Operating an Integrated Business Model

This chapter provides an in-depth overview of Clariant’s integrated business model. It presents the company’s holistic approach to creating value, providing an overall understanding of the different aspects of Clariant’s business, which are depicted in more detail in the subsequent sections of this report and in the Review on Performance, People, and PlanetPerformance, People, and PlanetComprises a discussion of Clariant’s material topics previously provided in the Multicapital Review.View entire glossary . The chapter also explores the company’s external environment and its organizational structure, two important parameters affecting business activities. In addition, it portrays Clariant’s core processes for creating value.

A holistic approach to value creation

Long-term value for all stakeholders

Clariant’s business model reflects how the company creates long-term value for all stakeholders – customers, employees, shareholders, and the environment, as Figure 003 depicts. It offers a detailed overview of the company’s multidimensional approach to value creation, covering both tangible and intangible, financial and non-financial aspects of the business.

External environment

Clariant’s integrated business model provides a strong foundation for the company to successfully navigate the current market dynamics in the specialty chemicals market, including the ongoing challenges posed by the COVID-19 pandemic, the war on Ukraine, and the resulting energy crisis. Read more in External Environment

Core processes for value creation

Idea to MarketIdea to MarketIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Idea to Market involves scouting global trends, identifying business opportunities, exploring unmet customer needs, developing products, as well as commercializing and monitoring business performance. It is essential for developing a well-filled product and service pipeline that delivers innovations to address customer needs.View entire glossary , Market to CustomerMarket to CustomerIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Market to Customer includes assessing market attractiveness, developing clear value propositions, and capturing the value created through the relationship-building and sales processes. To achieve a seamless customer experience, these steps are well connected and focused on customer needs.View entire glossary , and Customer to CashCustomer to CashIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Customer to Cash balances supply and demand, optimizing sourcing for spend effectiveness, monitoring production efficiency, and delivering finished goods to customers on time and in full to achieve safe, reliable, and efficient operations that support profitable growth.View entire glossary – these are the three value-creation processes at the core of Clariant’s business model. By turning customer needs into innovative and sustainable solutions, the company creates value for all stakeholders. Clariant’s Innovation Excellence, Commercial Excellence, and Operational Excellence approaches support these processes.

• Idea to MarketIdea to MarketIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Idea to Market involves scouting global trends, identifying business opportunities, exploring unmet customer needs, developing products, as well as commercializing and monitoring business performance. It is essential for developing a well-filled product and service pipeline that delivers innovations to address customer needs.View entire glossary : This process involves scouting global trends, identifying business opportunities, exploring unmet customer needs, developing products, as well as commercializing and monitoring business performance. It is essential for developing a well-filled product and service pipeline that delivers innovations to address customer needs. Read more in Core Processes for Value Creation
• Market to CustomerMarket to CustomerIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Market to Customer includes assessing market attractiveness, developing clear value propositions, and capturing the value created through the relationship-building and sales processes. To achieve a seamless customer experience, these steps are well connected and focused on customer needs.View entire glossary : This process includes assessing market attractiveness, developing clear value propositions, and capturing the value created through the relationship-building and sales processes. To achieve a seamless customer experience, these steps are well connected and focused on customer needs. Read more in Market to Customer
• Customer to CashCustomer to CashIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Customer to Cash balances supply and demand, optimizing sourcing for spend effectiveness, monitoring production efficiency, and delivering finished goods to customers on time and in full to achieve safe, reliable, and efficient operations that support profitable growth.View entire glossary : This process balances supply and demand, optimizing sourcing for spend effectiveness, monitoring production efficiency, and delivering finished goods to customers on time and in full to achieve safe, reliable, and efficient operations that support profitable growth. Read more in Customer to Cash

Purpose-led strategy with ambitious financial and non-financial targets

Based on Clariant’s purpose »Greater chemistry – between people and planet,« and based on its vision, mission, and values, Clariant developed a new strategy. With this purpose-led strategy and the related financial and non-financial targets, the company is committed to creating value while striving to achieve top-quartile performance compared to specialty chemical peers. Read more in Purpose-Led Strategy

003BUSINESS MODEL

Input

Resources and relationships that Clariant draws upon for its business activities

Performance

160

R&D spend in CHF m

> 330

Active innovation projects

> 65

Scientific collaborations

2 258

Raw material procurement in CHF m

3.50

Raw materials procured in m t

70

Production sites

89 %

Raw material spend covered by sustainability evaluations

People

1 418

New employees hired

114 508

Training hours

Planet

680

Energy consumption in kWh/t production

2.24

Water intake in m³/t production

Output

Results from Clariant’s business activities

Performance

5 198

Sales in CHF m

24 %

Growth in local currencies

15.6 %

EBITDAEBITDAEarnings before interest, taxes, depreciation, and amortization.View entire glossary margin

1.5 %

Return on invested capital (ROIC)

> 5.5 % ¹

Growth through innovation

> 4 300

Patents at year-end

3.8

Production volume in m t

• ¹Contains the contribution to growth of the innovation portfolio from both Top Line Innovation and Life Cycle Innovation. Potential cannibalization of existing sales by Life Cycle Innovation has not been excluded.

People

11 148

Staff in FTEs at year-end

0.24

Lost-time accident rate (LTAR)

Planet

0.64

Scope 1 & 2 GHG emissions in m t CO₂e¹

1.62

Wastewater in m³/t production

2.58

Scope 3 GHG emissions for purchased goods and services (cat. 1) in m t CO₂e

• ¹This includes 0.02 m t of biogenic CO₂ emissions

Stakeholders

Clariant constantly engages with its stakeholders to stay attuned to their needs and gain feedback on how to best create value for them.

Impact on global sustainable development

Clariant’s contribution to global sustainable development is further illustrated in the chapter Contributing to the SDGs

Read more here

Impact on global sustainable development

In addition to Clariant’s strategic objectives, the company follows the objectives set by the United Nations Sustainable Development Goals (SDGs). In relation to the SDGs, Clariant evaluates the positive and negative impacts of its products and services, operations, value chain, corporate citizenship activities, and collaborations. Read more in Contributing to the SDGs

While contributing to all 17 SDGs in varying degrees, Clariant identified six priority SDGs for the company: SDG 3 »Good Health and Well-being,« SDG 7 »Affordable and Clean Energy,« SDG 9 »Industry, Innovation, and Infrastructure,« SDG 12 »Responsible Consumption and Production,« SDG 13 »Climate Action,« and SDG 17 »Partnerships for the Goals.«

Value creation in the financial year

With customer-oriented products and solutions, Clariant and its business areas created value for the company and its stakeholders in the 2022 financial year, enhancing Clariant’s growth and profitability. Read more in Value Creation

Reviewing value creation

To measure and track the financial and non-financial value that Clariant creates for all stakeholders, the company monitors key performance indicators, including the ones mentioned under »Inputs« and »Outputs.« These indicators are associated with Clariant’s material topics, which were identified through a comprehensive materiality assessment.

Read more in our Review on People, Performance, and Planet

Q&A

Chris Hansen

Chief Corporate Development Officer

Member of the Executive Leadership Team

You started as Chief Corporate Development Officer in July 2022. What does your role comprise, and what are your priorities?

I am responsible for Corporate Strategy, Procurement, and for our Engineering & Process Technology department. Each of these functions of course has its own priorities. But at an overall level, my priorities are threefold. First, I want to drive our company’s sustainability transformation forward at a strategic level, ensuring that we define and execute initiatives that move the needle and make a real impact. Second, I will continue to scout for and realize bolt-on M&A opportunities to complement our portfolio and capabilities. My third priority lies in communicating, exemplifying, and cementing our new Clariant values and the related behaviors and capabilities throughout my teams and the broader organization, in particular the customer focus.

What are you most proud of when you think about Clariant?

Clariant has a true purpose, a purpose that aims high yet is actionable and practically meaningful. »Greater chemistry – between people and planet« stands for our ambition to protect the planet and the living standards of current and future generations – jointly with our customers. Through our actions, innovations, and climate-friendly products, we make a real difference.

You have worked for Clariant for 14 years now. What have been your best experiences to date?

I have spent most of my years at Clariant running actual business operations. We give our business leaders a lot of freedom to shape and decide how to do things, and I have had great fun working with teams all over the world in trying new things, failing and - luckily - mostly succeeding. It is always a great feeling when our value proposition convinces a customer and we gain a business in a true win-win situation. I find the biggest satisfaction of all, though, in seeing how team members learn and develop as leaders and individuals, and I am happy to have formed a number of close friendships over the years.

Clariant Excellence was launched more than a decade ago. How do you see the Excellence culture in Clariant today?

Clariant Excellence and the culture of continuous improvement is strongly anchored throughout our company today, thanks to excellence initiatives launched, rolled out, and sustained over the years. We have reached a maturity level that has allowed us to roll back the corporate teams to a bare minimum and to continue the implementation within each business unit and location. This means we can focus more senior management attention on what we do versus how we do it, that is, on the strategic direction.

External environment

In 2022, several external developments had a significant influence on Clariant’s business. In particular, the war on Ukraine and the resulting sanctions on Russia led to high energy prices and exacerbated supply chain issues. Despite this challenging situation, the industry continues to focus on sustainability, particularly in the context of energy security and GHG emission reduction. China’s zero-COVID policy further strained supply chains in and out of China and had a negative impact on Chinese growth.

Global economic setting

In the first half of 2022, demand remained quite strong as consumers continued to spend after COVID-19 restrictions were removed. There was a shift from spending on goods to services and leisure as consumers were free to resume their normal lives in most regions. The high energy prices resulting from the war on Ukraine and continuing supply chain issues in certain value chains led to significant inflationary pressures at a time of good demand. As wages have not kept pace with inflation, consumer spending power has been reduced. At the same time, central banks have tightened monetary policy and raised interest rates to reduce demand and control inflation. In the second half of 2022, this led to a weakening of demand. At the same time, many supply-chain issues eased, and logistic costs between regions fell. Inventory levels reached or exceeded normal levels. At the end of 2022, industrial demand was relatively weak, although inflation remained high and central banks continued to raise interest rates.

Impact on the chemical industry

Typical raw materials for the chemical industry include crude oil and derivatives, natural gas, metals, and minerals. Supply shortages arising from the war on Ukraine caused a shortage in some of these primary products, particularly in Europe, with prices rising significantly. In the first half of 2022, continuing strong demand for chemical products and restocking allowed the high prices achieved in 2021 to be maintained, together with strong sales and margins across the chemical industry, with capacities often well utilized. As the year progressed and demand weakened, certain sectors of the industry, such as base chemicals, saw weakening prices and margins. This was less true in the specialty chemical industry, where sectors such as care chemicals and oilfield services, as well as products for the recovering automotive segment, experienced continued or increasing demand.

004THE ROLE OF SPECIALTY CHEMICAL FIRMS IN THE CHEMICAL INDUSTRY VALUE CHAIN

Even under these dynamic trading conditions, customers and suppliers continued to develop their sustainability roadmaps, with alternative future feedstocks and sustainable products and solutions looking more attractive in both sustainability and economic terms.

COVID-19 challenges mainly limited to China

In 2022, the largest remaining impact of the COVID-19 pandemic was in China due to the continued zero-COVID policy. Both the supply side and the demand side were negatively affected by local lockdowns. In some markets, such as base chemicals, where significant new capacity has been commissioned in recent years, the resulting overcapacity led to price and margin pressure and some localized temporary shutdowns.

Focus on sustainability and performance

Globally, the chemical industry is one of the largest consumers of energy. This results in significant contributions to global greenhouse gas emissions. Chemical companies also use oil and gas as feedstock and handle hazardous materials. While this confers great responsibility, it also creates opportunities for companies to become industry leaders in sustainable development, capturing competitive advantage in the process.

Despite the challenges from the energy crisis, the trend toward increased sustainability continued in 2022 with new proposed legislative initiatives and increasing customer and investor focus on the topic. Chemical companies are expected to substitute unsustainable products, while offering innovations for a low-carbon, circular economy. Consequently, further companies set new sustainability targets and announced sustainability initiatives.

Mounting importance of the Chinese market and industry

Despite the issues resulting from the zero-COVID policy, China remains the world’s largest market for chemical sales. It accounts for about 35 % of the global specialty chemical markets. China’s current five-year plan is focused on innovation as the core concept to drive the country’s modernization, promoting high-end, intelligent, and green production. This continues to provide interesting opportunities for Clariant and others.

Local presence on the ground in China has become even more important in the current environment of constrained logistics, trade tensions, and COVID-19 restrictions. This applies to manufacturing, technical support, products, and commercial management. Therefore, chemical companies increasingly seek to be close to their Chinese customers and partners and to work locally.

Despite the supply and demand issues in 2022, Chinese demand growth continues to outperform other regions, likely increasing its relative market share compared to Europe and the US again in 2022.

Organizational structure

Clariant is headquartered in Muttenz, Switzerland. In the 2022 financial year, Clariant’s continuing operations comprised five business units: Industrial and Consumer Specialties, Catalysts, Oil and Mining Services, Functional Minerals, and Additives. In this Integrated Report 2022, the continuing operations are reported in three business areas: Care Chemicals (including Industrial and Consumer Specialties), Catalysis (including Catalysts), and Natural Resources (including Oil and Mining Services, Functional Minerals, and Additives). The Business Unit PigmentsPigmentsPigments are substances used for coloring; they are used in a technical manner, for example in the manufacture of dyes, varnishes, and plastics. In 2020, Clariant launched the divestment process of its Pigments business, which was completed on 3 January 2022.View entire glossary was divested on 3 January 2022.

006BUSINESS AREAS

In 2022, the organizational structure further comprised nine service units and eight corporate functions. The responsibilities of the Executive CommitteeExecutive CommitteeUntil 30 June 2022, the Executive Committee was mainly responsible for implementing and monitoring the Group strategy, for the financial and operational management of the Group, and for the efficiency of the Group’s structure and organization. Effective 1 July 2022, the Executive Committee was replaced by the Executive Steering Committee (ESC).View entire glossary included the financial and operational management of the Group.

Change in organizational and leadership structure

In June 2022, Clariant announced changes in its organizational and leadership structure. This new structure aims at reducing complexity, speeding up decision-making, increasing customer proximity, strengthening governance and diversity, and increasing accountability. By making these changes, Clariant intends to support cultural transformation and the implementation of the purpose-led growth strategy. The reorganization does not impact the financial reporting until 1 January 2023.

Business units

Effective 1 January 2023, Clariant reduces the number of business units from five to three.

• Business Unit Catalysts comprises the former Business Unit Catalysts and the former Business Line Biofuels & Derivatives
• Business Unit AdsorbentsAdsorbentsUsually solid substances which are able to selectively accumulate certain substances from adjacent gaseous or liquid phases.View entire glossary & Additives comprises the former Business Units Functional Minerals and Additives
• Business Unit Care Chemicals comprises the former Business Units Industrial and Consumer Specialties and Oil and Mining Services

The three new business units are now based on the nature of the business, similar market and industry dynamics, technology and applications used, as well as a comparable customer approach. As of 1 January 2023, Clariant’s external reporting will reflect this new business unit structure.

Each business unit is headed by a President. In order to increase customer proximity, Clariant will locate these Business Presidents in the regions with the highest growth potential for the respective business:

• Care Chemicals in the Americas
• Catalysts in the Asia-Pacific region
• AdsorbentsAdsorbentsUsually solid substances which are able to selectively accumulate certain substances from adjacent gaseous or liquid phases.View entire glossary & Additives in the EMEA region

Consequently, the Business Presidents also take over the role of Presidents of the respective regions.

Executive Steering Committee and Executive Leadership Team

With this organizational change, Clariant reduces the hierarchical layers and brings the business units closer to the company’s management by creating direct reporting lines from the newly appointed Business Presidents to the CEO. The newly formed Executive Steering CommitteeExecutive Steering CommitteeThe Executive Steering Committee (ESC) is authorized by the Board of Directors to steer the company. It has overall strategic and financial responsibility, including for our profit and loss statement. The ESC consists of the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), and the three Business Presidents.View entire glossary includes the CEO, the CFO, and the Business Presidents.

The Executive Steering CommitteeExecutive Steering CommitteeThe Executive Steering Committee (ESC) is authorized by the Board of Directors to steer the company. It has overall strategic and financial responsibility, including for our profit and loss statement. The ESC consists of the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), and the three Business Presidents.View entire glossary , together with the Chief Human Resources Officer, the General Counsel, the Chief Corporate Development Officer, and the Chief Technology & Sustainability Officer, form the Executive Leadership TeamExecutive Leadership TeamThe Executive Leadership Team (ELT) consists of the Executive Steering Committee (ESC) along with the Chief Human Resources Officer, the Chief Technology & Sustainability Officer, the Chief Corporate Development Officer, and the General Counsel. By bringing all key functions together, Clariant ensures fast decision-making while incorporating all internal stakeholders’ needs. The ELT supports the ESC by promoting dialogue among its members, exchange of information and enabling awareness of the Group’s environment.View entire glossary . All key functions are combined in this team to facilitate strategic decision-making. Clariant intends to further increase the speed and strength of its governance and increase accountability.

005CLARIANT ORGANIZATIONAL STRUCTURE

In addition, some functions changed their reporting lines. Among others, ComplianceComplianceCompliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with company codes and ethical business practices and behaviors.View entire glossary and Corporate Audit will uphold additional dotted reporting lines to the CEO and to the Chairman of the Audit Committee. Thus, Clariant further strengthened its culture, which is built on integrity and compliance.

Please refer to the Corporate Governance Report for information on the updated bylaws.

Core processes for value creation

The processes Idea to MarketIdea to MarketIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Idea to Market involves scouting global trends, identifying business opportunities, exploring unmet customer needs, developing products, as well as commercializing and monitoring business performance. It is essential for developing a well-filled product and service pipeline that delivers innovations to address customer needs.View entire glossary , Market to CustomerMarket to CustomerIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Market to Customer includes assessing market attractiveness, developing clear value propositions, and capturing the value created through the relationship-building and sales processes. To achieve a seamless customer experience, these steps are well connected and focused on customer needs.View entire glossary , and Customer to CashCustomer to CashIdea to Market, Market to Customer, and Customer to Cash – these are the three value-creation processes at the core of Clariant’s business model. Customer to Cash balances supply and demand, optimizing sourcing for spend effectiveness, monitoring production efficiency, and delivering finished goods to customers on time and in full to achieve safe, reliable, and efficient operations that support profitable growth.View entire glossary are essential to create value for all stakeholders. Turning customer needs into innovative and sustainable solutions is what forms the core of Clariant’s business model.

Idea to Market

Clariant believes that continuously investing in innovation is key to future success – even in times of economic uncertainty. The company’s innovation power makes it possible to deliver products with an outstanding technical performance. Innovative chemistry is one of the four dimensions of the company’s purpose-led strategy. Leveraging the deep technical knowledge and resources of Clariant’s Research & Development as well as the systematic innovation approach, Clariant develops high-performing solutions to satisfy unmet customer needs, while adding value with sustainability. To find these solutions, Clariant places a particular emphasis on the understanding of market and customer needs through collaboration and the leveraging of digitalization throughout the innovation process.

Market developments characterized by sustainability

Sustainability, another of Clariant’s four key dimensions, becomes more and more important for the entire value chain. With end customers attaching increasing importance to product ingredients and sustainability performance, these topics are critical for Clariant’s customers as well, particularly in customer-facing market segments, such as the electrical and electronics, cosmetics, and home care segments. Regulatory requirements like the European Union’s Green Deal or similar developments in other regions also highlight the fact that sustainability includes both operations as well as the transformation of the product portfolio. To achieve this, a sustainability assessment (Portfolio Value Program) is closely interlinked with Clariant’s innovation process Idea to market.

Due to its systematic link between sustainability and innovation, Clariant is in an excellent position to benefit from this ongoing shift. The business areas have launched new products in 2022 that combine excellent performance with clear sustainability benefits, representing both an improved footprint as well as handprint.

New business opportunities through circularity

Enhancing circularity is one important dimension of adding value through sustainability. Companies in the chemical sector need to find new ways to close material loops by reusing products at the end of their life cycle. This offers new business opportunities for Clariant, as the company has been developing new product portfolios and new business models systematically for many years, using redirected waste streams for new applications.

Digitalization: step-changing R&D and innovation processes

With a strong focus on sustainability-driven innovation, digital tools are powerful enablers of Clariant’s innovation strategy. Digitalization of R&D and innovation processes enables significant gains in efficiency, increasing speed and optimizing resource consumption. Data capturing, advanced data analytics, computational science, and the setup of the required IT infrastructure, combined with lab automation and high-throughput experimentation (HTE) capabilities, allow Clariant to shorten its innovation cycles and reduce the time to market. In addition, Clariant uses digital tools to develop new digital business models and explore new ways to collaborate with customers. Digital collaboration solutions have become even more important due to the COVID-19 pandemic.

Strong technology capabilities power Clariant’s research

Clariant’s innovation activities are based on a strong network of more than 785 full-time equivalents. R&D is performed in three contract R&D centers in China, Germany, and India, where several BUs are represented. Dedicated centers with a focus on bio­technology, high-throughput experimentation for catalysts and consumer care innovation complement the global network of Clariant’s R&D Centers. The R&D resources are allocated to and managed by each business unit to ensure maximum market and customer alignment. For certain technologies, which cut across several business units, the R&D is housed in the unit with the greatest need serving the other units in a contract R&D service model. The company structures its research activities along five Technology Platforms Figure 007, which collaborate closely with the business units to provide them with crucial technology expertise and innovative solutions:

• Chemistry & Materials: This Technology Platform focuses on new chemistries and formulations that meet emerging value propositions of Clariant’s customers, while providing a clear sustainability benefit. Hosted within Business Unit Industrial & Consumer Specialties, this platform serves all business units to leverage synergies.
• Biotechnology: This Technology Platform focuses on the valorization of biomass toward biofuels and biobased chemicals by supporting the Business Line Biofuels & Derivatives in further developing the EcoTain®-awarded sunliquid® technology.
• Catalysis: This Technology Platform develops innovative catalysts to increase the resource and energy efficiency of chemical processes and to reduce their environmental footprint. One specific focus of the Technology Platform lies in using greenhouse gases such as carbon dioxide as feedstock to be converted into valuable chemicals, e.g., methane and methanol.
• Process Technology: This Technology Platform focuses on process development and scale-up to commercial scale production by providing a comprehensive chemical engineering toolbox with the aim to provide safer and more sustainable high-performing manufacturing processes. Among others, the Data Science team makes use of advanced data analytics and artificial intelligence to further boost process performance.
• Emerging Technologies: This newly implemented Technology Platform focuses on emerging technology trends with high relevance for Clariant’s business units and with high transformational impact. Current activities include high-throughput experimentation, digital formulation technologies, as well as cutting-edge analytical methodologies, to widen the solution space and accelerate time to market.

007CLARIANT INNOVATION CHAIN

Centralized functions to support innovation, growth, and the sustainability transformation of the company

Group Engineering, part of the Service Unit Group Operational Excellence (GOE), is responsible for managing and executing major and complex investment projects.

The Sustainability Transformation department is responsible for integrating sustainability in the company’s products and processes. The department aligns innovation management practices with Clariant’s sustainability programs to enhance its transformation roadmap.

Sustainability Transformation collaborates closely with Global Product Stewardship, a function responsible for monitoring all global regulatory developments, evaluating the impact and risk for Clariant’s portfolio, and ensuring compliance of Clariant’s products with regulatory requirements. The close interaction between Sustainability Transformation and Global Product Stewardship allows joint action in advocacy and regulatory affairs to tackle the wave of new legislation to be expected from the Green Deal in Europe and other regions likely following. Global Product Stewardship and Sustainability Transformation are involved early on in the innovation process to assure from the beginning that the product developed will be safe and sustainable by design.

By securing Clariant’s patents and trademarks, Global Intellectual Property Management leverages the value creation from innovative products for Clariant.

Collaborations for innovation

To drive its innovation strategy, Clariant strongly relies on colla­boration across functions and businesses, as well as with external partners. The company’s Open Innovation initiative identifies collaboration partners in the private sector as well as at universities and other research institutions to source creative ideas.

Complementing its strong ties to different partner networks, Clariant strives to collaborate closely with partners in the supplier industry to develop solutions that are more sustainable when considering the entire value chain. Thus, the company’s innovation team is collaborating closely with Procurement to create opportunities for joint supplier innovation.

Market to Customer

Clariant’s success relies on its ability to understand customer needs and market trends along the entire value chain, to develop solutions that address those needs, and to capture the value created. To foster this ability, the company constantly builds and adapts its marketing and sales capabilities, optimizes its pricing, and continues to strengthen its customer relationships, supported by digitalization.

A portfolio continuously focused on sustainability contributions

Following the trends from recent years, 2022 introduced a stricter regulatory landscape, along with customers’ growing interest in sustainable products. Aligned with its purpose, Clariant decided to raise its sustainability ambitions even more. This year, the Portfolio Value Program (PVP) methodology, which is Clariant’s way of assessing the sustainability profile of the project and product portfolio, was updated, anticipating customers’ requests, upcoming legislation, and trends. Based on 39 sustainability criteria covering all life cycle phases, the assessment allows Clariant to design and promote new solutions with less footprint and a higher handprint. PVP also identifies products with an outstanding sustainability profile for recognition with the EcoTain® label. In 2022, 6 new products were awarded the EcoTain® label for an outstanding sustainability profile.

Clariant has been a front-runner in assessing the sustainability of chemical products holistically across the life cycle. Due to the rapidly evolving stakeholder expectations around sustainability, Clariant updated its PVP in 2022. The company is actively assisting the World Business Council for Sustainable Development (WBCSD) in updating its framework for portfolio sustainability assessments, serving as a member of the working group developing the methodological update based on current and upcoming initiatives. With PVP, Clariant can provide more accurate and credible information about the performance of the portfolio across all life cycle phases, which allows customers to have a deeper understanding of the effects, releases, and emissions of Clariant’s products and services, enabling the company to move toward zero pollution in air, water, soil, and biota.

Standing out in the market through specialized solutions

To meet the evolving ecological standards and its customers’ quality expectations, the company aims toward ever increasing innovation and specialization, despite the continuing commoditization, consolidation, and integration in the chemicals market. As a specialty chemicals company, Clariant is working to maintain and strengthen its market position by delivering services tailored to customer needs.

Customer satisfaction survey

Clariant conducts customer satisfaction surveys to gain insights into how its customers perceive the company’s operational, commercial, and innovation performance. The last survey in 2020 revealed improved values of the Customer Satisfaction Index, the Customer Loyalty Index, and in particular the Net Promoter Score (NPS) compared to 2018. The next survey will be conducted in 2023.

New organizational setup to challenge commercial performance

Customer centricity is important to stay ahead of the competition. That is why Clariant keeps challenging its commercial performance and reinventing its portfolios. Clariant’s Commercial Excellence approach, with its deep functional expertise, facilitates dialogue with current and prospective customers to improve commercial strategies, customer engagement, as well as sales and marketing operations. It concentrates on three areas that are central to all business units: Sales Force Effectiveness, Pricing Excellence, and Digital Solutions.

• Sales Force Effectiveness for improved marketing performance: Sales Force Effectiveness aims to increase sales performance and holistically assesses sales-related areas to identify levers for targeted improvements. In addition to its focus on improving sales force productivity, the approach includes in-depth analyses of market gaps and of the performance potential for key market segments. This provides the basis for growth analytics, including lead identifications. When analyzing short- and long-term market trends, Clariant always follows a triangulation approach, considering various sources and looking at a situation from different angles to avoid bias. Clariant continues to adjust and to differentiate customer profile development to ensure that profiles stay relevant. Observing the customer experience reveals both apparent and hidden needs of different roles at different points in time within the decision cycle and allows Clariant to tailor the value proposition accordingly.
• Mutually beneficial pricing through Pricing Excellence: By determining mutually beneficial price points, Clariant transforms value created for customers into profitable growth for the company. Value calculators that can quantify and visualize the financial benefits of using Clariant’s products as compared to the next best competing alternative are helpful to demonstrate a product’s value to customers. Clariant’s Pricing Excellence identifies intrinsic margin potential and supports the implementation of pricing, based on data lake-driven analyses. New digital pricing tools integrate both internal and external sources, such as weather influences and commodity stock prices, and accurately execute the value calculations for customers and for Clariant.
• Advancing customer relationships with digital solutions: Clariant’s commercial activities are driven by digitalization. Creating effective digital solutions starts with understanding each touchpoint along the customer journey, systematically investigating potential digital opportunities for go-to-market approaches. Clariant’s Customer Relationship Management (CRM) system continues to be developed as a core digital solution, enabling effective customer relationships and performance management.

Customer to Cash

Clariant continuously optimizes its operational chain. The company fosters process efficiency using digitalization, improves CAPEX efficiency with so-called front-end loading, and responds to customer needs and changes in market environments with agile approaches. Beyond that, Clariant strengthens its overall profitability with continuous cost savings in procurement with safe, functional operations and by further integrating sustainability into the value chain.

Connecting customers and operations with end-to-end supply chains

Clariant continues to build integrated end-to-end supply chains, connecting the commercial with the operational value chain. The company translates customer requirements into demand planning, using an agile mindset as well as digital solutions and technology, including machine learning, demand sensing, and advanced analytics.

Operational Excellence strongly anchored at every site

Launched back in 2009, Operational Excellence today is core to the DNA of every manufacturing site in Clariant. Through Lean Six Sigma and an evolving project portfolio, Clariant’s Operational Excellence efforts continue to deliver safety, productivity, and quality improvement year on year through local Green Belts and Black Belts and global coordination and steering.

Digitalization for optimal processes

Digitalization optimizes process efficiency in various ways. Digital lean methods use computer-based optimization to go beyond manual improvements of a classical lean approach. Drawing from increased data availability, this allows for digitally steered processes with advanced controls, including in-time raw material delivery, improved plant throughput, system and employee scheduling, and energy use optimization.

Front-end loading for CAPEX efficiency

For CAPEX projects, Clariant has introduced a stringent front-end loading (FEL) stage-gate process. Starting with a critical review of the business case, the process builds on thorough reviews of a project’s fundamentals before proceeding to the next stage. This avoids unnecessary spend on projects that may not be viable and fosters best possible design choices early in the process.

Well-positioned through agile approaches

Benefits for customers are the primary driver for improvements in the operational chain. To satisfy the cus­tomers’ evolving expec­tations, Clariant keeps improving its agility. The company has fully adapted agile approaches like the SCRUM methodology, which are established through team trainings and a Black Belt curriculum. To offer optimal lead times, the company fine-tunes improvements based on feedback from users along the operational chain, including controllers, procurement managers, and production personnel.

Global supply chains under pressure due to COVID-19 and the war on Ukraine

While COVID-19 keeps challenging Clariant’s supply chain management and demand planning, the war on Ukraine has added further significant risks in terms of energy and raw material availability, product delivery, and logistics performance at customer sites. This has led to targeted mitigation measures, such as investing in fuel flexibility to respond to possible shortages in natural gas availability in Europe. Moreover, flexibility and a global sourcing network that mitigates supply shortages allow Clariant to respond to these challenges quickly and effectively.

Coordinated procurement for cost efficiency

In 2022, 2 479 vendors delivered raw materials worth CHF 2.3 billion to Clariant’s continuing operations. Given these figures, aligned and coordinated procurement activities are vital for overall cost competitiveness and related efficiency. Clariant keeps a structured value chain approach, combined with improved and digitally supported processes. Thus, Procurement contributed to ensure security of supplies at competitive costs to support all business units. Additional cost efficiency measures, supported by digital enablers, resulted in further sustainable cost savings, placing Procurement in the top quartile of its industry peers.

Operational safety: a key priority

A safe operational chain is of utmost importance for Clariant as a responsible employer. It is also necessary to minimize disruptions in production. Thus, Clariant has defined a safety target of zero accidents in its operations. In 2022, the lost-time accident rate (LTAR) rose from 0.16 to 0.24 days lost per 200 000 hours of work. Because of the COVID-19 pandemic, Clariant established additional security and safety concepts to guarantee the health and safety of employees at all times.

Sustainable operations for sustainable success

Sustainability is a key priority for Clariant’s own operations, but also across its entire value chain. The company continues to increase its renewable electricity share, a cost-effective measure with positive environmental impacts. Clariant also keeps rethinking its operations in the pursuit of climate-neutral production. For instance, the design of plant construction aims at optimal energy consumption. Driven by customer demand for sustainable chemistry, Clariant considers carbon footprint and origin when sourcing raw materials. In cooperation with the business units, Clariant’s Procurement continuously seeks solutions for alternative materials.