facilities
3.14
Raw materials procured in m t
People
7 000
Suppliers of raw material
65 %
Raw material supply base by spend covered by sustainability evaluations
Planet
3 245
Energy consumption in m kWh
49
Water consumption in m m3
Performance
6 377
Sales in CHF m
15.3 %
EBITDA margin before exceptional items
428
Operating cash flow in CHF m
4.60
Production volume in m t
People
0.20
Lost time accident rate (LTAR, accidents with at least 1 day lost/200 000 work hours)
Planet
13
Waste water in m m3
198
Waste in thousand t
0.97
Greenhouse gas emissions (scope 1 & 2) in m t
Performance
1.9 %
R&D spend of sales
414
Raw material procured in CHF m
> 90
Active innovation projects
36
Production sites
3 349
Number of raw materials procured
People
35 174
Training hours
1 737
Raw material suppliers
Planet
881
Energy consumption in m kWh
Performance
1 357
Sales in CHF m
14 %
Growth in local currencies
15.3 %
EBITDA margin before exceptional items
3.11
Production volume in m t
People
3 454
Staff in FTE at year end (2016: 3235)
Planet
103
Waste in thousand t
93
Greenhouse gas emissions in kg/t production
Performance
6.4 %
R&D spend of sales
214
Raw material procured in CHF m
110
Active innovation projects
14
Production sites (50:50 or minority joint ventures not included)
1 296
Number of raw materials procured
People
19 101
Training hours
567
Raw material suppliers
Planet
557
Energy consumption in m kWh
Performance
767
Sales in CHF m
13 %
Growth in local currencies
25.8 %
EBITDA margin before exceptional items
0.06
Production volume in m t
People
1 970
Staff in FTE at year end (2016: 1548)
Planet
12.4
Waste in thousand t
2 758
Greenhouse gas emissions in kg/t production
Performance
1.3 %
R&D spend of sales
1 068
Raw material procured in CHF m
> 100
Active innovation projects
60
Production sites
14 101
Number of raw materials procured
People
56 153
Training hours
4 632
Raw material suppliers
Planet
1 038
Energy consumption in m kWh
Performance
2 678
Sales in CHF m
5 %
Growth in local currencies
14.5 %
EBITDA margin before exceptional items
0.46
Production volume in m t
People
6 759
Staff in FTE at year end (2016: 6 737)
Planet
51
Waste in thousand t
697
Greenhouse gas emissions in kg/t production
Performance
> 2.5 %
R&D spend of sales
877
Raw material procured in CHF m
> 70
Active innovation projects
15
Production sites
2 697
Number of raw materials procured
People
27 479
Training hours
1 709
Raw material suppliers
Planet
727
Energy consumption in m kWh
Performance
1 575
Sales in CHF m
8 %
Growth in local currencies
18.4 %
EBITDA margin before exceptional items
0.96
Production volume in m t
People
2 582
Staff in FTE at year end (2016: 2 574)
Planet
30.6
Waste in thousand t
210
Greenhouse gas emissions in kg/t production
The business model illustrates how a company draws on various capitals as inputs and converts them into outputs, such as products and services, through its business activities. The company’s activities and outputs lead to outcomes that affect the capitals, thus impacting the company and its stakeholders. VIEW ENTIRE GLOSSARY
Stakeholders are people or groups whose interests are linked in various ways with those of a company. They include shareholders, business partners, employees, neighbors, and the community. VIEW ENTIRE GLOSSARY
Clariant’s three brand values, under which the different capitals considered in integrated reporting have been categorized in this report: Performance (financial and intellectual capital), People (human and relationship capital), and Planet (manufactured and natural capital). VIEW ENTIRE GLOSSARY
Reporting that extends traditional formats of corporate disclosure in order to communicate the full range of factors that significantly affect an organization’s ability to create value through its business model. An integrated report provides insight about the resources used and impacted by the company – collectively referred to as »the capitals« – and their interdependence. It reflects and supports integrated thinking and decision-making that focuses on the creation of value over the short, medium, and long term. VIEW ENTIRE GLOSSARY
The pool of funds available to the company for use in the production of goods or the provision of services. This can include funds obtained through financing, such as debt, equity, or grants, and funds generated by the company, for example through sales or investments. VIEW ENTIRE GLOSSARY
Knowledge-based intangibles used and created by the company, often in collaboration with partners. This can include intellectual property, such as patents, trademarks, copyrights, software, rights, and licenses, and »organizational capital« such as tacit knowledge, systems, procedures, and protocols. VIEW ENTIRE GLOSSARY
Manufactured physical objects such as buildings, equipment, and products. These can include objects that are available to the company for use in the production of goods or the provision of services, or that the company produces for sale to customers or for its own use. VIEW ENTIRE GLOSSARY
The company’s staff and its composition, competencies, capabilities, experience, and motivation to innovate. This can include employees’ alignment with corporate values and their ability to understand and implement the company’s strategy. VIEW ENTIRE GLOSSARY
Key relationships including those with significant groups of stakeholders and other networks. This can include shared values, the trust and willingness to engage that the company has developed, and related intangibles associated with its brand and reputation. VIEW ENTIRE GLOSSARY
Renewable and nonrenewable environmental resources and processes that support the past, current, or future prosperity of the company or are affected by it. Examples can include resources related to air, water, and land that are utilized or impacted for example by emissions. VIEW ENTIRE GLOSSARY
Stakeholders are people or groups whose interests are linked in various ways with those of a company. They include shareholders, business partners, employees, neighbors, and the community. VIEW ENTIRE GLOSSARY
Core business activities that create additional value are structured into three value creation phases at Clariant. Idea to Market encompasses scouting global trends and ideas, scoping out customer needs, executing product development and commercializing, and monitoring product performance. VIEW ENTIRE GLOSSARY
Market to Customer includes identifying market attractiveness, developing a clear value proposition and articulating it to the customers, and capturing the value created through relationship building and the sales process. VIEW ENTIRE GLOSSARY
Customer to Cash encompasses planning to balance demand and supply, optimizing sourcing for spend effectiveness, constantly monitoring production for high efficiency, and delivering finished goods on-time and in-full as required by the customer. VIEW ENTIRE GLOSSARY
The business model illustrates how a company draws on various capitals as inputs and converts them into outputs, such as products and services, through its business activities. The company’s activities and outputs lead to outcomes that affect the capitals, thus impacting the company and its stakeholders. VIEW ENTIRE GLOSSARY
The pool of funds available to the company for use in the production of goods or the provision of services. This can include funds obtained through financing, such as debt, equity, or grants, and funds generated by the company, for example through sales or investments. VIEW ENTIRE GLOSSARY
Knowledge-based intangibles used and created by the company, often in collaboration with partners. This can include intellectual property, such as patents, trademarks, copyrights, software, rights, and licenses, and »organizational capital« such as tacit knowledge, systems, procedures, and protocols. VIEW ENTIRE GLOSSARY
Manufactured physical objects such as buildings, equipment, and products. These can include objects that are available to the company for use in the production of goods or the provision of services, or that the company produces for sale to customers or for its own use. VIEW ENTIRE GLOSSARY
The company’s staff and its composition, competencies, capabilities, experience, and motivation to innovate. This can include employees’ alignment with corporate values and their ability to understand and implement the company’s strategy. VIEW ENTIRE GLOSSARY
Key relationships including those with significant groups of stakeholders and other networks. This can include shared values, the trust and willingness to engage that the company has developed, and related intangibles associated with its brand and reputation. VIEW ENTIRE GLOSSARY
Renewable and nonrenewable environmental resources and processes that support the past, current, or future prosperity of the company or are affected by it. Examples can include resources related to air, water, and land that are utilized or impacted for example by emissions. VIEW ENTIRE GLOSSARY