GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

A strong focus on innovation and Research & Development is the first of the five pillars of Clariant’s strategy to become the globally leading company for specialty chemicals. By leveraging technology and expertise, Clariant tackles emerging macro-trends to stay ahead in dynamic markets, creates high-performing solutions for rapidly changing customer needs, and drives profitable growth in all its businesses.

Innovation also supports Clariant’s second strategic pillar—adding value with sustainability—by continuously improving Clariant’s sustainability performance, enhancing the company’s ability to create long-term value for its stakeholders. Sustainability likewise promotes innovation by meeting the increasing demand for sustainable solutions, which spurs growth and higher financial results.

Living a culture of innovation is also an increasingly important factor in employer branding, helping Clariant attract and retain talent.

103-2 The Management Approach and its components

As of January 1, 2019, a newly established Innovation Committee oversees all innovation activities at Clariant. Under the lead of the Chief Technology Officer, the Innovation Committee comprises representatives from the Business Units (Heads of Innovation, Heads of Marketing & Innovation, Innovation Champions), key functions from Group Technology & Innovation and New Business Development, the Head of Clariant Innovation Excellence, the Head of the Technology & Innovation Office, and a representative from Corporate Planning & Strategy.

The charter of the Innovation Committee outlines its focus: It reviews the innovation strategy at the corporate level and within each Business Unit; defines corporate growth fields and technology focus fields; and coordinates innovation activities across Business Units. Moreover, it steers Clariant’s innovation portfolio to maximize pipeline value and pipeline delivery. The Innovation Committee is ultimately responsible for ensuring best practice application in innovation, intellectual property management, and adherence to Clariant’s Technology & Innovation governance. It is also tasked with fostering open innovation, which includes the acquisition of public funding, and strengthening Clariant’s position as industry leader in R&D and innovation. The objective is to achieve a growth rate through innovation of 2–3% per annum, with 1–2% sales growth through top line innovation only.

Research & Development activities are bundled in the department Group Technology and Innovation (GTI) and structured along four technology platforms: Chemistry & Materials, Biotechnology, Catalysis, and Process Technology. GTI collaborates closely with the Business Units to ensure that technology push and market pull go hand in hand. This setup is complemented by New Business Development (which explores business opportunities beyond the current scope of Clariant’s Business Units), Group Engineering (which is responsible for the management and execution of capital investment projects), and Group Intellectual Property Management (which secures the generated value through intellectual property protection).

Clariant Innovation Excellence (CIX) supports the Business Units in innovation management and new business creation according to the Group-wide Idea-to-Market (I2M) process. The process encompasses scouting global trends and ideas, scoping out customer needs, executing product development, commercializing products, and monitoring product performance. With its Innovation Management experts, CIX provides Clariant’s businesses with an elaborate toolbox and hands-on guidance for discovering and incubating new business opportunities and for managing innovation projects from ideation to efficient execution, commercialization, and the launch of new solutions.

Read more: Integrated Report, Idea to Market and Innovation and Technological Advances

103-3 Evaluation of the Management Approach

Clariant strives to realize a local currency growth rate of 2–3% through innovation, with a target of 1–2% sales growth from top line innovation alone. After achieving this target already in 2017, Clariant also met the expectations in 2018 and grew by more than 3% through innovation. Nevertheless, the Strategic Management Process 2018 unveiled untapped potential for Clariant’s innovation portfolio management and stringent allocation of funds towards attractive business opportunities. Business Units will further focus their resources and budgets on identified customer-centric and macro-trends-derived opportunities, thus raising innovation’s contribution to profitable growth and the return on technology and innovation spend. The innovation governance was also adjusted and the Innovation Committee, with a new functional reporting structure, was introduced, which is effective as of January 1, 2019. The Innovation Committee is responsible for maximizing the value of Clariant’s innovation pipeline and pipeline delivery.

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Clariant is committed to creating added value for customers by delivering innovative, competitive, and sustainable solutions. Engaging with customers is essential to understand their needs and create continuous, profitable growth. After taking significant steps in recent years to turn Clariant from a product-driven to a customer-centric organization, Clariant aims to further improve the customer experience and increase interactions to uncover new business opportunities.

103-2 The Management Approach and its components

To strengthen customer-centricity throughout the organization, Clariant established the Commercial Excellence initiative in 2011. It emphasizes continuous improvement in customer engagement and sales operations through ongoing dialog with existing customers, new prospects, and other partners along the value chain. Commercial Excellence is part of Group Excellence Services, an integral element of Clariant’s Business Services units, which report to the Executive Committee. It supports the Business Units in developing and implementing actionable commercial growth plans and accompanies a growing number of projects on customer segmentation, cost-to-serve analysis, and customer engagement, as well as value-based pricing and selling initiatives that drive both performance and the bottom line. In addition, Commercial Excellence supports systematic capability building with a »Commercial Curriculum« for professionals in commercial and leadership functions.

In 2017, Clariant initiated the »Leading Marketing Organization« (LMO) initiative in order to further integrate marketing within the Business Units. Each Business Unit developed a tailored marketing organization structure with clearly assigned responsibilities, supporting the organization in enhancing customer-centricity. In every Business Unit, a global Head of Marketing now leads a dedicated team of marketing professionals. To identify and capture profitable growth opportunities, marketing teams work closely with technical sales functions.

To strengthen exchange between marketing professionals, Clariant also established a new Marketing Advisory Board in 2018. It consists of the Business Units’ Marketing Heads and the Head of Commercial Excellence, who will convene regularly to share best practices and drive further development of strategic marketing processes, tools, and capabilities, and thus ensure continuous improvement of the marketing organizations.

After introducing a marketing essentials training in 2018, an advanced marketing training program that supports capacity-building and realizing the full potential of the new organizations in all Business Units will be launched in 2019.

Read more: Integrated Report, Market to Customer

103-3 Evaluation of the Management Approach

In addition to the feedback received from customer interactions throughout the year, Clariant conducts a biennial survey to monitor customer satisfaction. This survey is critical to learn about customers’ perception of Clariant as a supplier and business partner, and it provides an invaluable outside-in perspective to improve touchpoints along the entire customer journey. The most recent customer satisfaction survey was conducted in 2018.

Read more: Integrated Report, Customer Relationships

Clariant tracks several indicators to monitor the success of its approach to marketing and customer engagement. One of the most important indicators is the additional margin generated from Marketing Excellence projects (commercial margin), which gives a good indication of how well Clariant translates customer insights into profitable growth. Since 2014, this indicator has grown substantially from CHF 2 million to CHF 12.8 million in 2018, underscoring that Clariant is moving in the right direction toward true customer-centricity.

GRI 418:2016 Customer Privacy

418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data

In 2018, Clariant received no complaints from outside parties or regulatory bodies regarding data breaches of customer privacy or loss of customer data. Similarly, Clariant is not aware of any identified leaks, thefts, or losses of customer data.

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Protecting customers, consumers, and the environment by providing safer and more sustainable solutions is one of Clariant’s top priorities.

Product stewardship is a legal prerequisite for a chemicals company. It adds value to Clariant’s portfolio by providing all required information to ensure the safe use and handling of its products as well as compliance with national and international regulations, and by preventing reputational or legal damages. In addition, product stewardship supports Clariant’s business through active communication with customers on product safety for their applications, thereby playing an important role in supporting business and environmental and health protection.

As sustainability leadership requires moving beyond compliance and current standards, Clariant steers its product portfolio towards more sustainable and innovative solutions considering all three dimensions of sustainability: people, planet, and performance. For Clariant, embedding sustainability aspects in product development and other business processes is a must. Driven by societal demand and policy attention, customers and markets are increasingly aware of and sensitive to sustainability aspects. By proactively screening its products and innovation projects against strict and forward-looking sustainability criteria, Clariant aims to develop more sustainable and innovative solutions that support long-term value creation.

Product stewardship and sustainable chemistry applies to all product cycles from cradle to grave, as impacts can result from all phases of product development, operations, and downstream value chains.

103-2 The Management Approach and its components

Clariant’s approach to product stewardship is globally oriented and ensures that local and regional product stewardship teams play an integral role in the Global Product Stewardship organization and support business and external customer communication on all regulatory issues regarding the management of chemicals.

Clariant's product stewardship practices are embedded in the innovation process, guaranteeing that chemical safety is considered throughout the entire product life cycle. Regulatory compliance and communication to customers on the safe use and management of the products are thus ensured when placing products on the market.

Regulatory Compliance
Clariant monitors and assesses the impact of changes in chemical management regulations worldwide in order to be prepared for any shifts in the regulatory landscape. Proximity to regulatory bodies and participation in expert groups and associations support proactive management. Ensuring regulatory compliance also includes substance registration with relevant regional and national authorities and supply chain communication on product safety.

European Union Registration, Evaluation, Authorization, and Restriction of Chemicals (EU REACH) Targets
Clariant is fully committed to the REACH targets. After successfully registering all relevant chemicals before the May 2018 deadline, the company ensures that all product dossiers are kept up to date. During the next phase of REACH – the evaluation of the registration dossiers and registered substances – Clariant maintains the cooperation with regulatory bodies, such as the European Chemicals Agency (ECHA) and EU member states.

Clariant goes beyond mere compliance: Its Global Toxicology & Ecotoxicology Group has initiated and co-developed in a Cefic (European Chemical Industry Council) LRI (Long-Range Research Initiative) project the so-called AMBIT tool – an open IT-based system on a predictive toxicity model. AMBIT helps predict the properties of one chemical using the known properties of similar chemicals. The European Chemicals Agency (ECHA) supports this tool by giving access to non-confidential registration data.

Policies and Guidelines
As a signatory to the Responsible Care^® Declaration, Clariant supports the Responsible Care^® Global Charter. Clariant embedded the Responsible Care^® principles in its Sustainability Policy, underlining the company’s strong commitment and leadership in sustainable chemistry, and promoted the program in several countries. Reflecting the holistic approach in fulfilling the Responsible Care^® principles, Clariant’s Global Product Stewardship Organization takes care of the health, safety, environmental, and other regulatory aspects of the company’s portfolio throughout product life cycles, following clear guidelines and process descriptions.

Clariant adheres to the Precautionary Principle and takes a proactive approach to ensure the health and safety of people and the environment, while designing more sustainable and innovative products.

Product Portfolio Sustainability Screening
Beyond product safety, a sustainability screening is mandatory for all major product developments at Clariant. Under the Portfolio Value Program (PVP), Clariant systematically assesses its product portfolio for strengths and weaknesses in terms of sustainability comparing its performance against alternatives on the market and against defined sustainability risks and benefits. The product portfolio, which includes all existing products and the innovation pipeline, is screened for sustainability performance on 36 criteria that consider the entire life cycle and all three dimensions of sustainability: people, planet, and performance. Clariant awards products that show an excellent sustainability profile based on the PVP criteria with its EcoTain^® label. These products are nominated by Business Units and undergo the scrutiny of an internal EcoTain^® panel, comprised of Corporate Sustainability & Regulatory Affairs (which includes relevant product stewardship experts), Group Technology & Innovation, and Group Communications. In 2018, 24 products were awarded the EcoTain^® label, bringing the total number of Clariant products branded with the sustainability excellence label to 193.

By participating in the development of a Product Portfolio Steering Framework of the World Business Council for Sustainable Development (WBCSD), Clariant supported the development of a set of sustainability indicators for evaluating product portfolios in the chemical industry. The initiative supported bringing best practice forward in evaluating product portfolios from a sustainability perspective and encourages companies to adopt methodologies for evaluating and steering their product portfolio towards increasing sustainability based on facts, market, and stakeholder expectations.

Read more: Integrated Report, Product Stewardship/Sustainable Chemistry

103-3 Evaluation of the Management Approach

Clariant developed the Portfolio Value Program (PVP) and EcoTain^® label in close cooperation with external stakeholders. Customers, suppliers, scientists, non-governmental organizations, policymakers, and authorities were consulted in workshops and dialogs and provided valuable feedback. The stakeholders appreciated the focus on continuous improvement, transparency, and the inclusive consultation process. They also valued the PVP approach for being focused, balanced, and ambitious. They commended the 36 criteria for being comprehensive and fit for purpose.

In addition, Clariant received an independent third-party assurance statement on the PVP/EcoTain^® system from PricewaterhouseCoopers (PwC) in December 2015. In 2018, Clariant had the number of EcoTain^® products verified by PwC.

The overall evaluation of the management approach includes internal controls, PVP progress-tracking dashboards, benchmarking against peers using external references, such as the Dow Jones Sustainability Index, as well as participation in external networks, discussions, and report reviews.

GRI 416:2016 Customer Health and Safety

416-1 Assessment of the health and safety impacts of product and service categories

Read more: Integrated Report, Product Stewardship/Sustainable Chemistry

416-2 Incidents of non-compliance concerning the health and safety impacts of products and services

In 2018, there were no fines, penalties, or warnings resulting from incidents of non-compliance with regulations or voluntary codes concerning information and labeling of products and services.

GRI 417:2016 Marketing and Labeling

417-1 Requirements for product and service information and labeling

Clariant fosters permanent contact with customers, who are supported in the application and use of Clariant’s products. Laboratories are available to solve any specific problems. The service offering also features comprehensive product information, particularly in respect to optimum and safe application, health risks, waste disposal, and handling of packaging.

Safety data sheets containing the relevant substance data, information on safe handling and storage of products, and measures in the event of incidents such as product spillages/release and fire are provided by Clariant to all parties involved in the handling of the substances. Clariant has a close relationship with its customers and provides all REACH-relevant information about the supply chain through an IT tool. With this, every Clariant customer is able to securely receive REACH-relevant information on the specific products they have purchased. Comprehensive customer support services ensure compliance with the high communication requirements set by REACH regarding the use of products in the customer chain.

417-2 Incidents of non-compliance concerning product and service information and labeling

In 2018, there were no fines, penalties, or warnings resulting from incidents of non-compliance with regulations or voluntary codes concerning information and labeling of products and services.

417-3 Incidents of non-compliance concerning marketing communications

In 2018, Clariant had no complaints or legal actions concerning compliance with legal provisions on unfair competition or marketing communications.

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Occupational health, safety, and well-being add value to Clariant by minimizing the risk of harm to both people and the environment and reducing potential liabilities for the company. Processes regarding occupational safety are top priorities for Clariant to ensure seamless manufacturing operations, protect the health and safety of Clariant’s employees, and meet legal and reputational requirements. Failing to meet requirements has a direct negative impact on staff morale, labor costs, and productivity, as well as on operational costs. Moreover, negative incidents of occupational health, safety, and well-being have a detrimental effect on the company’s brand image.

As a global employer, Clariant is committed to promoting a healthy culture at the workplace, acknowledging the physical and mental well-being of its employees as a prerequisite for engagement and performance. The company aims to create an environment that encourages employees to actively self-manage their health and achieve an adequate work-life balance.

Occupational health, safety, and well-being are relevant for all Clariant businesses, including management-controlled joint ventures. The impacts of this topic occur within Clariant’s own operations.

103-2 The Management Approach and its components

Clariant’s Corporate Environmental Safety and Health Affairs (ESHA) Department and ESHA experts in all regions, countries, Service Units, and Business Units are responsible for managing occupational health and safety. Managing the well-being of Clariant’s employees is a shared responsibility of the well-being experts, the Corporate Human Resources Department, and the regional and local human resources departments.

Clariant is focused on its goal of zero accidents and its desire to embed process safety into the daily life of all operations. Milestones are defined on Group, Business Unit, and regional levels, and progress toward zero accidents is linked to top management bonuses. A zero-accident goal also reflects the company’s focus on the people dimension, one of Clariant’s brand values.

To ensure operational health, safety, and well-being, Clariant has several policies and guidelines in place, including an Employment Standards Policy, which underscores Clariant’s commitment to global workplace rights and acknowledges its social responsibility toward all employees. Clariant’s Sustainability Policy also contains a section on the safety and security of employees and the environment. Several additional guidelines cover a large number of safety and security issues, such as fire and explosion precautions, the handling of hazardous substances, and the identification of risks associated with chemical production. In addition, Clariant adheres to the Precautionary Principle when dealing with risks where scientific understanding is incomplete.

In 2007, Clariant launched the AvoidingAccidents@Clariant program, underscoring its commitment to the occupational health, safety, and well-being of its employees. Under the umbrella of the program, Clariant rolled out multifaceted trainings and tools to achieve the zero-accidents objective. These include, for example, safe behavior trainings, safety leadership improvements, safety checks, safety days, and safety weeks. In addition, Clariant has a Learning Management System (LMS), which is used to provide, steer, and monitor various programs such as occupational health and safety-related e-Learnings, webinars, and workshops. Furthermore, according to the »Protection from Hazards to Health« guideline, the area responsible is tasked with informing workers and contractors about any specific hazard and training them on specific standard operating procedures and work instructions.

As part of Clariant’s Audit Program, internal experts from corporate ESHA and the Integrated Group System Management (IGSM) regularly visit sites to check process safety standards by assessing the facilities and establishing corrective measures to tackle the main risks. Process Hazard Analyses (PHAs) are conducted periodically by competent personnel at the sites. The PHAs are reviewed at least every five years and updated in case of modifications. Whenever modifications are done in the facilities, management of change procedures are applied, ensuring that no new or additional risks are introduced without being assessed and controlled.

Clariant’s »Safety Counts!« cards also play an important role in ensuring health and safety by providing employees with an opportunity to report critical safety situations and the circumstances that led to them. Employees can also submit their proposals to improve occupational health, safety, and well-being in suggestion boxes. Furthermore, they have access to an Integrity Line hosted by an external service provider, where they can raise their complaints anonymously and around the clock. The system guarantees that concerns are dealt with by representatives of Group Compliance.

The promotion of workplace health and well-being is a local responsibility that each Clariant region addresses with tailored programs. Exceptions are the company-wide family-friendly policy and standards that ensure a healthy and safe working environment for all employees. Further, Clariant’s Employee Assistance Program offers free counseling by external specialists in case of stress (regardless of work-related or not), burnout, personal crisis, drug addiction, or other challenging circumstances. Certain locations implemented voluntary programs to support employees to quit smoking. For drug addiction, Clariant established a procedure for treatment through medical plans and in-hospital care, if necessary. Flexible working arrangements can be made and apply to both work-related stress management and unrelated, extenuating circumstances. Clariant performs an assessment of health habits and special health issues of all employees and updates local programs based on these findings.

To protect employees from work-related hazards, every workplace at Clariant is subject to a systematic assessment that includes workplace ergonomics, illumination, noise, indoor air quality, humidity, and temperature. Clear minimum requirements are defined for each factor, and measures to redesign the workplace are taken if these requirements are not met. Since balance between work and family life significantly contributes to the well-being of employees, Clariant also offers a wide range of flexible working arrangements, such as flextime, part-time, or working from home. Further benefits designed to enhance the work-life balance of its employees include healthy meals in the cafeterias, the provision of fitness facilities and contributions to external fitness programs, childcare facilities and contributions to external childcare, support for employees who care for elderly family members, as well as access to nutrition counseling and health checks.

The health of employees is regularly examined by Clariant. Depending on the workplace, extensive health checks are carried out in order to detect signs of illness as early as possible. For some activities, special health certificates and vaccinations are required, and special attention is paid to ensure that these are obtained and given. Medical health professionals anonymously report issues noticed through personal health checks of employees, for example, from blood or urine monitoring, to either the local ESHA organization or the area responsible depending on local laws. The reported information is used to review the mandatory workplace risk assessments required by »Protection from Hazards to Health.« Clariant ensures medical confidentiality. Initial workplace risk assessments define whether or not personal health monitoring is a necessary measure.

To further support Clariant’s local activities and promote a shared culture of health and well-being, the company plans to initiate a global policy to provide a framework for new ways of working, including agile and mobile work.

Read more: Integrated Report, Occupational Health, Safety, and Well-being

103-3 Evaluation of the Management Approach

To evaluate the effectiveness of the management approach, Clariant monitors several key performance indicators on a regular basis: Lost Time Accident Rate (LTAR) and Restricted Work cases are continuously and globally reported on a monthly basis. Recorded Injuries are reported quarterly, and Occupational Illnesses are tracked continuously and reported globally on an annual basis. Safety Deviations are continuously monitored at respective sites and quarterly on a global level.

Furthermore, Clariant monitors all Process Safety Events (PSEs). All reported PSEs are assessed quarterly and published in Corporate ESHA dashboards. When Clariant identifies a trend in Process Safety Events that must be corrected, the corresponding units are contacted and instructed to take corrective measures.

GRI 403:2018 Occupational Health and Safety

403-1 Occupational health and safety management system

Clariant’s occupational health and safety management system is externally certified and based on the international standard OHSAS 18001 (Occupational Health and Safety Assessment Series). It applies to all employees and contractors where Clariant controls the workplace. For workplaces that Clariant does not control, the management system only applies to Clariant’s employees.

403-2 Hazard identification, risk assessment, and incident investigation

The internal Clariant guideline »Protection from Hazards to Health« serves to avoid work-related illnesses and regulates the identification of occupational health hazards for all workplaces. The guideline includes defined revision criteria and cycles. For the control measures, the STOP principle has to be applied, which defines the hierarchy of measures to be taken in case of an incident. A comprehensive internal audit system ensures the quality and triggers continuous improvement.

To report work-related hazards or near-miss incidents, Clariant’s employees can either approach their supervisors directly or utilize an online system at some sites. If employees identify a hazardous situation, they are permitted and encouraged to stop the activity and report to their superior. The application of this rule is part of the »Avoiding Accidents@Clariant« training.

After a work-related incident, Clariant conducts an investigation to identify corrective actions and to avoid reoccurrence. Specific methodologies are provided and described in Clariant’s investigation guide. According to internal processes, Lost Time Accident and Restricted Work case reports are only closed if an appropriate investigation report is available and filed. The decision to close a report is made on the Group level by an assigned member of Corporate ESHA.

403-3 Occupational health services

Read more: Management Approach, Occupational Health, Safety, and Well-being

403-4 Worker participation, consultation, and communication on occupational health and safety

94% of staff employed per capita in production are represented by a safety committee. Taking the workforce as a whole (production, procurement, sales, and management), 83% of staff per capita are also represented. At Clariant, safety issues are also addressed in committees that do not primarily deal with this topic.

A working group is established if there is a need for new internal standards or to update existing ones. The resulting draft is sent to the different stakeholders in Clariant's Business Units and regions to solicit feedback. Feedback and requests for revisions are duly considered before the standard is finalized and approved. The relevant information is subsequently published in the Group Management System (GMS) database and on SharePoint.

403-5 Worker training on occupational health and safety

Read more: Management Approach, Occupational Health, Safety, and Well-being

403-6 Promotion of worker health

Read more: Management Approach, Occupational Health, Safety, and Well-being

403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships

Read more: Management Approach, Occupational Health, Safety, and Well-being

403-8 Workers covered by an occupational health and safety management system

403-9 Work-related injuries

Additional indicators:

403-10 Work-related ill health

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Environmental protection and resources encompasses pollution prevention, waste management, energy and water use, and ecosystem protection. Clariant currently focuses on the impacts of its own operations, which can be controlled and monitored directly. Potential effects along supply chains are also considered.

Pollution Prevention
Clariant is fully committed to sustainability, as reflected in its ongoing efforts to protect the environment by conserving natural resources and preventing pollution. Its pollution-prevention approach includes a clear commitment to reduce air emissions and minimize the discharge of harmful pollutants into water bodies. It adds value to the company by minimizing the risk of harming human health and the environment while also reducing potential liabilities and negative impacts on the company’s brand image.

Waste Management
Clariant’s waste management approach adds value by reducing the risk of environmental harm as well as costs associated with waste production. These efforts are in line with Clariant’s commitment to sustainability and lend credibility to our operations around the world.

At Clariant, the prevention of waste takes priority over recycling or disposal. Therefore, every effort is made during the development and manufacturing of products to ensure that as little waste as possible is generated, while unavoidable production waste is recycled or disposed of properly. Each type of waste is recorded and precisely analyzed, and proper disposal must be proven and documented in internal records. It is important to know which plant generated the waste, what amounts accrued during what period, what properties the waste components have, whether the waste can be classified as hazardous, and how it can be recycled or disposed of.

Energy
Managing energy is paramount for Clariant in order to conserve resources and be cost-efficient. Clariant’s energy management aims to minimize emissions and greenhouse effects from energy use, and acknowledge the development and implications of climate change. Clariant aims to improve energy efficiency in its operations, but also strives for high standards in its value chain. Ultimately, Clariant’s customers profit from solutions that enable them to significantly save energy.

Water
Water management is a key topic for the chemical industry, as water is used in numerous production processes and as an ingredient for certain products. The majority of production sites are located in areas with sufficient and stable water availability. To also ensure continuous operations in areas under water stress, introducing measures that reduce water consumption and increase water reuse is essential. Clariant prioritizes actions that increase water use efficiency, ensure proper water management, and address potential risks, particularly in areas under water stress.

Clariant uses water for a variety of purposes in the production of chemical products, resulting in the release of wastewater effluents. Clariant adheres to local regulatory requirements regarding discharge limits at all sites. Production wastewater is often subjected to multi-stage chemical-physical pre-treatment before being routed to biological wastewater treatment plants. This multi-step treatment approach and constant monitoring guarantee that discharged wastewater does not negatively impact ecosystems. Water that is only used for cooling is monitored and directly released into rivers. To prevent pollution of the intake water through undetected leaks in the cooling system, the cooling water and rainwater are constantly analyzed at the individual sites as an additional safety measure. If contamination is discovered, discharge into rivers (or other receiving water bodies) is prevented by various on-site containment systems.

Protection of Ecosystems
Ecosystems provide a variety of critical goods and services to companies like Clariant, such as clean water, energy, recreational areas, and protection from flooding. Companies can negatively impact the ecosystems on which they depend and must therefore take great care in monitoring and remedying these impacts in order to maintain ecosystem services.

Since most of Clariant’s sites are located in industrial areas, ecosystems are usually not impacted. If negative impacts can potentially occur, Clariant monitors parameters such as air emissions and water quality in areas adjacent to production sites. Where possible, the monitoring is extended along the value chain.

Protection of ecosystems also encompasses Clariant’s use of renewable raw materials, specifically palm oil, and primarily impacts the Business Unit Industrial & Consumer Specialties and the mining activities of the Business Unit Functional Minerals.

103-2 The Management Approach and its components

The corporate Environmental Safety and Health Affairs (ESHA) unit and its specialized teams within Business Units and country organizations are responsible for managing environmental protection and resources. While they set and monitor the standards, the full operational responsibility lies with each site, which also nominates a responsible person for day-to-day operational ESHA topics.

Corporate Sustainability & Regulatory Affairs also supports the businesses with strategic and operational activities, for example by providing input to product screenings and customer requests.

By 2025, Clariant wants to achieve significant improvements on six major parameters compared to the base year 2013. With respect to produced goods (per ton), Clariant aims to reduce energy consumption and direct CO₂ emissions by 30%, greenhouse gas emissions, water consumption, and waste volume by 35%, and wastewater volume by 40%.

Clariant has an environmental management system based on ISO 14001 in place. As required by ISO 14001, Clariant defined a process landscape and established environmental guidelines that focus on emissions, waste, and wastewater. In addition, Clariant conducts environmental impact and aspect assessments and participates in the ISO 14001 audit process. One of the most important aspects of this is the continuous improvement process (CIP), which is supported by Clariant’s Excellence program. Clariant follows ISO 50001 guidance for its energy management approach.

Clariant abides by the principles of the Responsible Care^® Global Charter, which was initiated by the members of the International Council of Chemical Associations (ICCA) to create a global vision and highlight the commitment of the industry to continuous improvement in the environmental, health, and safety performance of chemical producers worldwide. Furthermore, Clariant adheres to its Sustainability Policy, Code of Conduct, Internal ESHA Management System, ESHA Guidelines and Guides, internal audits, and bylaws of the Executive Committee. The ESHA guidelines contain several common principles for environmental protection, including prioritizing measures that avoid or minimize negative environmental impacts over pollution control (end of pipe) measures.

In 2018, Clariant’s investments and expenditures in the areas of environment, safety, and health protection (ESH) amounted to CHF 12.6 million (2017: CHF 8 million), representing an increase of 58% compared to the previous year.

Pollution Prevention
Clariant implemented several measures to improve its performance regarding pollution prevention. Air emissions and wastewater quality of all sites are monitored closely at the corporate level. Parameters tracked for air emissions include volatile organic compounds (VOCs), sulfur oxides (SO_x), nitrogen oxides (NO_x), and particulate matter. For assessing wastewater quality, biological and chemical oxygen demands (BOD and COD, respectively), as well as total organic content (TOC), suspended solids, heavy metals, nitrogen compounds, and phosphorus are recorded. All Clariant production sites strictly comply with local regulatory requirements regarding air and water emissions limits.

Waste Management
At Clariant, the prevention of waste takes priority over recycling or disposal. Therefore, every effort is made during the development and manufacturing of products to ensure that as little waste is generated as possible. Unavoidable production waste is recycled or disposed of properly. Each type of waste is recorded and precisely analyzed and described. Proper disposal must be proven and documented in internal records. Clariant’s environmental performance has improved continuously over recent years thanks to ongoing efforts at individual sites and global programs. At the site level, waste generation is minimized by comprehensive planning and high-quality standards.

Energy
The main governing programs at Clariant to minimize energy consumption and increase energy efficiency are eWATCH, Clariant Excellence, and the YEE initiative.

The eWATCH program is a three-dimensional energy efficiency and management approach that combines an operating system, management system, and employee system to reduce operational costs at production sites. The Clariant Energy Intelligence Guide (CEIG), a component of the eWATCH Employee System, supports careful management of the company’s energy demand. This guide combines information, advice, best practices, and successful optimization projects, as well as key figures and tools that support energy efficiency, enabling users to systematically improve the energy efficiency of equipment.

An important component of the Operational Excellence program is the Clariant Production System (CPS). The CPS’s goal is to achieve optimal productivity and financial performance in the production units of all Business Units by identifying, developing, and implementing good practices across all production sites. Implementing the CPS leads to improvements in safety, productivity, conversion costs, energy consumption, and product quality.

The Clariant Production System’s Yield, Energy, Environment (YEE) initiative increases yields, improves energy efficiency, and reduces waste streams by analyzing specific production processes or production units to create a comprehensive picture of energy optimization. Since inception in 2012, YEE led to savings of more than CHF 50 million. In 2018, YEE allowed for cost savings of CHF 6 million.

Water
Clariant is one of eleven partners in the European INSPIREWATER project, which is exploring innovative solutions for industrial water management. The project includes developing a pilot wastewater treatment plant in the water-limited region of Tarragona, Spain, with the aim of achieving zero liquid discharge. Knowledge obtained from this project can be transferred to other Clariant sites, particularly those located in water-stressed areas. Furthermore, Clariant engaged in internal quality audits, which are a central element of the ESHA management system, supporting the external environmental management certification according to ISO 14001.

Protection of Ecosystems
To guarantee sustainable sourcing of palm oil-based oleo chemicals, Clariant began certifying the key production sites that process palm oil-derived raw materials under the sustainability certification scheme of the Roundtable on Sustainable Palm Oil (RSPO). By 2016, it achieved its goal of certifying all sites that manufacture products with palm oil-based raw materials (i.e., Clariant’s personal and home care products). In 2018, Clariant worked intensively to broaden its RSPO mass balance-certified product portfolio for the personal and home care markets in Europe, Asia, North America, and Latin America. This helps Clariant’s customers comply with increasing demand for certified-palm ingredients in the end-consumer markets.

As a member of the »Sustainable Palm Oil and Traceability in Sabah« (SPOTS) initiative, Clariant also implements specific action plans regarding the sustainability of the palm oil supply chain. These include working on the transparency of supply chains and providing support services to independent smallholders to improve their income and quality of life.

Read more: Integrated Report, Progress toward environmental targets 2025

Read more: Integrated Report, Environmental protection and resources

103-3 Evaluation of the Management Approach

Clariant annually collects ESHA key figures to monitor ESHA performance and efficiency improvements. Clariant’s Project Tracking Tool (CPTT) is used as a central tool for tracking the progress toward objectives, such as the 2025 targets.

For example, Clariant strengthened its water risk management in 2017 by establishing an annual water risk assessment for sites operating under high water stress. By systematically mapping water risks with a comprehensive tool, the Aqueduct Water Risk Map developed by the World Resources Institute, a facility’s overall water risk score (a combination of quantity, quality, regulatory, and reputational risks) is calculated and the facilities that rank as medium to high risk are short-listed. Based on this initial assessment, Clariant refined the Aqueduct analysis by performing a more detailed internal risk assessment. Relevant sites reported on impacts and emerging risks according to certain classifications and categories, allowing Clariant to identify the sites with water risks that could have a substantial impact on operations, revenue, or expenditure. Further, in order to develop an in-depth understanding of risks and to make sure a systematic water risk management process is in place, a pilot water risk management project was started in 2018 in Santa Clara, Mexico. Following the pilot study, specific water-related goals will be developed for sites identified as having water risks.

Clariant established the Target 2025 Group to exchange knowledge between stakeholders in the Business and Service Units on projects undertaken to reduce environmental impacts. At the same time, Clariant instituted its Clariant Excellence program, which has clear targets for resource savings. Moreover, ideation workshops were coordinated by Corporate ESHA in collaboration with various Business Units to identify bottlenecks and generate new ideas to achieve the 2025 targets. The participants in these ideation workshops were the operations managers from the production sites, who were the main stakeholders in implementing the strategies at site level.

GRI 302:2016 Energy

302-1 Energy consumption within the organization / 302-2 Energy consumption outside of the organization / 302-3 Energy intensity

Clariant’s plants require energy primarily in the form of steam, electricity, and heat. Electricity is mainly used for drives in electric motors in mixers, pumps, and other process-engineering equipment. Measurement and control technology, as well as lighting, also requires electricity. Clariant uses natural gas for heating dryers, firing furnaces, and generating electricity and steam in its own power plants. Clariant uses steam to heat reactors and separators, such as distillation columns. The resulting condensate is, whenever possible, used for heating purposes. Across the Group, Clariant records the total energy consumption, independently of whether it has been internally produced or externally procured. Small energy procurements, such as transport services during business trips, are not recorded. In Clariant’s overall energy balance, these numbers are insignificant.

Direct energy consumption (i.e., the use of primary energy sources) takes place at Clariant’s sites and mainly for process heat- and steam-generation purposes. The main primary energy source is natural gas; coal is only used as an energy source in very few locations and Clariant is in the process of finding alternatives where possible. Indirect use of energy is from the consumption of electricity and steam from external sources in lieu of Clariant’s own energy generation. Electricity and steam procured from 3^rd parties are produced with a mix of different primary energies. Clariant endeavors, however, to increase the share of energy obtained from renewable sources on an ongoing basis.

To estimate the relative energy consumption per ton of production, Clariant accounts for all the energy it consumes.

302-4 Reduction of energy consumption

In 2018, Clariant managed to save 92.3 m kWh through its eWATCH and YEE programs. For information about the eWATCH and YEE programs refer to:

Read more: Management Approach, Environmental Protection and Resources

302-5 Reductions in energy requirements of products and services

Clariant evaluates the energy consumption of products through its Portfolio Value Program, which includes the innovation pipeline. For more information, please see the section on the Portfolio Value Program on Clariant’s website.

GRI 303:2018 Water and Effluents

303-1 Interactions with water as a shared resource

One of the main auxiliary materials for the chemical industry is water. Foremost, it is used as a coolant and as process water in production. Of the 49 million m³ of Clariant’s total water quantity purchased in 2018, about 70% was used for the cooling of its production plants, 20% for production processes, and 10% as a product component or for steam/ice generation, irrigation, or sanitary purposes. The water supplies, especially at large production sites, are primarily guaranteed with river water supplied via 3^rd parties. Before being discharged into the piping system at each site, the river water is cleaned using various filter systems. Remaining amounts are obtained from the respective local water grids, but not in volumes that would significantly impair the water system.

Clariant is a chemical company with a long-standing history, and some of its production sites are more than a hundred years old. New locations were chosen because of the required infrastructure in already existing industrial settlements. For these reasons, Clariant’s properties for plants and office buildings are located today almost exclusively in industrial parks or appropriate commercial districts. Clariant systematically tracks water-related impacts and engages with stakeholders where necessary to deal with specific water-related impacts.

With regard to plants located next to rivers, Clariant implements strict environmental regulations so that its activities have no registrable impact on the surrounding flora and fauna. The wastewater produced by Clariant in the year under review had no measurable impact on biodiversity. Clariant mostly operates plants in integrated industrial sites without sensitive adjacent areas.

The importance of water management differs according to the local conditions. Therefore, the production sites set their own targets regarding the water footprint whenever relevant. Moreover, monitoring of regulatory developments takes place in the regions and countries.

303-2 Management of water discharge-related impacts

At some Clariant locations, cooling water is guided into circulatory systems, where the temperature is again lowered after use in recooling plants. This environmentally compatible cooling method is used in plants where technically possible. In 2018, it saved 123 million m³ of industrial water, which would otherwise have been additionally procured. Clariant provides general rules for minimum standards for quality of effluent discharge to all its sites. The effluent before discharge is subject to adequate treatment and is regularly monitored. The discharge limits set by local authorities are strictly adhered to.

303-3 Water withdrawal

The disclosures on freshwater based on Total Dissolved Solids are omitted until internal processes on the collection and reporting of such data have been completed.

Clariant is in the process of standardizing the water stress/water risk assessment disclosure in accordance with various sustainability reporting requirements. The respective disclosure is thus omitted until the process is complete.

303-4 Water discharge

In 2018, Clariant recorded one incident of non-compliance with discharge limits of priority substances of concern. The respective case has been resolved in the reporting year.

The disclosures on freshwater based on Total Dissolved Solids are omitted until internal processes on the collection and reporting of such data have been completed.

303-5 Water consumption

Clariant considers the entire volume of water withdrawn and used as its total water consumption. Cooling water returned to the source after being used in cooling cycles is not excluded from total consumption.

See also: GRI 303-1

GRI 304:2016 Biodiversity

304-1 Operational sites owned, leased, managed in, or adjacent to protected areas and areas of high biodiversity value outside protected areas

Clariant does not operate any chemical production sites in biological reserves or in areas with a high biodiversity value.

304-2 Significant impacts of activities, products, and services on biodiversity

If forests, which are generally unprotected areas, are located in the immediate vicinity, Clariant ensures that the nature of the plant and activities carried out do not have an appreciable adverse effect on the surrounding flora and fauna. Clariant is also aware of the possible impact of certain raw materials and their cultivation on biodiversity, as in the case of palm oil. Therefore, Clariant cooperates with customers to improve traceability of palm-based raw materials and is a member of RSPO, offering RSPO MB-certified material.

304-3 Habitats protected or restored

In areas that were reclaimed by Clariant following bentonite extraction (such as Southern Bavaria), certain types of animals that are on the Red List of Threatened Species have repopulated.

304-4 IUCN Red List species and national conservation list species with habitats in areas affected by operations

Because of the targeted locations of Clariant’s sites, animal and plant species included on the Red List of the IUCN (International Union for Conservation of Nature and Natural Resources) and on national protection lists are not visibly affected by Clariant’s business activities.

GRI 306:2016 Effluents and Waste

306-1 Water discharge by quality and destination

The absolute quantity of water discharged remained stable between 2017 and 2018. Water discharged in relation to production increased, as production declined in the same time range.

Clariant has reduced the chemical oxygen demand (COD)—the measurement of the degree of wastewater burdened with organic substances—in all its wastewater treatment plants by ~25% from 2014 to 2018. Consequently, fees and production costs were reduced.

Only small amounts of heavy metals remain in the wastewater at Clariant’s individual sites. The values are partly based on the concentrations that are at or below the detection limit. The wastewater discharged by Clariant is largely cleaned and does not affect the quality of the receiving water. Thus, Clariant has achieved high standards in wastewater treatment and water purification.

306-2 Waste by type and disposal method

306-3 Significant spills

In 2018, Clariant recorded four spills, which is considered significant under the definition of ICCA, category 2. The total volume of the spills amounted to 6 m³.

Safety of people and the environment is the highest priority for chemical companies. One indispensable factor is an effective safety management system that can also identify, assess, and control risks in the production process using appropriate measures, so as to reduce or even entirely avoid these risks. For this reason, Clariant, in close cooperation with the European Process Safety Centre (EPSC), has actively supported the development of a simple and representative measurement system, also with the aim of establishing an industry-wide standard.

This system records and systematically assesses smaller substance and energy releases in order to avoid major incidents. These incidents, or Process Safety Events (PSEs), are categorized according to criteria stipulated by the European Chemical Industry Council (Conseil Européen des Fédérations de l’Industrie Chimique, Cefic) and the International Council of Chemical Associations (ICCA). They are a component of the ongoing improvement procedures for the process safety of the production systems. In 2018, the process safety event rate at Clariant increased from 0.35 to 0.46, according to ICCA criteria. However, if Clariant continued to use the Cefic reporting criteria, the rate for 2018 would have been 0.35. Due to the change in our PSE reporting criteria starting in 2018, many training sessions and webinars were conducted, which impacted the reporting culture, increasing the total number of reports in 2018. We expect this trend to continue in the following years. The rate denotes the number of incidents per 200 000 working hours.

306-4 Transport of hazardous waste

Hazardous waste transport is done by certified companies fully compliant with all requirements of transport and waste legislation. It is important to know from which plant the waste originates, which amounts accrue during what period, what properties the waste components have, whether the waste has to be classified as hazardous, and how it can be recycled or disposed of.

GRI 307:2016 Environmental Compliance

307-1 Non-compliance with environmental laws and regulations

Clariant’s operative business adheres strictly to the company’s internal control guidelines for the area of »environment, safety, and health« (ESH). This directive aims to ensure that there are no breaches of internal and external regulations. As a result of these efforts and stringent voluntary commitments, Clariant was not aware of any cases in 2018 in which it was accused of not having acted essentially in compliance with laws, regulations, and voluntary codes of practice in connection with nature and environmental protection. As such, Clariant did not have to pay any substantial fines or non-monetary penalties for non-compliance with environmental laws and regulations.

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Empowered, motivated, and highly skilled employees that create value for the company and its stakeholders are essential to Clariant’s long-term success. Clariant is thus striving to build a reputation as a preferred employer to attract, engage, develop, and retain the right people with the right skills. Human resource practices such as recruiting, learning, and performance management are central for all Business Areas and regions along Clariant’s entire value chain. The recruitment and onboarding processes need to be efficient so that new employees can quickly contribute to the implementation of the Business Units’ strategies. Skills development is also imperative to remain agile and drive innovation in fast-evolving markets that continuously demand new competencies. Lastly, employee engagement and performance management are critical to retain talent and motivate employees to implement Clariant’s business strategy and contribute to a high-performing company.

103-2 The Management Approach and its components

Within Clariant, engaging and developing talent is a shared responsibility of all management functions. Clariant’s leaders are key in shaping a high-performance culture. They are supported by Group Human Resources, which has established strong processes for talent acquisition, onboarding, performance management, and talent management in all regions. Globally, Clariant’s operational and strategic human resources departments comprise 209 employees dedicated to talent attraction and development. Clariant’s People Excellence strategy ensures that the different employee initiatives are closely linked to business needs and implemented effectively and efficiently.

For the management of Talent Attraction and Development, Clariant abides by its Global Talent Acquisition Policies (Recruitment Policy, Global Recruitment Agency Policy, Onboarding Policy, and Employee Referral Policy). The policies clarify and specify the roles and responsibilities of the hiring manager and recruitment and HR personnel to ensure an efficient, effective, and professional talent acquisition process. More specifically, highly trained talent acquisition teams partner with the Business Units to source and select the best talent. Employer branding programs create awareness in the market and positively influence potential candidates. Moreover, line managers are trained in the »License to Hire« program to ensure they make the right hiring decisions.

With regard to capability development, Clariant creates an inspiring learning environment and promotes a learning culture. It offers structured capability-building programs, which entail defining required competencies per job family, assessing these competencies, and creating individual development plans. The Clariant Academy encompasses all global learning offerings designed to support Clariant’s strategy and to promote common language and values across the organization. Learning programs within the Clariant Academy are differentiated by job family and management level. A nomination process for the Clariant Academy programs ensures that all relevant employees participate in the training programs designed for a specific target audience. Besides the Clariant Academy, trainings, social learning (e.g., learning communities, mentoring, and peer coaching), and on-the-job learning opportunities (e.g., job rotation and work shadowing) are offered. Dedicated regional learning managers help identify the right learning solution for each employee and foster peer and cross-level learning by facilitating workshops with management teams. Clariant’s support of its employees’ education is described in global and regional learning policies, which include budget frameworks for trainings and study assistance guidelines.

The objective of talent management is to have a consistent and structured pipeline of functionally and vertically deployable talent for each management level. This process entails systematically identifying, developing, and retaining talent and provides local, regional, and global talent pools to ensure successful short-, mid-, and long-term succession planning and availability of candidates. For many years, Clariant has filled at least 80% of open positions at management level with internal candidates. Dedicated regional and local talent managers lead talent potential reviews, create individual development plans with Clariant’s talent, and participate in internal placement decisions. They also organize so-called »talent engagement sessions« in order to give internal talent visibility and exposure to senior managers.

In 2018, all Business Units implemented a new People Excellence Strategy. It specifies the management requirements needed for the successful execution of the corporate strategy and breaks down business challenges into people-related measures that address existing shortcomings in the most focused manner. The People Excellence Strategy thus helps line managers define how to best execute their business strategy. Moreover, several new training programs were rolled out or further developed across the organization to strengthen innovation, commercial, technical, and leadership competences across functions and levels.

Read more: Integrated Report, Talent Attraction and Development

103-3 Evaluation of the Management Approach

The feedback collected after each training course is systematically reviewed and required amendments are performed in order to ensure high-quality training courses. In 2018, the average feedback score for Clariant Academy trainings was 3.6 (with 3 being fully satisfactory and 4 superior). Individual training feedback scores ranged from 2 to 5. For selected programs of the Clariant Academy, feedback on the mid-term impact is collected from participants.

For instance, for the Competency Management Training, 48% of participants agree or strongly agree that they have been able to apply the information learned to their day-to-day work and 44% have been able to apply more than 75% of the information learned.

GRI 404:2018 Training and Education

404-1 Average hours of training per year per employee

404-2 Programs for upgrading employee skills and transition assistance programs

Offerings of the Clariant Academy programs included so-called leadership training programs and sales competencies to enhance communication and presentation skills, while local offerings comprised training programs with an emphasis on language courses. Employees also attended courses in environment, safety, and health (ESH). Other training programs also covered topics such as technical courses and product-related training programs.

Training at the academy takes place within a modularly configured program that accurately reflects operating procedures. The training measures start with basic training, which is completed mostly on a theoretical level, and also include the categories of equipment and procedural training. This is followed by plant training where Clariant’s employees are educated about new equipment. The in-services conclude with process training, where employees deal with all the processes that are potentially significant in their daily jobs.

Clariant also offers local trainings for employees who are close to retirement in order to prepare them for their new stage in life and to facilitate effective knowledge transfer.

404-3 Percentage of employees receiving regular performance and career development reviews

One of the aims of the »360-degree feedback process« and the annual »performance dialog« is to identify the ongoing development potential of all employees (management position holders and people in downstream levels) and to agree on appropriate development goals. The performance-management process comprised 819 people in the highest five management levels (ML) by the end of 2018, which corresponds to approximately 5% of the total work force, as well as 9 531 people in the downstream levels (53% of employees). This corresponds to an overall percentage share of 58% of all employees. Over the next few years, this process will be expanded to encompass the majority of employees at lower levels.

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Clariant’s vision is to be the globally leading company for specialty chemicals and to stand out through above-average value creation for all stakeholders – customers, employees, shareholders, suppliers, society, and the environment. As the company’s ability to realize this aspiration is based on above-industry growth, profitability, and Total Return to Shareholders (TRS), Clariant defined growth and profitability as two of the five pillars of its Group strategy and set related financial goals.

Read more: Integrated Report, Strategy

103-2 The Management Approach and its components

Value creation at Clariant is based on an elaborate business model that converts diverse resources into valuable products and solutions that benefit all stakeholders. At the core of this transformation are three value-creation phases, Idea to Market, Market to Customer, and Customer to Cash, which are underpinned by Clariant Excellence initiatives (Clariant Innovation Excellence, Clariant Commercial Excellence, Clariant Operational Excellence). These help the Business Units deliver innovative and sustainable products and solutions that address pressing customer needs in a safe, reliable, and efficient way, building the basis for business growth and profitability.

Achieving growth and profitability is a shared responsibility of all management functions. However, the overall direction of the Group is defined by Clariant’s Board of Directors. The Board reviews and further develops the company’s strategy once a year during a two-day Board of Directors meeting. The Board has delegated the executive management of the Clariant Group to the Executive Committee, which consists of the CEO, the CFO, and two other members. The Executive Committee is mainly responsible for implementing and monitoring the Group strategy for the financial and operational management of the Group, and for continuously improving the efficiency of the Group’s structure and organization.

Read more: Integrated Report, Strategy

Read more: Corporate Governance Report

103-3 Evaluation of the Management Approach

Clariant’s Strategic Management Process (SMP) ensures that the Group strategy is executed at the level of each Business Unit, all of which collectively comprise Clariant’s four business areas. A strategy update in 2018 focused on a major portfolio upgrade designed to capture a significant collaboration opportunity with SABIC in the area of high-performance materials. This portfolio upgrade allows Clariant to focus even more on customer-specific, technologically advanced applications with high growth and high value-creation potential. This enhanced growth profile of the Group is expected to enable Clariant to reach sales growth of 5–6% annually, and to increase the EBITDA margin to approximately 20% by 2021.

The SMP discussions with each Business Unit include growth and profitability targets at the segment level as well as for the whole Business Unit. From these discussions, Clariant derives growth and profitability objectives for its four Business Areas. For Care Chemicals, Clariant expects an annual sales growth of 5–7% and aims to achieve an EBITDA margin of 19–21% by 2021. For Catalysis, the expected annual sales growth rate is 6–9% and the EBITDA margin to be achieved by 2021 amounts to 26–30%. The respective targets for Natural Resources are set at 6–7% and 16–17%. From the new Business Area High-Performance Materials, which will comprise the Additives business, high-value Masterbatches, and high-performance thermoplastics, Clariant expects an annual sales growth rate of 6–9% and an EBITDA margin of 24–25%.

Read more: Integrated Report, Financial Capital

GRI 201:2016 Economic Performance

201-1 Direct economic value generated and distributed

Read more: Integrated Report, Summary on Performance, People, Planet

201-2 Financial implications and other risks and opportunities due to climate change

Clariant discloses details about the risks and opportunities posed by climate change through a number of sustainability reporting programs, such as the Carbon Disclosure Project (CDP). These include a detailed description of the risks and opportunities per type of impact (regulatory, reputational, and physical parameters) as well as the methods used to manage the risks.

Main risks driven by changes in regulation:

• Climate and energy policies leading to increased fuel/energy taxes and regulations (e.g., cap and trade schemes and environmental taxation).

Main opportunities driven by changes in regulation:

• Innovation and R&D focus on low-carbon products and differentiation through a more sustainable product portfolio.
• Increased demand for solutions related to megatrends such as low-carbon mobility, recycling, food security, and urbanization.

Main risks driven by changes in physical climate parameters:

• Change in precipitation extremes and droughts (e.g., water scarcity), induced changes in natural resources, tropical cyclones (hurricanes and typhoons), impact on infrastructures, and/or impact in the supply chain.

Main risks driven by reputational considerations:

• Shift in consumer preferences and increasing customer demand for climate-friendly products, and changing customer behavior and higher awareness of products with less impact on climate and other environmental aspects.
• Stigmatization of a sector or of a company related to brand image, community opposition, and negative media coverage.

Main opportunities driven by reputational considerations:

• Responsible behavior qualifies Clariant for investors that focus on sustainable investments.
• Customer engagement, stakeholder dialog, community initiatives, and overall positioning of Clariant as a credible sustainability leader.

201-3 Defined benefit plan obligations and other retirement plans

Pension and other employee benefit plans are monitored globally by Clariant for relevance, compliance, costs, and suitability as a valuable employee benefit. Clariant is aware of the significance of these pension and other benefit plans as a lever for retaining staff. These plans are regularly matched with benefits in the respective countries in order to be in line with current practices. Before every adjustment, Clariant carefully examines the impact the changes have on the employees and, if necessary, directly consults with them.

Clariant offers retirement or pension plans as a benefit to protect employees after completing their active working life and to enable them to actually retire. Clariant aims to offer benefits that are competitive in the local markets; existence and type of retirement or pension plans differ widely from country to country based on local legislation, social security systems, and market practices.

Read more: Financial Report, Retirement benefit obligations

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

In Clariant’s view, digitalization is a megatrend with the potential to reshape many areas of the chemical industry. While some of the changes may only be visible in hindsight, Clariant is already adapting to gradual developments that could potentially impact the business.

Digitalization offers many opportunities and challenges for Clariant. In the area of innovation and marketing, digitalization allows Clariant to anticipate and capture market trends, for example, by employing predictive data analytics. Speed and quality of new product developments and related applications can be increased by using data science and high-throughput experimentation. This is particularly important for customers that are exposed to fast-changing demand due to the increase of online sales. Clariant also predicts an evolution in the buying behavior of demographically younger buyers who are used to accessing information at any time. This could lead to a higher interest in buying and selling activities on transparent Internet platforms. Even though the benefit and impact of platform economics cannot yet be determined, Clariant closely monitors developments in this field. Digitalization also creates an opportunity to enhance Clariant’s solution-centric go-to-market approach by offering additional digital insights and services to customers. In particular, the combination of chemical knowledge and data science enables Clariant to offer completely novel services. They can be offered to the market as stand-alone »software as a service« or as part of regular service packages.

Regarding production and supply chain management, the combination of traditional automation processes and data science is expected to have a considerable impact. Predictive process and quality control have the potential to increase yields, lower energy consumption, and avoid bottlenecks in production, leading to increased speed and quality, as well as reduced costs.

In procurement, Clariant is observing promising impacts regarding price predictions and the planning of material flows. Data-driven tools are making it possible to exploit price advantages, and improved demand predictions and risk management are enabling strategic buying. In addition, automated e-auctions are expected to lower raw material prices, as Clariant can easily compare a large number of offers from suppliers, making the selection process more competitive. Clariant considers displaying digital material flows as an opportunity to increase supply stability and enhance monitoring of sustainability factors in the supply chain. Predictive planning tools are expected to lower net working capital by improving multi-layer inventory and increase the On-Time/In-Full (OTIF) rate.

In addition to these high-impact areas, digitalization may also further streamline services and digitize processes to improve efficiency and lower costs, for example, in finance or service organizations.

103-2 The Management Approach and its components

To systematically explore and capitalize on the opportunities of digitalization, Clariant applies a two-fold approach. First, it aims to mainstream digitalization throughout the company by working with all Business and Service Units to gradually improve processes and offerings to the customers. Second, it launched a dedicated cross-functional and collaborative program, Digital4Clariant, at the end of 2016. The program established three core workstreams that pursue the following objectives:

1. Find new business models around digital offerings.
2. Improve Clariant’s operations with digital means (Digital@Operations).
3. Utilize the potential of big data and advanced analytics.

Clariant realized that the early involvement of security, legal, and tax experts is crucial to speed up digital projects. Consequently, Clariant instituted three supporting workstreams concerning cybersecurity, legal, and tax issues.

Clariant’s digital innovation approach is inspired by rapid innovation methods widely used in the technology sector. It incorporates elements of design thinking, agile project management, and SCRUM. To make sure that new solutions satisfy customer needs, Clariant starts its innovation sprints with customer interviews and continuously refines ideas based on customer feedback. As a principle, ideas are also rigorously sorted, embracing the spirit of fail fast, fail early, and fail cheaply.

In close collaboration with Clariant Operational Excellence (COX), Digital@Operations systematically identifies improvement potential in the operational processes and implements corresponding projects, particularly along six clusters considered relevant for Clariant: predictive process and quality control, predictive maintenance, digital material flow, connected workforce, retrofitting, and robotics.

Digital Innovation Cycle

To exploit digitalization’s full potential, Clariant also plans to adjust its current IT and support functions and further develop internal digital skills beyond classical IT capabilities. Enhanced support services, which include legal advice on data protection and intellectual property, employer branding to attract digital talents, and capacity-building of digital skills among existing staff, will help the businesses navigate in the digital world.

Read more: Integrated Report, Digitalization

103-3 Evaluation of the Management Approach

Digital4Clariant is supported by top management. All workstreams and projects under Digital4Clariant have steering committees, typically consisting of the sponsoring member of the Executive Committee, the Head of the involved Business Unit, a member of the Business Unit’s Management Committee, the Chief Information Officer, and the Head of Digital4Clariant. The committees meet regularly to assess the progress of each project and decide on their continuation using a set of digital key achievement and performance indicators. These indicators vary depending on the type and maturity of each workstream or project. They range from standard financial KPIs to indicators that reveal the product/market fit, such as the number of returning/paying visitors to a platform or the customer lifetime value to customer acquisition cost ratio. They are complemented by indicators that reflect sound customer-centric project management, such as the number of customer and industry expert interviews conducted, the number of pilot customers in the incubation phase, and the number of full-time equivalents assigned to a sprint.

The biggest potential for growth and cost savings was identified in the field of data science, leading Clariant to establish a dedicated competence center for data science that will focus on data intelligence and process simulations as part of Group Process Technology. In conjunction with Clariant’s high-throughput experimentation team, the new data science center will increase the speed and quality of both digital and non-digital product and service developments. The influx of new ways of working in digital and innovation teams in general have also impacted other areas. Agile work organization in sprints is expected to gain importance throughout the company.

GRI 103:2016 Management Approach

103-1 Explanation of the material topic and its boundary

Increasing awareness of planetary resource limits has highlighted the circular economy as a necessary alternative to the current linear economic model. The circular economy is driven by policy objectives linked to climate change, environmental protection, and resource efficiency, as well as resource scarcity. Policy examples include the European Union Plastic Strategy and the waste ban in China. In addition, the circular economy promotes the opportunity to reinvent today’s unsustainable take-make-dispose economy, and its associated production and consumption patterns.

Clariant is committed to supporting the transition toward a circular economy and is engaged in projects and activities that promote a more resource-efficient and sustainable society. Unnecessary material losses throughout the life cycle of products negatively impact business competitiveness and the environment. In contrast, the ongoing circulation of materials and products benefits both business and the environment. A circular economy has the potential to support additional business opportunities and product or service developments given emerging regulations and customer markets that are advancing on circular business models.

Within Clariant’s operations, opportunities for advancing the circular economy include energy, materials, and other resources that affect operational efficiency and costs. Company efforts in the field are closely linked to its environmental-protection and resource-efficiency objectives. The circular economy goes beyond Clariant’s own operations, however, and includes analyzing the life cycle of products and business models to support a more circular society that uses less, while reusing and recycling more. Supporting a circular economy thus has a strong value-chain orientation, seeking to connect waste-material loops and linking directly to innovations driven by sustainability considerations.

Read more: Management Approach, Product Stewardship/Sustainable Chemistry

103-2 The Management Approach and its components

Opportunities offered by an increasingly circular economy are evaluated across several company functions. Among them are Corporate Sustainability and Regulatory Affairs (CSRA), Group Technology and Innovation (GTI)—especially its New Business Development function (NBD)—as well as the different Business Units.

Clariant’s contributions to a circular economy are manifold. They include continuously increasing eco-efficiency of production processes, choosing waste and renewable resources instead of virgin or fossil resources where suitable, process redesign, reducing water and energy use, closed-loop recycling on sites, industrial symbiosis, and value-chain clusters. The optimization is further driven by the 2025 environmental targets, which are being reported under the topic Environmental Protection and Resources.

Read more: Management Approach, Environmental Protection and Resources

Promoting a circular economy is fueled by the development of new products and technologies. Clariant’s wide range of innovative detergents, stabilizers, pigments, and masterbatches supports obtaining higher-value plastics from recycling streams, while other products are focused on increasing durability of materials.

Read more: Integrated Report, Circular Economy

103-3 Evaluation of the Management Approach

Clariant reviews risks and opportunities associated with the circular economy as part of the corporate strategy management process. This structured approach further outlines, anchors, and advances the topic within Clariant’s Business Units.

GRI 301:2016 Materials

301-1 Materials used by weight or volume

301-2 Recycled input materials used

Clariant tries to use recycled materials in production wherever possible. However, the percentage is low due to the nature of the production process, as recycled raw materials often cannot be used due to purity or safety standard requirements.

301-3 Reclaimed products and their packaging materials

When supplying customers, Clariant provides mostly reusable packaging, which can be returned to Clariant for cleaning and reuse. Other products are shipped as bulk goods in tank trucks and rail tank cars or silo trucks. To the extent possible, non-reusable packaging is recycled for material purposes or, especially in the case of hazardous materials, used to generate energy.