Growth Opportunities from Sustainable Products and Solutions

There is an increasing demand for sustainability in all industries that Clariant serves. With its focus on innovative, sustainable, and bio-based chemicals, the company is in an excellent position to benefit from this ongoing shift. Its products and solutions also help customers to achieve their targets for the reduction of greenhouse gas emissions.

The activities in the 2022 business year were marked by transforming Clariant operations as well as focusing on the sustainable transformation of the Clariant portfolio. Increasing the safety and sustainability of Clariant products and solutions activates the company purpose »Greater chemistry – between people and planet.« Clariant uses its scientific expertise and innovative power to offer products and solutions for major sustainability challenges of these times, taking into account the sustainability goals of its customers as well. Developing growth opportunities from sustainable products and solutions therefore directly supports three interconnected focus themes of the purpose-led strategy: These are customer focus, innovative chemistry, and leading in sustainability.

Clariant strives to be safe and sustainable in all activities. Clariant has made it a priority to set and refine its sustainability strategic approach in 2022 with the so called »1+5 focus areas.« The Group’s efforts center around the ambition to be safe and sustainable in everything Clariant does. This comprises not only the target of zero accidents, but also the development of a safe and sustainable product portfolio. Based on this foundation, there are five key focus areas: fighting climate change, increasing circularity, fostering a sustainable bio-economy, eliminating waste and pollution from operations and value chains, and creating social value. Social value includes fostering the development of employees as well as creating value in the business networks and in society as a whole.

Like in the previous year, Clariant’s ambitions gained external recognition again in 2022 as Clariant was listed in the Dow Jones Sustainability Indices (DJSI).

001SUSTAINABILITY PRIORITIES

graphic: Clariant: circle of sustainability priorities

Management approach

The Global Innovation and Sustainability Council shapes Clariant’s agenda on sustainability-driven portfolio transformation. To emphasize the strong connection between innovation and sustainability, Clariant established a Sustainability Transformation department in 2020 with the responsibility to fully integrate sustainability in the company’s products and processes.

Since January 2021, the Service Unit Group Innovation and Sustainability (GIS) has bundled both topics under one roof to align Clariant’s innovation management practices with its sustainability programs. GIS establishes Group-wide innovation and sustainability policies, strategies, and standards and coordinates their implementation. In 2022, Clariant strengthened the integration of innovation and technology by introducing a Chief Technology & Sustainability Officer, reporting directly to the CEO. The Chief Technology & Sustainability Officer is the chair of the Global Innovation and Sustainability Council. He is not only responsible for the Sustainability Department, but also has a direct reporting line to the Innovation Champions in the business units, and through this is reinforcing steering of the innovation portfolio towards increased sustainability.

Read more about the »Innovation Champions« in the chapter Innovation & Technological Advances.
Read more about the committees in the Corporate Governance Report.

While business units remain responsible for developing new business opportunities, GIS provides service and support on best-in-class innovation approaches and emerging technologies and systematically evaluates the sustainability profile of innovation projects.

Clariant’s sustainability transformation has also become a cornerstone of Clariant’s Strategic Management ProcessStrategic Management ProcessClariant’s Strategic Management Process (SMP) is conducted by the business units in collaboration with Corporate Planning & Strategy. The SMP ensures Group level and business unit strategies are connected and are updated together. Clariant refreshed its SMP in 2021.View entire glossary (SMP), through which the company continuously monitors the performance of its management system and identifies improvement potential. The innovation and sustainability progress toward the strategic targets is reviewed on a quarterly basis in the Global Innovation and Sustainability Council (GISC), comprising the CTSO, the innovation heads of the BUs, key functions as well as the CEO and the board delegate of the Innovation and Sustainability Committee as permanent guests. The conclusions are further reported to the Innovation & Sustainability Committee (ISC), a board subcommittee tasked with the oversight of innovation and sustainability matters, including climate risk management.

GIS sustainability priorities 2022

Strengthen the focus on »1+5« sustainability key areas
Climate: release of new tool CliMate, Scope 1, 2, and 3
Bio-economy: engage with ASD/supplier evaluation
Portfolio Value Program 2.0
Internal trainings and workshop to increase sustainability understanding

Clariant’s main policies and guidelines relating to growth opportunities from sustainable products and solutions are:

Sustainability Policy
Human Rights Policy Statement
Code of EthicsCode of EthicsThe Code of Ethics is laying down Clariant’s commitments and is intended to be a guide with ethical principles and examples to enable all personnel and associated parties to act with the highest standards of integrity.View entire glossary
NDPE/Palm Oil Policy
Supplier Code of EthicsCode of EthicsThe Code of Ethics is laying down Clariant’s commitments and is intended to be a guide with ethical principles and examples to enable all personnel and associated parties to act with the highest standards of integrity.View entire glossary

Clariant engagement in the public policy dialogue

Public policies are increasingly driven by sustainability imperatives, as is the case under the Green Deal program at the EU level and in other important economies on the global stage.

As a responsible corporate actor, Clariant aims to ensure an open and transparent dialogue with policymakers, business associations, as well as NGOs, in a number of strategic policy areas, including sustainable chemistry; climate change and the energy transition; clean mobility; the bio-economy; and the circular economy.

The engagement of Clariant representatives in business associations, industry coalitions, and sustainability supports strategic alignment across the industry and provides an opportunity to exchange industry perspectives and best practices.

Acknowledging the urgency of accelerating the transition to a safer, low-carbon, and more circular economy, Clariant supports ambitious, science-based policies. Clariant is actively contributing to address regulatory and societal expectations by bringing forward innovative and sustainable solutions. It is therefore key that such solutions are supported and valorized under adequate policy frameworks.

External policy-related engagements are supported within Group Innovation & Sustainability by Government Affairs and Advocacy, as well as subject matter experts in sustainability topics and product stewardship where Clariant takes an active role in shaping sustainability tools, approaches, and policies.

To foster internal knowledge, advise on Clariant strategy, and expand the engagement with external stakeholders, the company has also established Clariant Policy Dialogues in 2021, a webinar series featuring external policy or sustainability experts (value chain players, industry associations, academics, and NGOs) presenting their perspectives and recommendations. Clariant engaged in four Policy Dialogues in 2022, covering, for example, the United States Inflation and Reduction Act (IRA), China’s race towards carbon neutrality, and the new policy incentives in support of sustainable aviation fuels (SAFs).

To enhance the sustainability dialogue with external stakeholders, Clariant co-organized a EURACTIV conference in Brussels to promote ambitious climate policies and the role of advanced biofuels in transport.

Growing demand for sustainability products and solutions

Consumer and customer demand for sustainable products increased again in 2022. In response to this development, Clariant continuously brings forward sustainable solutions that do not compromise on performance or on the company’s commitment to fulfilling customer needs. That is why Clariant’s innovation portfolio has shown particularly robust performance over the past few years and the total sales from innovation* have increased.

The share of consumers that consider sustainability criteria when buying products continues to increase. In addition, in 2022, Clariant experienced an expansion of industrial goods companies taking sustainability criteria into account in their buying decisions, most frequently to lower their carbon footprint. These trends are expected to endure in the future, driven by new disclosure obligations requiring publicly traded companies to report their carbon footprints, as well as increasing pressure to back up sustainability claims of products by robust data.

Clariant’s customers face challenges surrounding climate change, plastic waste, and overall circular economy needs. Clariant’s sustainable products help them to achieve their sustainability targets, decrease their environmental footprint, and comply with existing and anticipated policies and regulations.

Customer dialogue

To be informed and ensure regular updates, for Clariant, open communication with customers is critical to address emerging needs and trends in its business environment. This information is essential to bring forward solutions that serve customer needs. During the pandemic, Clariant’s digital capabilities and channels – including e-commerce – have become increasingly important. Customer dialogue in the past years revealed a growing demand for innovative and sustainable solutions to meet efficiency goals. Demand for products with a lower carbon footprint and favorable hazard profile is strong, particularly in emerging sectors like electric vehicles and renewable energy.

*Products five years or less after market launch

Sustainable growth strategy

As a part of Clariant’s aspiration to strive towards sustainability leadership, the target is to generate 1–2 % annual growth from sustainability-driven innovation by 2025 by developing bio-based products, enabling decarbonization, and promoting circularity. These efforts are leveraged in Clariant’s 1+5 sustainability priorities. In 2022, Clariant continued to work on reducing the use of hazardous substances and on promoting alternatives that are safer than required by regulation. This approach is particularly important in regions where regulatory action is lagging.

Clariant has set itself sustainability targets for climate protection, as well as in the areas of circular plastics and the bio-economy. Packaging has been designed to create a cleaner waste stream in existing recycling infrastructure and to create a circular economy with full recyclability. The project was awarded the Sustainable Packaging Award.

For plastic waste unsuited for mechanical recycling, Clariant launched a product line of new HDMax® catalysts and Clarit™ adsorbents to achieve cracker-compatible pyrolysis oil in chemical recycling.

Another example is the D3 Program, a coordinated effort in the Oil Services product portfolio to identify and pursue opportunities to decarbonize, densify, and detoxify products using innovative technologies. These efforts will lead to lower Scope 3 emissions from raw materials, as well as logistics, and an elimination of substances of high concern from Clariant’s products.

In view of this strategy, Clariant will continuously keep reviewing its portfolio for potential improvements and upgrades as the company had been doing over the last years already.

Portfolio Value Program (PVP)

The Portfolio Value Program (PVP) is Clariant’s portfolio sustainability assessment, based upon which Clariant evaluates the sustainability profile of its product and project portfolio and identifies sustainability improvement opportunities, best-in-class products signaled with Clariant’s EcoTain® label, sustainable and non-sustainable products, as well as transitional products. It is also a key tool to support the center sustainability focus filed from the 1+5 sustainability priorities: Safe and sustainable in everything we do.

The PVP methodology was initially developed in 2012 to support Clariant’s transition toward a more sustainable portfolio. In 2022, a new version of the PVP was launched, reflecting the company’s significantly increased sustainability ambition.

Clariant’s PVP is not only aligned with the industry standard provided by the World Business Council for Sustainable Development (WBCSD), called PSA (Portfolio Sustainability Assessment), but Clariant is also actively contributing to the update of WBCSD’s framework for portfolio sustainability assessments as member of the working group developing the methodological update according to the EU Green Deal and other initiatives.

The PVP update therefore considers new trends and stakeholders’ expectations, but also anticipates upcoming requirements, especially those deriving from the European Green Deal. It provides more accurate and credible information about the performance of the Clariant portfolio. This enables Clariant and its customers to have a deeper understanding of the products across all life cycle phases, effects, releases and emissions of products and services, enabling Clariant to move toward zero pollution for air, water, soil, and biota.

Similar to the original version, the methodology includes a twofold assessment comparing products to the current industry standard as well as to absolute sustainability criteria. Every product is thus assessed systematically across its life cycle on their impact on the environment and society, as well as its performance, using 39 screening criteria. The methodology criteria were updated to reflect the latest understanding of sustainability criteria being developed in the EU chemicals strategy for sustainability (CSS), the Safe and Sustainable by Design (SSbD) initiative, as well as in the update of the Portfolio Sustainability Assessment methodology (PSA). Clariant is actively participating in the industry discussions about implementation of these new sustainability methods and tools.

The assessments are performed by a multidisciplinary team, which allows the capture of different aspects of the products, such as product safety, sustainability contributions, comparison against next best alternative, and others. All PVP assessments are conducted in a bespoke online tool called myPVP, where historical information is also archived.

Following the launch of the PVP update, the business units, in collaboration with Sustainability Affairs, started to develop rescreening roadmaps to review all screenings already performed according to the new criteria. The portfolio is regularly reassessed according to the categorization.

In addition, in 2022 a series of training sessions was set up for different internal stakeholders, such as technical, sales, and marketing experts. Over 70 people were trained in the new methodology. A »Lunch & Learn« in November 2022 was dedicated to sharing insights into sustainability trends and how companies like Clariant navigate current challenges and keep their product portfolio fit for the future, which included an overview of the new PVP methodology for over 100 employees worldwide.

PVP steers sustainable product design and upgrades the portfolio toward increased sustainability; sustainability checks are deeply embedded in all stages of Clariant’s innovation process (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 ), with the full PVP screening being performed before commercialization.

According to the product classification, periodic rescreenings are carried out: EcoTain® products are rescreened every two years and sustainable products every five years, while Transitional and Non-Sustainable products have yearly checks.

KPMG

002TARGET CLASSIFICATION OF 2022 SALES

graphic: Clariant: sustatinability classification of clariants sales in 2022

003PVP CATEGORIZES THE CLARIANT PORTFOLIO IN FOUR CATEGORIES

graphic: Clariant: PVP four categories of PVP

004KEY FOCUS AREAS REFLECTED IN PVP 2.0

graphic: Clariant: comparison between PVP1.0 and PVp2.0

Internal labels

The best-performing products in the PVP are awarded the EcoTain® label by a panel of Sustainability Transformation, Product Stewardship, and regional sustainability functions, called the EcoTain® panel, which usually takes place four times per year. In 2022, two EcoTain® panels took place. Since the launch of EcoTain®, more than 200 products have been awarded the label. EcoTain® sales have been continuously increasing over the years. In 2022, they accounted for approximately 9 % of total sales, considering continuing business, a number which is targeted to further increase in the years to come.

In 2019, Clariant launched its sustainability designators, which enable customers to identify products with key sustainability advantages. Designators were assigned to 128 products in the reporting year. Also in 2022, customers increasingly appreciated the transparency given by the designators.

2 EcoTain Panels in 2022

Due to the methodological revision of the PVP, the number of panels was reduced to two. The first panel at the beginning of the year still related to the original methodology, whereas the second at the end of the year was based on the revised set. Resulting from these panels, five new products gained the prestigious EcoTain® Label:

Dispersogen®
H2Max®
Plantasens® LS6
Prenylium®
TexCare® Gemini

Dispersogen® is a label-free blend of polymeric dispersing agents that can be used for a wide range of organic and inorganic pigments, offering significant reductions in supply chain complexities. Due to its active content of 100 %, it allows superior formulation performance and reduces undesired side effects that occur during pigment paste and paint preparation with conventional surfactants.

H2Max® catalysts are optimized for the purification of terephthalic acid (PTA) to remove impurities. The H2Max® series is a more economical solution, as it demonstrates significantly lower loss of costly palladium during operation compared to state-of-the-art catalysts, besides it is free of human and environmental hazard labels, allows high reclaiming rate of PD from spent catalyst and the catalyst carrier is manufactured with non-food-competing renewable raw materials.

Plantasens® LS6, a versatile emollient developed from sustainably sourced and biomimetic ingredients, is able to respond to different skin types. It has a close composition to skin lipids to naturally rebalance the natural sebum composition and offers an excellent affinity for the skin. Each component of Plantasens® LS6 has been carefully selected from valuable heritage plant oils and is 100 % bio-based.

Prenylium® is a Morus alba tree root extract obtained by the Plant Milking technology allowing the cultivation of plants in aeroponic condition. This sustainable technology enables the exploration of unsourceable plant parts, such as roots, without destroying tree. In addition, through an innovative process used to stimulate the growth of the roots, the content of targeted molecules is increased.

TexCare® Gemini, a high-performing soil release polymer with rheology control technology for liquid laundry detergent, removes the need for readjusting viscosity with supplementary thickeners. This eliminates the respective additional costs and reduces formulation complexity.

KPMG

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Sustainability portfolio Classification

	Continuing operations	Discontinued operations	Total 2022	2021	2020	2019	2018
EcoTain® awarded products	6	0	6	18	24	27	24
EcoTain® withdrawn products	0	0	0	3	15³	0	0
Cumulative number of EcoTain® products	215	0	215	243⁴	228¹	204²	193
Product portfolio screened for sustainability performance (sales %)	77	0	77	78²	76²	76²	76
Screened products meeting internal sustainability definition (%)	68	0	68	68²	67²	68²	68²
Screened products not meeting internal sustainability definition (%)	9	0	9	10²	10²	8²	8
¹ Restated due to EcoTain® withdrawals
² Number refers to continuing businesses only.
³ Number refers to discontinued businesses.
⁴ Number contains 34 products of discontinued business.

Sustainability recognition

Clariant’s efforts in the market are also reflected in a number of different sustainability awards. Read more about these in the chapter Innovation and Technological Advances.

Raw materials

Clariant strives to increasingly use biomass as a renewable feedstock. This development is in line with the growing demand for sustainable products from customers and consumers. Clariant also anticipates a stricter regulatory environment.

Clariant’s suppliers offer more sustainable solutions as well. The company cooperates with them to identify sustainable feedstock sources and lower-carbon footprint raw materials, such as ethylene and ethylene oxide. Particular emphasis is also on the responsible sourcing of conflict minerals. Clariant investigates allegations of violating its sustainability commitment in the supply chain.

Clariant IGL Specialty Chemicals produces and markets ethoxylates based on ethylene oxide from bioethanol.