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15Report
OCHRE GOLD
Color of the Year 2016
www.akzonobel.com/colorfutures
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AkzoNobel creates everyday essentials to make people’s lives more liveable and inspiring. As a leading global
paints and coatings company and a major producer of specialty chemicals, we supply essential ingredients,
essential protection and essential color to industries and consumers worldwide. Backed by a pioneering
heritage, our innovative products and sustainable technologies are designed to meet the growing demands
of our fast-changing planet, while making life easier. Headquartered in Amsterdam, the Netherlands, we
have approximately 45,000 people in around 80 countries, while our portfolio includes well-known brands
such as Dulux, Sikkens, International, Interpon and Eka. Consistently ranked as a leader in sustainability, we
are dedicated to energizing cities and communities while creating a protected, colorful world where life is
improved by what we do.
15Report
AkzoNobel in 2015 at a glance
Key regions (by revenue)
North America
17%
Mature Europe
Emerging Europe
36%
7%
€14.9 billion revenue
€2.1 billion EBITDA
€1.6 billion operating income
€3.95 earnings per share
80+ countries
45,600 employees
Latin America
10%
Other countries
3%
Our businesses
Asia Pacific
27%
Decorative Paints
Performance Coatings
Specialty Chemicals
Whether our customers are professional
decorators or keen DIY-ers, they want great
paint that gives a great finish. We supply a
large variety of quality products for every
situation and surface, including paints,
lacquers and varnishes. We also offer a
range of mixing machines, color concepts
and training courses for the building and
renovation industry, while our specialty
coatings for metal, wood and other critical
building materials lead the market.
We’re a leading supplier of performance
coatings with strong product technologies
and brands. Our high quality products
are used by customers across the world
to protect and enhance everything from
ships, cars, aircraft, yachts and architectural
components (structural steel, building
products, flooring) to consumer goods
(mobile devices, appliances, beverage cans,
furniture) and oil and gas facilities.
Main business operations:
• Automotive and Specialty Coatings
• Marine and Protective Coatings
• Industrial and Powder Coatings
Brands include Awlgrip, International,
Interpon and Sikkens.
Main business operations:
• Decorative Paints Europe,
Middle East and Africa
• Decorative Paints Asia
• Decorative Paints Latin America
Brands include Coral, Dulux, Flexa,
Hammerite, Sadolin and Sikkens.
Some of our customers: thousands of paint
distributors around the world and large retail
outlets such as B&Q, Leroy Merlin and OBI.
As a major producer of specialty chemicals
with leadership positions in many markets,
we make sure that industries worldwide are
supplied with high quality ingredients and
process aids for the manufacture of
life’s essentials.
Main business operations:
• Functional Chemicals (including Ethylene
and Sulfur Derivatives and Polymer
Chemistry)
• Industrial Chemicals
• Pulp and Performance Chemicals
• Surface Chemistry
Brands include AkzoNobel, Bindzil, Biostyle,
Dissolvine, Ecosel, Eka, Expancel, Jozo and
Kromasil.
Some of our customers: Airbus, Boeing,
Bosch, Dell, IKEA, Philips, Samsung, Shell,
Toyota and Whirlpool.
Some of our customers: BASF, Bayer, Dow,
GE, Huntsman, Momentive, Monsanto, P&G,
Shin-Etsu, Stora Enso and Unilever.
Decorative Paints 2015 revenue breakdown by
end-user segment in %
Performance Coatings 2015 revenue breakdown
by end-user segment in %
Specialty Chemicals 2015 revenue breakdown
by end-user segment in %
A Buildings and Infrastructure
100
A Buildings and Infrastructure
B Transportation
C Consumer Goods
D Industrial
0
0
0
B Transportation
C Consumer Goods
D Industrial
24
40
22
14
A Buildings and Infrastructure
B Transportation
C Consumer Goods
D Industrial
19
6
28
47
AAABCDABCD
Featured content
WE CREATE
EVERYDAY
ESSENTIALS
TO MAKE
PEOPLE’S
LIVES MORE
LIVEABLE AND
INSPIRING
Essential ingredients
Essential protection
Essential color
Making the planet more
sustainable
12 – 17
18
10
2
Contents
AkzoNobel in 2015 at a glance
Cover flap
How AkzoNobel performed in 2015
How AkzoNobel created value in 2015
CEO statement
Our purpose
Strategic performance
Business performance
Leadership
Governance and compliance
Financial information
Sustainability statements
Index
Financial calendar
Glossary
4
6
8
10
25
61
99
115
141
195
254
255
256
Bringing energy and
inspiration to urban areas
Using creativity and invention
to meet life’s challenges
20
22
How AkzoNobel performed in 2015
Financial targets
9.0%
14.0%
<2.0
Return on sales (ROS)
Achieve return on sales
(operating income/revenue)
of 9.0 percent by 2015
Return on investment (ROI)
Achieve return on investment
(operating income/average
invested capital) of 14.0 percent
by 2015
Net debt/EBITDA
Maintain net debt/EBITDA
lower than 2.0 by 2015
Financial
progress 2015
10.6%
15.0% 0.6
4
4
How AkzoNobel performed in 2015 | AkzoNobel Report 2015
Sustainability targets
20%
25-30%
Eco-premium solutions
Increase revenue from
downstream eco-premium
solutions to 20 percent of
revenue by 2020
Carbon emissions
Reduce our carbon emissions
across the value chain by
25 to 30 percent per ton
by 2020 (2012 base)
Resource Efficiency Index
Monitor gross margin divided by
carbon emissions across the
value chain, as an indicator for
resource efficiency
Sustainability
progress 2015
19%
3%
113
AkzoNobel Report 2015 | How AkzoNobel performed in 2015
5
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How AkzoNobel created value in 2015
Economic value: Input
Organization
By bringing more value to our customers,
investors, employees and society in general,
we can better position ourselves for
growth and achieve our strategic vision
of leading market positions delivering
leading performance.
€7.0 billion
group equity
€2.6 billion
borrowings
€14.9 billion
revenue
€651 million
capital expenditures
€1,573 million
operating income
€9.8 billion
invested capital at year-end
We are actively working to reduce our
carbon footprint across the value chain
– to improve our resource efficiency and
reduce our environmental footprint – as
well as creating social value by developing
our employees and being active in the
communities where we operate. And by
continuing to innovate in order to supply
more sustainable products and solutions
for our customers, we create economic,
environmental and social value.
€347 million
research and development expenses
€1,136 million
cash flow from operations
We invested in 2015 to keep our facilities
in good shape, as well as expanding our
manufacturing capability.
Environmental value: Input
All these initiatives contribute to our financial
performance and ultimately lead to more
economic value for our investors.
38%
renewable energy
95,000 TJ
energy use
11%
renewable raw materials as %
of organic materials
€0.7 billion
energy spend
9.7 million tons
upstream CO2(e) emissions
Social value: Input
Organization
45,600
employees at year-end 2015
1.6
total reportable rate of injuries
Employee and supervised contractors
total reportable rate of injuries
Target: <2.0 (2015)
16,400
number of volunteers for Community
Program projects (cumulative since 2005)
2.4
2.3
1.8
1.6
2012
2013
2014
2015
6
How AkzoNobel created value in 2015 | AkzoNobel Report 2015
Revenue breakdown by Business Area
in %
Revenue breakdown by end-user segment
in %
C
A
D
C
A
B
B
Outcomes
€261 million
income tax paid
€281 million
dividend paid
A Decorative Paints
B Performance Coatings
C Specialty Chemicals
Organization
27
40
33
A Buildings and Infrastructure
B Transportation
C Consumer Goods
D Industrial
43
17
18
22
RD&I investments have resulted in
19 percent of revenue derived
from eco-premium solutions with
customer benefits.
Outcomes
10.6% ROS
15.0% ROI
0.6 /EBITDA
19%
net debt
of revenue from eco-premium solutions with
customer benefits
3.8 million tons
CO2(e) emissions own operations
155 kilotons
total waste own operations
24.6 million
tons
CO2(e) emissions cradle-to-grave
decrease CO2(e) per ton of sales from 2012
3%
cradle-to-grave carbon footprint
113 REI
in Resource Efficiency Index
11.1 million
tons
downstream CO2(e) emissions
Outcomes
€2.7 billion
employee benefits
4.03
employee engagement score
2,385
Community Program projects
(cumulative since 2005)
AkzoNobel Report 2015 | How AkzoNobel created value in 2015
7
23%
reduction in operational eco-efficiency
footprint (since 2009)
19%
female executives
16%
high growth markets executives
“I TAKE GREAT PRIDE
IN THE FACT WE
CONTINUED TO BE
SUCCESSFUL DOING
WHAT WE DO BEST”
Scan and explore
8
CEO statement | AkzoNobel Report 2015
CEO statement
As I look back on 2015, I take great pride in the fact we
continued to be successful doing what we do best – creating
everyday essentials to make people’s lives more liveable
and inspiring. This is the purpose that drives us. It sparks
our creativity, gives us energy, enables us to deliver for our
customers and, ultimately, generates value for our business.
We’re using our key strengths – essential ingredients,
essential protection and essential color – to help build a solid
foundation for the next phase of the company’s strategy.
Although conditions were challenging during the year
– with many markets and regions experiencing varying
degrees of volatility and uncertainty – we made significant
progress towards our vision of leading market positions
delivering leading performance. We are now a stronger,
leaner, more agile company. We have new operating
models in place; we’ve refined our portfolio; our factory
footprint has been optimized; a continuous improvement
culture is being initiated and there’s continued focus on
operational excellence. In addition, our ability to successfully
commercialize innovation remains strong, we continue to
lead the way in terms of sustainability and our Human Cities
initiative has evolved and continues to grow and thrive.
All of this contributed to our performance, which saw
us successfully achieve our 2015 financial targets.
We continued our strong track record of performance
“WE’RE STRONGER
AND MORE AGILE”
improvement, with higher return on sales and return on
investment. The increase in the dividend is also a clear sign
we are more confident about our cash flow generation.
We now plan to accelerate our efforts to fully accomplish
our vision, which remains critical to the next phase of our
strategy. We aim to build on the foundations we have
created and grow in line with, or faster than, our market
segments. New financial guidance for 2016-2018 has also
been communicated (see the Strategic performance section).
We have been relatively cautious with regard to acquisitions
in recent years, choosing to concentrate on performance
improvement through operational excellence. However, we
are now at a stage where we will focus on organic growth
and innovation and, where applicable, will consider value-
generating bolt-on acquisitions, in line with our focus on
market leading and profitable positions.
On an organizational level, we made further improvements.
Support functions such as Human Resources, Information
Management, Finance and non-product related Procurement
have been simplified and operate under a Global Business
Services model (as of January 1, 2016), which will continue
to develop over time. We’re also enhancing our Integrated
Supply Chain activities through the AkzoNobel Leading
Performance System (ALPS), a continuous improvement
program designed to further build operational excellence.
Our innovation also continued to prosper, especially our digital
tools. For example, our Visualizer app has been downloaded
over eight million times to date. Launched in 2014, the
pioneering decorating app won several major awards in 2015
and its functionality is being regularly updated. In addition, our
International brand launched Intertrac Vision, the shipping
industry’s first consultancy tool to provide accurate and
transparent predictions on the fuel and CO2 savings potential
of fouling control coatings, prior to application.
We also made progress on our strategic sustainability targets.
As well as maintaining our revenue from eco-premium
solutions, we reduced our CO2 footprint (across the value
chain) and improved our Resource Efficiency Index. A major
highlight was being ranked top of our industry group in the
Dow Jones Sustainability Index for the fourth year running.
This sustained performance provides reinforcement for
our belief that sustainability is fundamental to our business
strategy. It also shows the value of our Planet Possible
approach to resource efficiency. A key development was the
agreement to buy sustainably generated steam from Dutch
energy provider Eneco at our Delfzijl site. It will help reduce
our CO2 emissions by over 100,000 tons a year.
After launching in 2014, our global Human Cities initiative
continued to progress. Designed to help cities adapt to
rapid urbanization, we’re using our key strengths – essential
ingredients, essential protection and essential color – to
energize, inspire and sustain communities for generations
to come. During 2015, we launched the first project linked
to our partnership with The Rockefeller Foundation’s
100 Resilient Cities program. It involved restoring and
safeguarding the heritage of one of Singapore’s most
historically significant buildings. Meanwhile in Brazil, we’ve
added a sense of identity and helped to revitalize a favela
community in Santa Marta, Rio de Janeiro, as well as training
local people to become painters.
All our achievements were made possible by our employees.
I thank all of you for your passion and hard work. So it was
pleasing to see our ViewPoint survey results, which showed
engagement levels have risen every year since we started the
survey in 2010. Allied to this, our safety performance further
improved. Our aim continues to be zero incidents.
We expect the volatility experienced in 2015 to continue
during 2016, so we anticipate limited support from our
markets. Having built a foundation for the future, we will
continue to drive operational performance and are confident
the next phase of our strategy will enable us to make
further progress towards our vision, while creating everyday
essentials to make people’s lives more liveable and inspiring.
Ton Büchner
CEO and Chairman of the Board of Management and
Executive Committee
AkzoNobel Report 2015 | CEO statement
9
9
WE CREATE
EVERYDAY
ESSENTIALS TO
MAKE PEOPLE’S
LIVES MORE
LIVEABLE AND
INSPIRING
Scan and explore
10
Our purpose | AkzoNobel Report 2015
Essential
ingredients
Essential
protection
Essential
color
AkzoNobel Report 2015 | Our purpose
11
We are the essential ingredient in everything from mobile
devices and varnishes to paper and plastics. You’ll often
find we have a positive impact on various aspects of your
daily life.
We’re all around you, even when you least expect it.
We’re in the food you eat, the roads you drive on
and your favorite personal care products. Essential
ingredients can’t always be seen, but ice cream,
shampoo, sun lotion and building products would be very
different without us.
Essential ingredients
WE’RE ALL
AROUND
YOU AND
YOU’RE
PROBABLY
NOT AWARE
OF IT
12
Our purpose | AkzoNobel Report 2015
…in paper
…on wood
furniture
Scan and explore
…on
electronic
devices
AkzoNobel Report 2015 | Our purpose
13
We care about you and what’s important to you. Whether
you’re conserving and treasuring the past or building the
world of tomorrow, we’re always there to offer safety and
protection.
We protect the things you see, touch and rely on each
and every day. From buildings to boats, and from fridges
to bridges, our products provide strength and durability.
Essential protection comes in all shapes and sizes, from
the colorful coating on consumer goods to fire protection
coatings on a skyscraper.
Essential protection
WE PROTECT
THE THINGS
YOU SEE,
TOUCH AND
RELY ON
EACH AND
EVERY DAY
14
Our purpose | AkzoNobel Report 2015
®
®
…on
structural
steel
…in
insulating
glass
…on
building
exteriors
Scan and explore
AkzoNobel Report 2015 | Our purpose
15
We believe in a more colorful world full of energy and
inspiration. We have centuries of color expertise. It helps
to brighten up homes and communities and stops the
world from becoming dull and dreary.
Bringing color to people’s lives also helps to build a
stronger sense of community and makes cities more
vibrant. Essential color means we don’t have to live in a
joyless, black and white world lacking inspiration.
Essential color
WE BELIEVE
IN A MORE
COLORFUL
WORLD
FULL OF
ENERGY AND
INSPIRATION
16
Our purpose | AkzoNobel Report 2015
…on wood
and metal
…in paint
Scan and explore
…on
concrete
floors
AkzoNobel Report 2015 | Our purpose
17
Making the planet
more sustainable
When talking about sustainability, one statistic seems
to dominate. It’s the likelihood that by 2050, the world’s
population will reach nine billion. The question is, what
are we all doing to meet the challenges this will create?
At AkzoNobel, we made a conscious decision to be bold
and start thinking differently. We quickly realized that if we
wanted to bring about the change that’s needed, we’d
have to reinvent how we use the world’s resources.
The result was Planet Possible, an approach to
sustainability which is focused on creating more value
from fewer resources across the whole value chain.
Putting our customers at its core, it’s about increasing
our resource efficiency and working together with both
customers and suppliers to develop leading solutions for
the challenges people face every day.
Sustainability in itself is nothing new to AkzoNobel. We’ve
been ranked top of the Dow Jones Sustainability Index in
our industry group for the last four years and have been
in the top three for a decade. More than anything, this
sustained top performance provides reinforcement for
our belief that sustainability should sit at the heart of our
business strategy.
Planet Possible is our commitment to discovering
opportunities where there don’t appear to be any. We’re
finding more innovative solutions; we’re using more
renewable energy and materials and less fossil-based;
we’re focusing more on our entire value chain; we are
actively enhancing lives in the many communities in
which we operate, as well as inspiring and equipping our
employees to recognize new possibilities.
We’re also continuing to accelerate our development
of eco-premium products. Recent examples include
a range of solvent-free concrete flooring paints; highly
efficient and fully biodegradable micronutrients for
agro applications; and UV clearcoats that help vehicle
bodyshops to reduce their energy costs.
We believe that the only way to be successful in the
future is to care about the future. So for us, sustainability
is also about many other things, such as investing
in science to accelerate new ideas; investing in our
capabilities to ensure we deliver for our customers on
time, every time; and creating a sustainable business for
shareholders.
Ultimately, we believe that by opening up infinite
possibilities in a finite world, we can create a sustainable
planet capable of comfortably supporting the nine billion
people who will soon call it home.
18
Our purpose | AkzoNobel Report 2015
Improving air quality
We’re developing more products that improve the air quality both
inside and outside of buildings. Dulux Guardian, for example, can help
absorb interior air pollutants such as formaldehyde, while Sikkens Alpha
Aeroxane can neutralize smog-inducing nitrous oxides.
DOING MORE
WITH LESS
Scan and explore
Community RePaint
We’ve launched a remanufacturing project with
Community RePaint in the UK. It will divert around three
million liters of waste paint from landfill each year, which
will be recycled and re-used by local communities.
AkzoNobel Center
Amsterdam, The Netherlands
Making extensive use of the company’s
own products, the new building has an
“Excellent” BREEAM rating.
AkzoNobel Report 2015 | Our purpose
19
MAKING CITIES
MORE HUMAN
Bringing color to the world
Our “Let’s Colour” initiative is making a difference to people and communities all over
the world. As well as revitalizing urban areas with color, we also train local people to
become painters.
Scan and explore
20
Our purpose | AkzoNobel Report 2015
Bringing energy and
inspiration to urban areas
In 1800, only 2 percent of the world’s population lived
in cities. Now it’s 50 percent (3.5 billion people). By
2050, estimates suggest that number of city dwellers
will rise to more than 65 percent (6.3 billion). Meanwhile,
the number of people living in slums will have reached
around 1.5 billion by 2020, double the figure in 1990.
This rapid urbanization presents huge challenges: land
insecurity, poor housing, flooding, shortage of public
space, as well as inadequate supply of clean drinking
water and sanitation services, health and education
facilities. The responsibility for coping with all of this, for
making cities and human settlements sustainable for
all inhabitants, lies with policymakers, businesses and
society itself.
AkzoNobel is at the core of the change that’s taking
place in every city in the world. We’re in schools,
hospitals, roads and vehicles – we’re in the engine room
of city design. But we also have to look beyond these
purely physical aspects. In order to grow and prosper,
cities and their communities need a purpose, an identity
and a heartbeat that creates, sustains and mobilizes this
collective to achieve great things.
That’s why we established our Human Cities program.
It channels our three key strengths – essential
ingredients, essential protection, essential color – to help
energize communities and make them more liveable
and inspiring. We believe our products and expertise
can help cities to deliver a stronger sense of community
purpose, pride and happiness. It’s a more human
approach which will help to reduce crime, boost
competitiveness and enable cities to grow faster and be
more successful.
A lot of work has already been done. We’ve partnered
with The Rockefeller Foundation’s 100 Resilient Cities
program, for example, and launched two game-changing
projects in 2015. In Brazil, we donated hundreds of liters
of paint to help revitalize the Santa Marta favela in Rio
de Janeiro. We also trained members of the community
to become painters. Meanwhile in Singapore, we are
restoring Burkill Hall, believed to be South East Asia’s last
surviving example of an Anglo-Malayan plantation-style
house. Further projects are planned in the United States,
India, China and the Netherlands.
We have also set up the Human Cities Coalition. This
aims to deploy a unique public-private partnership
approach to encourage sustainable and inclusive
development for citizens in fast-growing urban areas.
Focus areas will include land rights, public space,
drinking water, sanitation, drainage, housing and
healthcare facilities. It aims to stimulate a positive
contribution to the post-2015 Sustainable Development
Goals (SDGs), which include a specific reference to
inclusive and sustainable urban development. The
Coalition is currently scoping its unique approach in two
cities – Accra, Ghana, and Mumbai, India.
AkzoNobel Report 2015 | Our purpose
21
Using creativity and invention
to meet life’s challenges
Innovation sits at the heart of what we do. Whether we’re
developing new products or services, we’re focused
on making life easier for our customers, as well as
contributing to their success.
We’re extremely proud of our 400 years of invention. It’s a
pioneering heritage which continues to influence scientific
breakthroughs that make life safer, healthier and more
inspiring. We have 4,000 scientists around the world and
they work closely with customers to develop sustainable
solutions for the challenges people face every day.
The majority of our innovation is focused on products,
but we also put a lot of emphasis on process and digital
innovation. One of our biggest recent success stories is
the pioneering Visualizer app launched by our Decorative
Paints business. First introduced in 2014, the free app
enables users to see in real time what a room will look
like in a range of colors before any paint is applied to
the wall.
Having won a number of top awards in 2015, the
Visualizer has been updated with extra functionality and
will continue to be enhanced with new features. It now
includes extended photo capability – allowing users to
visualize their home (including the exterior) whenever
and wherever they want. The app has been downloaded
more than eight million times to date in over 40 markets,
under 13 different brands.
Another digital tool to have been well received is the
Automatchic Vision color matching device launched in
2015 by our Performance Coatings business. The hand-
held device – the smallest of its kind – allows vehicle
bodyshops to precisely measure and match first time
the existing color on any area of a vehicle. The software
ensures optimum color match while minimizing paint use,
reducing waste and saving valuable time.
Helping customers is fundamental to all our innovation,
although the results can sometimes remain hidden from
view. For example, our Specialty Chemicals business has
developed patented technology which speeds up PVC
production and makes it more sustainable. Known as
Continuous Initiator Dosing (CiD), it not only enhances
productivity by up to 30 percent, but also offers safety
improvements, energy and cost reductions and better
PVC quality.
This commitment to innovation and the desire to help
our customers stems from a thriving global culture
of invention which continues to grow throughout the
company. Ultimately, it’s all about making people’s lives
more liveable and inspiring.
22
Our purpose | AkzoNobel Report 2015
Weathershield Powerflexx
During the year, we rolled out Dulux
Weathershield Powerflexx across the
world. It’s an exterior paint which offers
high levels of rain protection and –
due to its reflective properties – can
reduce exterior temperatures by as much
as 5°C, keeping homes cooler (below).
INNOVATION SITS
AT THE HEART OF
WHAT WE DO
Scan and explore
Continuous Initiator Dosing (CiD)
PVC manufacturers using our new CiD
technology benefit from improved reactor
output, product quality and operational
safety (top left).
Automatchic Vision
Our digital system allows bodyshops to
precisely measure and match the existing
color on any area of a vehicle (top middle).
Visualizer app
Picture it before you paint it with our
pioneering app, which makes it easier
than ever to experiment with color in your
home (top right).
Bolikel® XP
In 2015, we also launched a novel,
highly efficient micronutrient which helps
to produce a full, healthy color of crop
(below).
AkzoNobel Report 2015 | Our purpose
23
Making life more comfortableThere are few everyday essentials more common than plastic and we supply some of the key ingredients that go into making all kinds of plastic products (many of which we also coat). You’ll often find us where you leastexpect to. Strategic performance
In 2013, AkzoNobel announced a new vision, three-year
targets, core principles and values, and strategy. Although
market conditions have been challenging, we achieved our
2015 ambitions and have built a solid foundation for the next
phase of the company’s strategy.
Our strategy
Strategic targets: 2015 performance
How we created value in 2015
Risk management
26
44
46
52
25
AkzoNobel Report 2015 | Strategic performanceStrategic performance Our strategy
As we continue to create everyday
essentials to make people’s
lives more liveable and inspiring,
we are proud to have achieved
the financial targets that we set
ourselves for 2015. Our return
on sales came in at 10.6 percent
(target: 9 percent), while our return
on investment was 15.0 percent
(target: 14 percent).
Achieving our targets represents significant progress for
the company. However, we know we must continue to
improve to achieve our vision of leading performance in all
the markets in which we operate. So we are maintaining that
same vision for the next phase of our strategy development,
which includes new financial guidance. For the period 2016-
2018, our guidance is:
• Return on sales between 9 and 11 percent
• Return on investment between 13 and 16.5 percent
• Clear aim to build on the foundation we have created
and grow in line with, or faster than, our relevant
market segments
2626
In addition, we remain committed to our strategy, including
our core principles and values, strategic focus areas and
core processes. In the next phase of our strategy, our action
focus will switch to a greater emphasis on organic growth
and innovation. The next steps we have identified are:
Our vision remains:
Leading market positions
delivering leading
performance
• Hardwire new organization model
• Deliver continuous improvement culture
• Build further operational excellence
• Drive organic growth and innovation
• Pursue value generating bolt-on acquisitions
The strategy framework for the next phase of our
development is shown below and on the right. More
detailed information on these next steps is provided later
in this section.
Strategic
focus
areas
Processes
Actions
Core principles and values
Customer
end-user
segments
Strategic performance | AkzoNobel Report 2015 Hardwire
new
organization
model
Deliver
continuous
improvement
culture
Build
further
operational
excellence
Drive organic
growth and
innovation
Pursue value
generating
bolt-on
acquisitions
Next steps
Culture
Core principles and values
Sustainability – Planet Possible
Human Cities – Society
2727
AkzoNobel Report 2015 | Strategic performance Defining what is essential in
the next phase of strategy
development
To define the detailed initiatives
and actions we will undertake
during the next phase of
our journey towards leading
performance, we started by
consulting key stakeholder
groups about the opportunities,
issues and risks that we face as a
company.
This evaluation not only incorporated insight from our
customers, shareholders and employees, but also from other
key stakeholders such as financial and regulatory bodies,
relevant non-governmental organizations (NGOs) and leaders
in the communities in which we operate.
We have also analyzed which topics will most likely provide
us with a substantive opportunity to achieve our vision
of leading performance. We then made sure to include
initiatives and actions in our next steps that will either
capitalize on significant opportunities, or mitigate
the significant risks. We call the outcome of this filtering
process our Integrated materiality diagram (see opposite).
Key opportunities, issues and risks material to stakeholders
are grouped into this framework using bullets. Items at
the center are opportunities, issues and risks that we believe
are also material to AkzoNobel’s strategy and, therefore,
are addressed by our core principles and/or strategic
focus areas.
2828
Integrated materiality diagram
l Key opportunity, issue or risk
Financial and
regulatory opportunities
and risks
Sustainability
opportunities
and risks
Core principles &
strategic focus
areas
Business
opportunities
and risks
The remainder of this Strategic perfomance section covers
our core principles and strategic focus areas, as well as our
processes, strategy next steps and outlook for our customer
end-user segments. For more information on how business
opportunities and risks are addressed by our strategy, see
the Risk management section. For more details about how
sustainability opportunities and risks are addressed by
our strategy, see Note 2 of the Sustainability statements.
Information about financial and regulatory opportunities and
risks can be found in the Other information section of the
Financial statements.
For further information
please see Sustainability on
www.akzonobel.com
Strategic performance | AkzoNobel Report 2015
Core principles and values
Our Code of Conduct brings our
core principles to life
Our core principles and values underpin everything we
want to achieve. We have four company values, which
were introduced in 2014 – Customer focused, Deliver
on commitments, Passion for excellence and Winning
together. These values form an integral part of our employee
performance evaluation, which in turn helps them to become
fully embedded into the organization.
We followed this up in 2015 by rolling out our updated Code
of Conduct, which is based on our core principles of Safety,
Integrity and Sustainability. The Code of Conduct explains
what we stand for as a company, what we value and how
we run our business. It sets out the behavior we expect from
everyone, regardless of their position in the company or the
role they play.
Given the importance of the Code of Conduct, we work
hard to properly train our employees and our contractors.
They receive detailed instructions regarding what we expect
from them. This includes a mandatory e-learning program,
which was launched company-wide to help ensure a basic
understanding. We are also in the process of carrying out
“dilemma workshops” designed to help both employees
and contractors develop more complete knowledge and
appreciation. This is achieved through a series of interactive
discussions about the kinds of dilemmas they might face
with regard to our core principles and the Code of Conduct
in their day-to-day work. These workshops help to create
a feedback culture where dilemmas are openly discussed.
Because the principles and the Code of Conduct apply to all
employees, the first workshop was held with the Executive
Committee and we have since been cascading them
throughout the organization.
We are not, however, limiting the application of our core
principles to our company boundaries. We have also
developed, and are in the process of rolling out, a Business
Partner Code of Conduct, which clarifies what we expect
from our business partners in terms of our Safety, Integrity
and Sustainability core principles.
Strategic focus areas
We continue to pursue initiatives
and actions in line with five clear
areas of focus
THE CODE OF
CONDUCT
EXPLAINS WHAT
WE STAND FOR
AS A COMPANY,
WHAT WE VALUE
AND HOW
WE RUN OUR
BUSINESS
During 2012-2013, we defined five focus areas in terms
of strategic initiatives and actions. Our recent materiality
analysis indicated that these five areas remain relevant and
we will continue to focus on them. A brief summary of key
activities in each of these five strategic focus areas follows.
Care for the customer
In almost every market in which we compete, we have a
leadership position. If we are to maintain these positions and
deliver against our aim of growing in line with, or faster
than, our relevant market segments, care for the customer
remains fundamental.
In 2015, we continued to build the foundations for care
for the customer via our three commercial excellence
programs. These programs incorporate processes and
tools designed to help us better understand customer and
consumer segments, develop appropriate go-to-market
value propositions and enhance salesforce efficiency and
effectiveness, all tailored for the individual demands of our
three Business Areas. More specific information about the
various programs can be found in the Business performance
section. Where it makes sense, we work across Business
Areas, for example in the development and implementation
of customer satisfaction metrics, an area in which we made
substantial progress in 2015.
2929
AkzoNobel Report 2015 | Strategic performance Reduction of product and process
complexity
Although our performance levels have improved
significantly since we began to implement our strategy
during 2012-2013, we still have more to do to achieve
our vision of leading performance. To deliver this, we
will continue to standardize and simplify throughout the
organization. This starts with products and supporting
raw material slates, but also means standardization and
continuous improvement in our manufacturing, selling
and support processes.
For example, we are continuing to implement our AkzoNobel
Leading Performance System (ALPS), a fundamental change
to the way we work in our Integrated Supply Chain. ALPS
incorporates standard and integrated work processes with
clear goals and metrics, as well as enablers in terms of
capability development, information technology (IT) systems,
organization model, definition of roles and responsibilities
and cultural change consistent with our AkzoNobel values.
We use a consistent approach to ALPS implementation. In
all cases, ALPS programs support our core principles. ALPS
also helps to improve people, product and process safety
and energy/material efficiency across the value chain, and
contributes to higher productivity levels. Additional objectives
are adapted to the different strategic requirements of the
relevant business. For example, in our Performance Coatings
Business Area, customer service improvements through
higher on-time in-full (OTIF) levels are a key priority and ALPS
is helping to facilitate this.
In support functions – Human Resources (HR), Information
Management (IM), Finance and non-product related
Procurement – we continue to make progress towards
a Global Business Services (GBS) approach. In all four
functions, we are moving away from a decentralized
approach to a more cohesive, centralized approach allowing
far greater consistency and synergies across the company.
Cash and return on investment
Since we developed our strategy in 2012, we have improved
in two areas that we had identified as issues – our return on
investment and our free cash flow. We will continue to focus
on these areas in order to meet our financial expectations.
This will involve offsetting inflation and other cost increases
through continuous improvement.
Careful capital allocation and management is a key strategic
priority, so we aim to continue our strong track record with
regard to operating working capital management. We are
also taking a disciplined approach to capital expenditure
management. During 2015, we introduced a new approach
to investment assessment and approval to help ensure
this discipline. In line with our core principles, safety and
sustainability implications are also evaluated, as well as
financial consequences.
Embedded safety and
sustainability
Our performance with regard to the core principles of Safety
and Sustainability continues to improve. This is a challenging
area which we will continue to prioritize for action going
forward. Our efforts are widely recognized externally. In 2015,
we were ranked number one in the Materials industry group
on the Dow Jones Sustainability Index for the fourth year in a
row. We have now been ranked in the top three in our sector
for the last decade.
We also continue to implement our Planet Possible
sustainability agenda, focusing on radical resource efficiency
throughout our entire value chain. This strategy is based on
three main pillars:
Sustainable business
We work together with our value chain partners to develop
leading solutions that create more value from fewer
resources. In particular, we focus on developing and
marketing solutions that deliver environmental or social
benefits for our customers when compared with competitive
products, as well as generating revenue for the business. We
call these products eco-premium solutions with downstream
benefits. During 2015, we again achieved 19 percent of our
revenue from these products, up from 17 percent in 2012.
WE WORK HARD
TO INCREASE
EMPLOYEE
ENGAGEMENT
AND PROVIDE
CONTINUOUS
LEARNING AND
DEVELOPMENT
OPPORTUNITIES
3030
Strategic performance | AkzoNobel Report 2015
Resource efficiency
We continually strive to increase our resource efficiency
and reduce carbon emissions in our own operations in
order to deliver environmental benefits and generate cost
improvements. During 2015, our carbon emissions fell to
3.8 million tons, down from 4.7 million tons in 2012. But
we do not limit our philosophy of more value from fewer
resources to our own operations. We also work with
suppliers and customers to reduce carbon emissions
throughout the value chain. This is a challenge which we
will continue to prioritize for action going forward.
Diverse and inclusive talent
development
If we are to deliver on our financial expectations and overall
vision, we need to have a strong, motivated and diverse
workforce. To help achieve this, we work hard to increase
employee engagement and provide continuous learning and
development opportunities. Our objective is to create a high
performing culture where employees can contribute to the
best of their ability, and where our management teams reflect
the diversity of our overall workforce.
Capable, engaged people
We are focused on developing our employees and forming
partnerships with key suppliers along the value chain to
help create more value from fewer resources. In 2014, we
made significant and visible steps in terms of forging external
partnerships through our Human Cities initiative and our
cooperation with The Rockefeller Foundation’s 100 Resilient
Cities program. We further built on this in 2015 by setting up
the Human Cities Coalition. More details about this can be
found in earlier pages of this Report 2015.
The three pillars of our Planet Possible agenda build on our
sustainability foundations. From a people safety perspective,
we continue to implement our behavior-based safety (BBS)
programs across the company. A key area of focus for
2015 was extending BBS beyond our manufacturing sites
to offices and laboratories. Our efforts have resulted in a
substantial improvement in the total reportable rate of injuries
per million hours worked, which has decreased from 2.4 in
2012 to 1.6 in 2015. This exceeds the target of 2.0 which we
set for 2015 a number of years ago. Continuing to drive this
number down will always be a key priority for the company
and we have set a new target of 1.0 for 2020. We also
continue to deploy process and product safety procedures
and are making good progress in these areas as well.
A valuable measure of our progress is the annual ViewPoint
employee engagement survey. The latest results show
further improvement and identify opportunities for making
additional progress next year. In 2015, we focused on
improving feedback throughout the organization while
creating development plans for higher potential employees
through a consistent, global approach to “assessment
centers” as part of our Talent management process.
This process is intended to bring increased objectivity to
talent identification, as well as a more targeted approach
to the development of leadership potential and increased
process transparency.
We continue to make progress in terms of gender and
geographic diversity in our executive workforce, working
towards our 2015 ambition of 20 percent. We ended 2015
with 19 percent female executives (up from 15 percent in
2012) and 16 percent of executives from Asia Pacific, Latin
America and emerging Europe (up from 13 percent in 2012).
Processes
We continue to implement our
six company-wide processes to
support our next steps
When we defined our strategy and focus areas during 2012,
we also identified six processes that required a consistent
approach across the company. During 2013-2014, our
focus was on codifying these company-wide processes
and including them in our corporate directives to ensure
appropriate governance. In 2015, we focused on deploying
these processes throughout the organization. A brief update
on these processes follows.
People, product and
process safety
As indicated throughout this strategic performance section,
Safety is a core principle which engages and unites all of
AkzoNobel. The people safety process is aimed at increasing
awareness of behaviors that put us at risk. In 2015, we
focused on reducing slips, trips and falls across the company
(including offices and laboratories) and on-site manager
safety leadership via a program called Hearts & Minds. The
CEO and senior leaders coached 80 site managers in 2015
as part of this program.
The aim of our process safety program is to identify and
control hazards in our operations by avoiding unwanted
events at manufacturing sites that result in injuries, waste
or harm. We measure our performance on this through a
disciplined audit process and are continually improving in our
audit outcomes. Product safety incorporates the traditional
approach of reactive regulatory compliance and even goes
beyond this, enabling us to take the lead in sustainable
product stewardship.
3131
AkzoNobel Report 2015 | Strategic performance STRATEGIC
SOURCING
FORMS
THE BACKBONE
OF THE
SUPPLIER
SELECTION AND
COMMERCIAL
PROCESS
Operational Control Cycle
The Operational Control Cycle, which has been in place
since 2012, forms the heartbeat of our operational
performance management system. We do this through
a cycle of regular, sequenced and staged operational
meetings, which incorporate structured and standardized
operational discussions. By employing this process, we
review past performance, but more importantly we focus
on a realistic three-month rolling forecast, as well as mid to
longer term planning.
Continuous improvement
As mentioned earlier in this section, implementation of the
AkzoNobel Leading Performance System (ALPS) is already
well underway in our Integrated Supply Chain, with clear
signs of progress in terms of deployment within the “Make’’
and “Plan’’ processes. Within the Integrated Supply Chain,
our next focus will be on “Source’’ and “Deliver’’ processes.
In 2016, we will also begin to deploy our continuous
improvement toolkit, including Lean and Six Sigma
fundamentals, in our support functions through our Global
Business Services (GBS) organization.
of our innovation. Coupled with a strong RD&I culture, this
will help to stimulate a resilient portfolio of organic growth
projects. (More detailed information about our work in RD&I
can be found in the Sustainability statements, Note 4).
Procurement
There are three primary components of our Procurement
process – strategic sourcing, supplier management and
purchase-to-pay. Strategic sourcing forms the backbone
of the supplier selection and commercial process.
After selection and contracting, a high level of supplier
performance is ensured by a strong supplier management
process. This process is focused on creating value beyond
commercial conditions, including innovation, sustainability,
cost, quality and on-time delivery improvements.
We are implementing a more robust purchase-to-pay
process and automating this where appropriate. The
Procurement organization is also able to keep our
businesses well informed of expected movements in
the supply market by closely monitoring the market
developments of purchased raw materials, enabling
appropriate commercial adjustments.
Innovation
Talent management
We have now restructured our Research, Development and
Innovation (RD&I) group. As part of the restructuring process,
we implemented new RD&I organizations within our three
Business Areas, strengthening strategic research capabilities
across the company. To support these organizations, we
are developing and deploying a standard innovation process
which includes best practice stage gate and portfolio
management sub-processes. The 2016 focus will be on
developing and deploying improved front-end processes,
such as idea generation and management and enhancing
our innovation metrics. This will give us greater visibility on
our portfolio health, stage gate success rate and the strength
In 2013, we developed our Talent management process
based on five steps – plan; attract, acquire and on-board;
assess performance and potential; develop and retain;
deploy. In 2014, we developed a set of tools to support this
process and implemented these tools throughout 2015.
Our engagement and diversity levels have improved as a
result (as described earlier in this section) and we expect to
continue making progress on these metrics. Going forward,
we will focus on utilizing this process to further develop a
high performance culture. This incorporates active talent
management and development of leadership and people
management capability.
3232
Strategic performance | AkzoNobel Report 2015 Actions
In the next phase of strategy
development, our action focus
will shift towards continuous
improvement and organic growth
So far, we have built a foundation for achieving our leading
performance vision by beginning a cultural transformation
based on our core principles and values, our Planet
Possible sustainability agenda and our Human Cities
initiative. We have implemented new organizational models
in all three Business Areas and in all functions, and have
defined and are deploying company-wide processes as
described. Further momentum will also be provided by our
new company purpose, which will help to fully align the
organization, drive employee engagement and create a more
unified and cohesive business. Our first three next steps in
terms of actions are to:
Hardwire new organization model
We have made some significant changes to our organization
model, including reorganizing and restructuring in all three
Business Areas and all functions. As already indicated,
in early 2016 we went live with our full Global Business
Services organizational model for the support functions. We
need to ensure that all the change we have undergone is
embedded and that the new models work, become the new
norm and deliver against expectations.
Deliver continuous improvement
culture
Our financial expectations for 2016-2018 don’t just rely on
maintaining current performance levels. They are based on
continued performance improvement as a cultural norm. We
now have a robust continuous improvement process, which
we call the AkzoNobel Leading Performance System (ALPS).
We have started to implement this process in our Integrated
Supply Chain and will begin to introduce it into our Global
Business Services (GBS) organization in 2016. Furthermore,
we have developed continuous improvement training
programs for all levels of the organization, which have been
incorporated into our AkzoNobel Academy learning platform.
Our focus now is on developing a culture where we do
things a little bit better every day.
In the next phase of strategy implementation, we will put
greater emphasis on growth and innovation, resulting in our
final two action steps:
Drive organic growth and
innovation
We have leading market positions in many of the sectors
and/or regions in which we compete. To maintain these
market positions, our ambition is to grow in line with, or
faster than, our relevant market segments. To achieve this,
as well as developing more robust operational excellence
models in commercial functions, we will continue to build on
our track record of successfully commercializing innovation,
with a significant emphasis on sustainability.
Build further operational
excellence
By creating a continuous improvement culture, we will
be able to progress towards operational excellence in all
aspects of the company. This includes the Integrated
Supply Chain and the support functions through GBS, as
outlined above. It also includes continuous improvement
to achieve operational excellence in our Marketing and
Sales functions. We will address these functions through
our commercial excellence programs, which are focused
on improving commercial processes, systems, tools,
remuneration and behavior.
Pursue value generating bolt-on
acquisitions
Over the last few years, we have pruned our portfolio to
focus on our market leading positions. Going forward,
we have a strong financial and operational foundation on
which to build via bolt-on acquisitions. We will consider
any acquisition that generates value in terms of market,
geography or technology synergies. We will be very
disciplined in evaluating these acquisitions, with a strong
focus on acquisitions that offer a good return on investment
in the medium term.
3333
AkzoNobel Report 2015 | Strategic performance End-user segments
We are present in a wide variety of markets,
which brings resilience and stability to
our company. Analyzing these end-user
segment trends is a fundamental driver
for our strategy. We are present in four
main end-user segments and outlook
profiles for each of them are provided on
the following pages.
Buildings and
Infrastructure
We are active in three sub-segments:
• New build projects
• Maintenance, renovation and repair
• Building products and components
Consumer
Goods
We are active in two sub-segments:
• Consumer durables
• Consumer packaged goods
3434
43%
of revenue
18%
of revenue
Strategic performance | AkzoNobel Report 2015 Transportation
We are active in three sub-segments:
• Automotive repair
• Automotive OEM, parts and assembly
• Marine and air transport
43%
of revenue
17%
of revenue
Industrial
We are active in two sub-segments:
• Natural resource and energy industries
• Process industries
18%
of revenue
22%
of revenue
35
AkzoNobel Report 2015 | Strategic performance Buildings
and Infrastructure
We provide specialty
chemicals used in the
manufacture of building and
infrastructure materials, as
well as paints and coatings
that are applied to building
interiors and exteriors.
The Maintenance, renovation
and repair sub-segment
is particularly important
to our Decorative Paints
Business Area.
3636
Trends
Much of this end-user segment has a
very strong regional component and the
regional outlook has been changing.
The downward adjustment is particularly
apparent in the Chinese New build projects
sub-segment; in some parts of this market,
we are even seeing contraction. This is
important because Chinese new build
is proportionately larger than European
new build and much larger than in North
American new build. Growth expectations
for the Chinese Maintenance, renovation
and repair sub-segment have also been
adjusted downwards, but the European
and North American regions are much
larger in this sub-segment due to the size
of the installed base.
Growth rates are increasing somewhat in
Europe, where the market has been flat or
even contracting over the last few years.
Growth rates are expected to increase in
some countries where the market has been
flat or decreasing in size, such as France,
Italy and Germany. On the other hand,
in the UK – where the market has been
recovering from the 2008-2009 recession
and growth rates have been above GDP
levels – the expectation is that growth
rates going forward will moderate.
We are therefore forecasting some growth
in Buildings and Infrastructure overall
in Europe.
Outside of China and Europe, analysts
expect a return to growth in markets that
have faced more recent macro-economic
difficulties such as Russia and Brazil.
We see limited evidence of such rapid
recovery. The two regions where growth
rates are expected to remain stronger
are North America and India. However,
our benefit from this will be limited,
as we do not sell decorative paints in
North America.
Future sustainability developments
According to the World Business Council
for Sustainable Development’s (WBCSD)
Vision 2050, 70 percent of the world’s
population will live in urban areas and
95 percent of new building stock will use
zero net energy by 2050. The proportion
of buildings heated by fossil fuels will
also fall below 6 percent. Sustainability
issues beyond energy use and carbon
emissions, such as indoor air quality, will
also have a significant impact on product
and service demand.
Implications for strategy and actions
Although growth rates in China are
expected to be lower than in the past, the
market is large and there is still significant
growth potential. We will therefore continue
to build our brands and capability in
this important region. We will also make
use of product and margin management
approaches to achieve appropriate
profitability levels. In Europe, North
America and India, we will capitalize on
organic growth opportunities as they arise.
In Brazil and Russia, we need to ensure
flexibility and agility to capture the benefits
of a return to growth when it occurs.
Strategic performance | AkzoNobel Report 2015 Total construction 1
Bubble size based on 2015 output
Total market new build construction 2
Real 2010 $ billion, output
Maintenance, renovation and repair 2, **
Real 2010 $ billion, output
Expected CAGR 2015-2020 (% p.a.)
10
India
30
25
20
China
15
-0.6% p.a.
7.5% p.a.
Europe*
5
10
3.2% p.a.
Brazil
North America
3.9% p.a.
Actual CAGR 2010-2015 (% p.a.)
5
-1.5% p.a.
China 4.6% p.a.
Europe* 2.2% p.a.
North America 2.7% p.a.
India 6.7% p.a.
Brazil -0.3% p.a.
12
10
8
6
4
2
-0.1% p.a.
3.5% p.a.
6.1% p.a.
4.6% p.a.
-2.0% p.a.
Europe* 3.0% p.a.
North America 3.5% p.a.
China 4.0% p.a.
India 6.5% p.a.
Brazil 0.1% p.a.
-5
0
5
10
2012
2013
2014
2015
2016
2017
2018
2012
2013
2014
2015
2016
2017
2018
1 Source: IHS.
2 Source: IHS/Construction IC.
* Europe includes Turkey and Russia.
** Excluding infrastructure and industrial construction
Decorative paints
(interior and exterior)
Fire protection
coatings
Wood
coatings
Coil coatings
Architectural
powders
Polymer powders for
cement admixtures
Chemicals for
building plastics
Anti-graffiti
systems
Protective
coatings
Cellulosic chemicals in
decorative paint
Surfactants
in asphalt
Solar reflective
coatings
37
3737
AkzoNobel Report 2015 | Strategic performance Transportation
The Transportation end-
user segment is particularly
important for our Performance
Coatings Business Area.
We supply a comprehensive
range of advanced coatings
and color technologies
for virtually every type of
transport, including cars,
commercial vehicles, ships,
yachts and airplanes. We also
produce specialty chemicals
used in the production of
automotive systems and
components, with particular
emphasis on automotive
plastics. In addition, we supply
surfactants for automotive
fuels and lubricants.
Trends
The outlook for the Automotive OEM
parts and assembly sub-segment remains
reasonably strong globally, although our
benefit from this is limited as we do not
compete in the mainstream automotive
OEM coatings business. Growth rate
expectations are particularly high in
China, which is now the largest region for
automotive production. Expectations for
growth are more modest in Europe, where
some recovery is required in order to
reach pre-recession production levels.
North America is an exception to the
positive growth outlook, with production
having returned to pre-recession levels.
Growth going forward is therefore
expected to be lower than overall North
American GDP growth. The trend towards
smaller, lighter weight cars is supporting
the continued conversion to plastics,
so the outlook for automotive plastics
is disproportionately strong, which is
important for AkzoNobel, as we are a
leader in automotive plastic coatings.
Growth expectations in the Automotive
repair sub-segment are less robust,
although the market is more stable and
less cyclical than in the other automotive
sub-segment. Key drivers for growth are
the number of vehicles on the road, the
insurance rate and the repair rate. Higher
growth is therefore expected in countries
such as Brazil, Russia, India and China,
where growth rates in these key drivers are
expected to be higher.
In the Marine and air transport end-user
segment, we see some evidence that
the bottom of the cycle has been reached
in marine new build, as production is
now very modestly increasing. However,
we are not expecting a sustained recovery
because new contracts are declining
and the order book is falling as a result.
Furthermore, the marine maintenance
market is continuing to grow slowly as
freight rates have still not recovered
significantly, dampening demand for
maintenance activities. Aerospace is a
much smaller market than marine for
AkzoNobel, but we do expect continued
robust demand growth.
Future sustainability developments
Based on the WBCSD Vision 2050, by
2050 there will be an 80 percent reduction
in energy use by light duty vehicles.
In addition, the WBCSD is expecting
a 50 percent drop in energy use in
freight transportation.
Implications for strategy and actions
As products with sustainability and/or cost
benefits in production and in use continue
to grow disproportionately, we will
continue to innovate and provide products
that lead to reduced carbon use and
lower costs. Aesthetics will also remain
important and we will therefore continue to
innovate in terms of products and services
that support differentiated color and finish.
In addition, we will ensure that we are well-
positioned geographically as the vehicle
car park continues to increase outside of
mature markets.
3838
Strategic performance | AkzoNobel Report 2015 Light vehicle production 1
Passenger cars and light vehicles (units)
Vehicle car park 1
Passenger cars and light vehicles (units)
30
25
20
15
China 4.8% p.a.
40
Europe 2.1% p.a.
North America 1.7% p.a.
35
30
25
Europe 1.0% p.a.
North America 1.7% p.a.
China 10.5% p.a.
India 10.0% p.a.
Brazil 5.2% p.a.
Brazil 2.6% p.a.
India 10.2% p.a.
Marine new build 2
Compensated gross tonnage, indexed to
January 2008
Deliveries
Order book
180
100
20
2015
2016
2017
2018
2019
2020
2015
2016
2017
2018
2019
2020
2008
2009
2010
2011
2012
2013
2014
2015
1 Source: IHS.
2 Source: Clarkson Research Services Limited.
Vehicle refinish
paint for repairs
Surfactants in fuels
and lubricants
Specialty chemicals
used in automotive
plastics
Marine
coatings
Specialty coatings
for interiors and
exteriors
Powder coatings
for components
Aerospace
coatings
Protective coatings
(linings)
Yacht
coatings
3939
AkzoNobel Report 2015 | Strategic performance Consumer Goods
The Consumer Goods end-
user segment is important
for both our Performance
Coatings and Specialty
Chemicals Business Areas.
We supply liquid and powder
coatings that play both an
aesthetic and protective
function in producing furniture,
consumer electronics,
domestic appliances and
packaging for food and
beverage. Our specialty
chemicals are either vital to
the production process or are
key functional ingredients in
a wide variety of consumer
durables and in consumer
packaged goods for cleaning,
dishwashing, personal care
and pharmaceutical products.
Trends
As a general rule, expected growth in
Consumer Goods roughly follows GDP
growth. Currently, this translates into
above average growth in North America,
balanced by more moderate growth in
Europe. In China, growth rates have fallen
from the high rates experienced in the
recent past, but we still expect growth due
to a combination of domestic demand and
exports to North America, where growth
rates are reasonable.
There have been some shifts in outlook in
the Consumer durables sub-segment. For
example, the growth outlook has improved
in mature market durables related to the
Buildings and Infrastructure end-user
segment, such as furniture. Currently,
external analysts are predicting higher
growth rates for furniture than for domestic
appliances, which was not the case in
the recent past. In the more technology-
oriented parts of this sub-segment, trends
differ significantly by type of product. For
example, double digit growth is expected
in tablets, but growth in other areas is
more limited.
In terms of production, there is an
ongoing shift in many sectors to the
emerging markets. Looking at domestic
appliances, for example, there is now
more production in Brazil, Russia, India
and China than there is in North America
and Western Europe. Expected growth
rates are also higher outside of mature
markets. However, it is worth noting that in
many cases, design and decision-making
processes are still based in North America
or Western Europe.
In the Consumer packaged goods
sub-segment, we expect growth slightly
below regional GDP growth rates in both
emerging and mature geographies. This
sub-segment tends to be more stable and
less cyclical over time.
Future sustainability developments
Based on the WBCSD Vision 2050,
consumer durables are expected to
last longer and recycling of packaging
will increasingly be built into business
models. By 2050, the WBCSD forecasts
that people will only use five tons of
non-renewable materials each, down from
today’s 85 tons (US).
Implications for strategy and actions
As demand growth and production in many
parts of the Consumer Goods end-user
segment shifts geographically, we will
ensure we have the right production,
sales and technical service organizations
in the right geographic locations. These
organizations will also work effectively
across regions in terms of design and key
account management, where appropriate.
To capture organic growth opportunities,
we will continue to utilize differentiated
business models with appropriate value
and cost trade-offs to serve both premium
and mass markets. Finally, we will ensure
that our products provide new or better
functionality, particularly with regard to
sustainability levels.
4040
Strategic performance | AkzoNobel Report 2015
Domestic appliance production 1
Real 2010 $ billion, value added
Furniture production 1
Real 2010 $ billion, value added
Food and beverage production 1
Real 2010 $ billion, value added
Brazil, Russia, India, China 5.0% p.a.
Western Europe and North America 1.7% p.a.
50
40
30
20
80
70
60
50
40
30
Western Europe and North America 2.5% p.a.
Brazil, Russia, India, China 6.0% p.a.
Western Europe and North America 2.3% p.a.
Brazil, Russia, India, China 4.6% p.a.
60
50
40
30
2015
2016
2017
2018
2019
2020
2015
2016
2017
2018
2019
2020
2015
2016
2017
2018
2019
2020
1 Source: Oxford Economics.
Surfactants used in
cleaning and personal
care products
Sports equipment
coatings
Powder
coatings
Wood
finishes
Specialty
finishes
Chelates in
dishwasher
detergents
Salt
Powder
coatings
Packaging
coatings
Specialty
finishes
Wood
finishes
4141
AkzoNobel Report 2015 | Strategic performance Industrial
The Industrial end-user
segment is the largest
segment for our Specialty
Chemicals Business Area.
We sell chemicals into a
wide variety of applications,
including metals and mining,
agrochemicals, plastics
(polymers) and pulp, where
they play an important
functional role during
production or in the end
product. We also sell liquid
and powder coatings into the
oil and gas, metals and mining
and power industries. These
coatings are largely used
for their functional benefits,
such as fire and corrosion
protection.
Trends
Lower oil prices are having a significant
short to medium term impact on the
outlook for the Industrial end-user
segment. For example, in oil and gas new
construction, we are seeing drastically
reduced upstream investment. Meanwhile,
some upstream businesses are not
profitable and we are seeing a shutdown of
high cost production units.
Lower oil and gas prices also have an
impact on chemicals. In the Middle East,
downstream chemical investments are
being postponed or even cancelled. In
North America, there has been a reduction
in the cost advantage in terms of shale
gas-based ethylene feedstocks and this is
moderating regional chemical growth rates.
Longer term, we expect disproportionately
high growth in regions with access to low
cost oil, gas and chemical feedstocks,
such as the Middle East (due to oil) and
North America (due to shale gas). However,
there are currently record trade surpluses
in chemicals in Europe and we expect this
to continue, particularly in the chemical
sectors relevant to AkzoNobel. Due to local
demand, we also expect continued growth
in the large and important Chinese market,
albeit with lower growth rates than we
have seen in the recent past.
From a sub-segment perspective, we
continue to expect above GDP growth
in many polymer markets, where there
is continued demand growth as global
wealth increases and products continue
to be converted to plastics for a variety
of reasons, including weight reduction.
Beyond plastics, there are differences in
expected growth rates for various Process
industries sectors relevant to AkzoNobel.
We expect GDP-level growth in segments
such as agrochemicals, with significant
regional differences in terms of growth
rates, as well as substantial year-to-year
volatility. While global growth in bleached
chemical pulp is below GDP and the
market is expected to contract in North
America, we expect continued growth
in South America in pulp due to the cost
competitiveness of the region.
Future sustainability developments
The WBCSD Vision 2050 indicates that
we should expect a four to ten-fold
improvement in the eco-efficiency of
resources and materials by 2050. Waste to
landfill will increasingly reduce as closed
loop processes become more common.
Implications for strategy and actions
Where appropriate, while low oil and gas
prices continue, we will ensure that we
focus our organic growth efforts on higher
growth areas, such as mining, power and
pulp from a sector perspective and
North America from a regional perspective.
We will also optimize our cost position
in Europe and China, where the cost
position is less competitive in the long
term. While we do this, we will continue
to improve sustainability levels throughout
the value chain.
4242
Strategic performance | AkzoNobel Report 2015 Brent crude oil price 1
$ per barrel, freight-on-board North Sea
Chemical production 2
Real 2010 $ billion, value added
Key industrial sectors 3
growth rate % p.a.
Spot price monthly average
Spot price annual average
350
Crop protection chemicals, 2014-2019* (varies by region)
Polymers, 2015-2018** (varies by type of polymer)
Bleached chemical pulp, 2015-2018** (varies by region)
140
100
60
20
300
250
200
150
100
50
0
China 5.7% p.a.
North America 4.1% p.a.
Western Europe 1.6% p.a.
Brazil, Russia, India 4.5% p.a.
0.5-6.0
1.8-4.8
-0.8-3.8
2008
2009
2010
2011
2012
2013 2014
2015
2015
2016
2017
2018
2019
2020
-1
0
1
2
3
4
5
6
1 Source: IHS.
2 Source: Oxford Economics.
3 Sources: PhillipsMcDougall for crop protection; ICIS supply & demand
database for polymers; RISI for bleached chemical pulp (BCP).
* Based on 2014 real US$.
** Based on volume.
Caustic soda
De-icing salt
Organic
peroxides
Functional powder
coatings used in pipes
Protective
coatings
Metal alkyls
Chlorine
Bleaching chemicals
Ethylene
amines
Surfactants and
chelates for well
stimulation
PLASTICS
PULP
43
4343
AkzoNobel Report 2015 | Strategic performance
Strategic targets: 2015 financial performance
Return on sales (ROS)
Return on investment (ROI)
Net debt/EBITDA
We use return on sales (ROS) as a performance indicator
to reflect profitability relative to revenue. ROS as a target
will focus management on delivery and quality of profits.
ROS is defined as operating income as percentage
of revenue.
We use return on investment (ROI) as a performance
indicator to reflect profit relative to invested capital. ROI as
a target will focus management on delivering value through
returns in excess of our cost of capital. ROI is defined as
operating income divided by average invested capital.
Exceeded our 2015 target
• Positive impact of process optimization
• Lower costs
• Reduced restructuring expenses as we move into a
stronger emphasis on continuous improvement
Exceeded our 2015 target
• Improved profitability as described in the ROS section
• Average invested capital increased compared with
2014 due to currency effects and temporary and
planned inventory increase as part of the scheduled
footprint optimization
Net debt/EBITDA reflects our strategy to maintain a strong
investment grade rating (or credit rating).
Exceeded our 2015 target
• EBITDA increased significantly as a result of process
optimization, lower costs, reduced restructuring expenses
and favorable currency developments
• Net debt decreased due to positive free cash flow
Target 9.0%
Return on sales (ROS) development
Operating income in % of revenue
Target
14.0%
Return on investment (ROI) development
Operating income/average invested capital in %
Target
<2.0
Net debt/EBITDA
Ratio
Target
6.6
6.9
9.6
10.0
10.6
9.0
15.0
14.0
2013
2014
2015
2015
2013
2014
2015
2015
1.0
1.0
2013
2014
0.6
2015
<2.0
2015
4444
Strategic performance | AkzoNobel Report 2015 Strategic targets: 2015 sustainability performance
Eco-premium solutions with
customer benefits
Our 2020 target is to achieve 20 percent of revenue from
products and services which provide customers and
consumers in our downstream value chain with a significant
sustainability advantage compared with the most
commonly available equivalent commercial products or
industrial processes.
Continued progress towards our 2020 target
• Percentage of revenue from eco-premium solutions with
downstream benefits remained stable at 19 percent
• Revenue increased from sales growth from new and
existing eco-premium solutions in all Business Areas
• This was offset by “mainstreaming” of a few of our
coatings products and revenue growth from products
which are not eco-premium
Cradle-to-grave carbon footprint
Resource Efficiency Index (REI)
Our ambition is to reduce our cradle-to-grave carbon
footprint by 25-30 percent per ton of sales between 2012
and 2020.
Some progress towards our 2020 target
• Carbon footprint per ton of sold product has decreased
The Resource Efficiency Index is defined as gross margin
divided by cradle-to-grave carbon footprint – reported as an
index. We are monitoring this index, and our aim is to use it
to drive further improvements in resource efficiency across
the value chain.
3 percent since 2012. Absolute footprint is down
10 percent
Improvement achieved
• REI increased to 113 from 2012 base of 100, though
• Solid improvements due to lower footprint energy sources,
trend is variable
including renewables, efficiency gains at our energy
intensive facilities, and increased sales of lower carbon
footprint coatings products
• Margin increases across the Business Areas from sales of
higher added value products and positive currency effects
• Some improvement in carbon footprint performance due
• Our 2020 target remains a challenge as we continue to
focus on working together with suppliers and customers
to deliver improvements across the value chain
to energy sourcing and efficiency gains, and sales of lower
footprint products
Target 20%
25-30%
Eco-premium solutions with customer benefits
in % of revenue
Cradle-to-grave carbon footprint
% reduction CO2(e) per ton of sales from 2012
Resource Efficiency Index
gross margin/CO2(e) indexed
Target
Target
17
18
19
19
20
25-30
95
94
100
98
96
113
0
2
-4
3
2012
2013
2014
2015
2020
2012
2013
2014
2015
2020
2010
2011
2012
2013
2014
2015
For more details see Sustainability statements Note 4.
For more details see Sustainability statements Note 5.
For more details see Sustainability statements Note 4.
4545
AkzoNobel Report 2015 | Strategic performance How we created value in 2015
By bringing more value to our
customers, investors, employees
and society in general, we can
better position ourselves for
growth and achieve our strategic
vision of leading market positions
delivering leading performance.
Economic value
Financial overview
We delivered on our 2015 targets. Revenue was up 4
percent, due to 6 percent favorable currency effects, partly
offset by divestments and lower volume. Operating income
was up 59 percent at €1,573 million, reflecting the positive
effects of process optimization, lower costs, reduced
restructuring expenses, favorable currency developments
and the impact of incidental items. ROS increased to 10.6
percent (2014: 6.9 percent). ROI increased to 15.0 percent
(2014: 10.0 percent).
Summary of financial outcomes
In € millions
Revenue
Operating income
Operating income excluding
incidental items
ROS (in %)
ROS excluding incidental items
(in %)
∆%
4
59
36
2014
2015
14,296
14,859
987
1,072
6.9
7.5
1,573
1,462
10.6
9.8
Average invested capital
9,871
10,475
Moving average ROI (in %)
Moving average ROI excluding
incidentals (in %)
10.0
10.9
15.0
14.0
EBITDA
Capital expenditures
Net cash from operating activities
Net debt
1,690
588
811
1,606
2,088
651
1,136
1,226
24
40
Net income attributable to
shareholders
Earnings per share from
total operations (in €)
546
979
79
2.23
3.95
Revenue development in % versus 2014
Increase
Decrease
-1%
0%
-1%
6%
4%
Volume
Price/
mix
Divest-
ments
Exchange
rates
Total
Revenue by destination in %
D
C
F
E
B
A
A Mature Europe
B Asia Pacific
C North America
D Latin America
E Emerging Europe
F Other regions
36
27
17
10
7
3
Revenue in € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
4,949
4,883
5,571
5,589
4,988
5,955
Adjusted earnings per share (in €)
2.81
4.02
43
4,174
3,909
4,007
Number of employees
47,200
45,600
2013
2014
2015
4646
Strategic performance | AkzoNobel Report 2015
Revenue
Revenue was up 4 percent, due to 6 percent favorable currency
effects, partly offset by divestments and lower volumes.
• Revenue in Decorative Paints was up 3 percent. Revenue
was up in Asia, flat in Europe and down in Latin
America. Volumes were down 1 percent overall for the
full-year, with positive developments in Asia offset by
Latin America and Europe
• In Performance Coatings, revenue was up 7 percent,
driven by favorable price/mix and currencies. Volumes
were down 2 percent across the segments, impacted
by market developments in Brazil and ongoing spending
declines in the global oil and gas industry
• In Specialty Chemicals, revenue was up 2 percent
due to favorable currency effects, partly offset by
divestments and adverse price effects. Overall volumes
were flat. Growth in some segments compensated for
lower demand in oil drilling segments, impacting Surface
Chemistry and Functional Chemicals. Growth in China
was subdued and demand remained stable in Europe
Operating income
Operating income increased 59 percent to €1,573 million,
reflecting the positive effects of process optimization, lower
costs, reduced restructuring expenses, favorable currency
developments and the impact of incidental items.
• In Decorative Paints, operating income increased by
39 percent as a result of the new operating model,
lower costs, reduced restructuring expenses and
currency developments
• In Performance Coatings, operating income increased
45 percent due to performance improvement initiatives,
management delayering, lower costs, reduced restructuring
expenses and currencies
• In Specialty Chemicals, operating income increased by
20 percent, with significant savings from continuous
improvement programs, and incidental items
Raw material prices were lower, although in certain regions
foreign currency effects adversely impacted raw material costs
in local currencies.
Divestments
The divestment of the Paper Chemicals business was
completed in Q2 2015 and accounts for the divestment
impact in Specialty Chemicals.
Operating income in € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
297
525
398
2013
508
545
248
2014
609
792
345
2015
Cash flows and net debt
Operating activities in 2015 resulted in cash inflows of
€1,136 million (2014: €811 million). The change was
mainly due to higher profit for the period and improved
working capital, partly offset by higher cash outflow from
restructuring programs.
Net debt at year-end 2015 was lower at €1,226 million
compared with year-end 2014 (€1,606 million).
In 2015, a €621 million bond was repaid from existing
resources.
4747
AkzoNobel Report 2015 | Strategic performance Invested capital
Invested capital at year-end 2015 totaled €9.8 billion,
slightly down on year-end 2014, mainly as a result of
lower operating working capital, driven by improvements
in inventories.
In 2015, we invested €651 million in property, plant
and equipment.
Allocation of 2015 capital expenditures
of €651 million in %
(4.4 percent of revenue)
A Decorative Paints
B Performance Coatings
C Specialty Chemicals
25
23
52
C
A
B
Eco-premium solutions
Revenue from eco-premium solutions with downstream
benefits remained stable at 19 percent of sales. Revenue
increased from sales growth of new and existing
eco-premium solutions in all Business Areas. This was offset
by “mainstreaming” of a few of our coatings products and
revenue growth from products which are not eco-premium.
We maintain our intention to lead by example by improving
the environmental/social performance of our products and
processes, which we measure through our development of
eco-premium solutions. They are a fundamental driver of our
Planet Possible agenda for creating more value from fewer
resources and minimizing the environmental footprint of the
products we sell and the processes we use to manufacture
them. For more details see Sustainability statements Note 4.
Dividend
Our dividend policy is to pay a stable to rising dividend. We
will propose a 2015 final dividend of €1.20 per share, which
would make a total 2015 dividend of €1.55 (2014: €1.45)
per share, up 7 percent. There will be a stock dividend
option with cash dividend as default.
Dividend in €
1.45
1.45
1.55
2013
2014
2015
Eco-premium solutions with customer benefits
in % of revenue
Earnings per share total operations in €
Innovation
We continue to invest in research, development and
innovation to fulfill future customer needs and fuel our
targeted growth in revenue share of eco-premium solutions
with customer benefits.
Target
17
18
19
19
20
2012
2013
2014
2015
2020
Innovation investments
research and development expenses in € millions
We may appear to be close to realizing our 2020 target, however, we measure
our performance across the whole value chain, against solutions available in the
marketplace. Our year-on-year progress is impacted not only by our own innovation
drive, but also by competitor activity and legislation changes.
3.95
3.00
2.23
2013
2014
2015
373
363
347
2013
2014
2015
4848
Strategic performance | AkzoNobel Report 2015 Interest
Net financing expenses decreased, mainly due to lower
interest expenses on net debt as a result of repayment of
high interest bonds and lower interest on provisions.
Income tax
The full-year effective tax rate was 28 percent (2014: 30
percent). The tax rate was lower as a result of non-taxable
income such as the gain on the divestment of the Paper
Chemicals business and prior year adjustments.
Income tax paid in € millions
230
258
261
Environmental value
Cradle-to-grave carbon footprint
Cradle-to-grave carbon footprint is our prime measure of
resource efficiency. Carbon footprint per ton of sold product
has decreased 3 percent since 2012. Absolute footprint is
down 10 percent. We achieved solid improvements due
to lower footprint energy sources, including renewables,
efficiency gains at our energy intensive facilities, and
increased sales of lower carbon footprint coatings products.
Our 2020 ambition – to reduce our cradle-to-grave carbon
footprint by 25-30 percent per ton of sales between 2012
and 2020 – remains a challenge, although we continue to
focus on working with suppliers and customers to deliver
improvements across the value chain. For more details see
Sustainability statements Note 5.
Energy
Renewable energy is an important aspect of the
improvements required to achieve our 2020 strategic carbon
footprint ambition. The proportion of renewable energy in our
operations increased to 38 percent (2014: 34 percent).
Our renewable energy supply strategy has three focus
areas: protecting our current renewable share, participating
in cost-effective, large energy ventures, and exploring
commercially feasible on-site renewable energy generation.
In 2015, we took steps to increase the share of renewables
in our energy supplies. This included a significant contract
for renewable steam in the Netherlands; record production
at the Nordic VindIn wind parks in which AkzoNobel
participates; and a contract for wind energy at 14 of our sites
in the Netherlands, including the new AkzoNobel Center in
Amsterdam, which has 100 percent green energy. For more
details see Sustainability statements Notes 5 and 15.
2013
2014
2015
Outlook
We expect 2016 to be a challenging year. Difficult market
conditions continue in Brazil, China and Russia. No
significant improvement is anticipated in Europe, particularly
in the Buildings and Infrastructure segment. Deflationary
pressures continue and currency tailwinds are moderating.
Cradle-to-grave carbon footprint
% reduction CO2(e) per ton of sales from 2012
Target
25-30
0
2
-4
3
2012
2013
2014
2015
2020
Total energy in % by source
E
D
C
A
B
A Renewable energy
B Natural gas
C Coal
D Nuclear
E Other fossil fuels
38
32
16
12
2
4949
AkzoNobel Report 2015 | Strategic performance
Raw materials
Bio-based (renewable) materials also contribute to our
sustainability agenda. A considerable share of AkzoNobel’s
environmental footprint is embodied in the raw materials we
buy, and most bio-based materials exhibit lower footprints.
In 2015, 11 percent of all our organic raw materials came
from bio-based (renewable) sources (2014: 13 percent).
This is 5 percent (2014: 7 percent) of the total volume of raw
materials purchased, including other raw materials such as
salt, minerals and clays. The decrease was mainly the result
of divestments in our Specialty Chemicals businesses.
We also made progress with our existing partnerships to tap
into alternative feedstock sources which are coming on line,
as well as announcing additional collaborations involving
a number of our key raw materials. For more details see
Sustainability statements Note 5.
Total volume of raw materials
in % per source
46%*
A
Operational eco-efficiency program
The focus of the operational eco-efficiency (OEE) agenda is
to increase raw material efficiency, reduce consumption of
energy, decrease emissions and production of waste.
Our company indicator combines energy, water, waste and
air emissions, as well as cost elements.
In 2015, we achieved a footprint measure improvement of
23 percent (since 2009). Many of our businesses achieved
eco-efficiency footprint improvements. However, due to
product mix changes and the consolidation of a joint venture,
the results are lower compared with the previous year for
the first time since we started monitoring performance.
Additional programs are being put in place to accelerate
progress towards our 40 percent ambition.
Improvements include many small site contributions,
upgrading of existing processes, rationalization of the
manufacturing footprint and application of best available
technology for new investments. For more details see
Sustainability statements Notes 15-19.
OEE footprint improvement
% reduction from 2009
Ambition
C
B
* 11 percent of organic
raw materials are from
renewable sources.
40
30
Waste
Effective waste management helps to increase raw material
efficiency in our manufacturing operations, while reducing
both our environmental footprint and costs.
Total waste per ton of production generated and leaving our
sites was up by 5 percent to 9.0 kg/ton. The total waste
volume increased to 155 kilotons, an increase of 4 percent.
The focus on waste over recent years has resulted in a
reduction in waste at the majority of our sites. In 2015,
incidental activities at some sites led to a one-off waste
increase of 6 kilotons. For more details see Sustainability
statements Note 18.
Total waste
in kilotons
Reusable
Non-reusable
11.0
118
Total kg per ton of production
9.0
8.6
9.0
96
85
65
77
72
79
75
24
24
23
2012
2013
2014
2015
11
13
2011
2012
2013
2014
2015
2015
2017
The OEE footprint is calculated from the weighted average of nine footprint parameters
and production volume.
Waste means any substance or object arising from our routine operations which we
discard or intend to discard, or we are required to discard. Reusable waste is waste
which is used e.g. for resource recovery, recycling, reclamation, direct re-use or
alternative uses for example composting. All other waste is non-reusable waste.
A Renewable raw materials (bio-based)
B Fossil-derived materials (petrochemicals)
C Inorganic materials (e.g. salt, minerals, clays)
5
41
54
5050
Strategic performance | AkzoNobel Report 2015
Community involvement
Our Community Program encourages sites and individuals
to take part in projects where our products/resources
and the skills and knowledge of employees can benefit the
wider community on a sustainable basis. In the past ten
years, the program has become firmly embedded in our
worldwide organization. For more details see Sustainability
statements Note 14.
Cumulative Community Program involvement
cumulative since 2005
Projects (number)
Volunteers (number)
Support (€ million)
13.0
9,000
14.0
11,000
16.0
16,400
15.0
13,500
1,931
2,108
2,260
2,385
2012
2013
2014
2015
Social value
At year-end 2015, our workforce totaled 45,600 employees
(year-end 2014: 47,200 employees). The reduction was
mainly due to divestments and continuing restructuring
activities. We also added to the headcount, mainly through
new hires in high growth markets.
We will continue to centralize and outsource back office
activities throughout the world. For more details see
Consolidated financial statements Note 4.
Employees
45,600 at year-end 2015
Employees by Business Area in%
ViewPoint score employee engagement
1 to 5 scale
Ambition
3.80
3.88
3.97
4.03
>4.00
>4.20
2012
2013
2014
2015
2015
2020
Safety
The overall total reportable rate (TTR) for employees and
supervised contractors decreased to 1.6 (2014: 1.8). We
achieved our 2015 target a year early and performance
continues to improve. This improvement in the number
of injuries also extends to independent contractors and
coincides with continued implementation of our people
safety programs. For more details see Sustainability
statements Note 8.
A Decorative Paints
33
B Performance Coatings 42
C Specialty Chemicals
D Other
20
5
D
C
B
A
Employee and supervised contractors total
reportable injuries frequency rate
Ambition
2.4
2.3
1.8
1.6
<2.0
<1.0
2012
2013
2014
2015
2015
2020
Employee engagement
One of our key measures of progress in the area of culture
is employee engagement, which we measure through
an annual employee engagement survey. We’ve seen an
increase in engagement score every year since we started
the survey in 2010. In 2015 we exceeded our ambition of
a 4.00 engagement score. In the context of our ongoing
change and restructuring, this is a positive signal. For more
details see Sustainability statements Note 12.
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AkzoNobel Report 2015 | Strategic performance
Risk management
Doing business inherently
involves taking risks. By taking
balanced risks we strive to be
a successful and respected
company. Risk management
is an essential element of our
corporate governance and
strategy development.
We continuously strive to foster a high awareness of
business risks and internal control, geared towards
preserving our risk appetite and providing transparency in
our operations. The Executive Committee is responsible
for managing the risks associated with our activities
and, in turn, for the establishment and adequate functioning
of appropriate risk management and control systems
(see Statement of the Board of Management in the
Leadership section).
5252
Enterprise
Risk Management
process
Supervisory
Board
Executive Committee
Top 10 risks + Risk response
Risk identification
and assessment
Business Areas/Corporate
functions/Countries
Top 10 risks + Risk response
Risk profile
Risk response
per risk profile
Actions
Risk profile +
Risk response
Business units/
Strategic market units
Top 10 risks + Risk response
Areas of major risk exposure
(businesses, projects, sites etc.)
Top 10 risks + Risk response
Enterprise
Risk Management
reporting
Risk consolidation
Risk transparency
Strategic performance | AkzoNobel Report 2015 Our risk management
framework
Through our risk management framework, we seek to
provide reasonable assurance that our business objectives
can be achieved and our obligations to customers,
shareholders, employees and society can be met. Our
risk management framework is in line with the Enterprise
Risk Management – Integrated Framework of COSO and
the Dutch Corporate Governance Code. The Executive
Committee reviews our risk management process,
control systems and our major business risks, which are
subsequently reviewed by the Supervisory Board.
Risk appetite
Clarity on risk appetite, along with the boundaries that
determine the freedom of action or choice in terms of risk
taking and risk acceptance, is provided to all managers.
Risk boundaries are set by our strategy, Code of Conduct,
core principles and values, authority schedules, policies and
corporate directives. Our risk appetite differs per objective
area and type of risk:
• Strategic: In pursuing our strategic ambitions, we are
prepared to take considerable risk related to achieving
our performance, innovation and sustainability objectives.
Returns on investment in the development of innovative
products and sustainable solutions are never certain.
Yet considerable funds and effort are spent on research,
development and innovation, even in less certain
economic circumstances
• Operational: With respect to operational risks, we seek to
minimize the downside risk from the impact of unforeseen
operational failures within our businesses
• Financial: With respect to financial risks, we have a
prudent financing strategy and a strict cash management
policy and are committed to maintaining strong investment
grade credit ratings. Our financial risk management and
risk appetite are explained in more detail in Note 22 of the
Consolidated financial statements
• Compliance: We do not permit our employees to take
any compliance risk and we take appropriate measures in
the event of any breach of our Code of Conduct. See the
Governance and compliance section for more details
successfully reduced the financial impact of the fraud in
2015 and launched an extensive fraud awareness campaign.
We will continue to make fraud awareness a standard part of
our regular training programs globally.
Our initial focus is on those major risks that may impact
the achievement of our strategy in the next three to five
years (medium-term risks). In addition, we recognize that
there are also relevant risk factors beyond the five-year time
horizon which could impact our strategy (long-term risks).
Both risk categories are included in this chapter with the
understanding that these are not exhaustive lists. There may
be current risks that the company has not fully assessed, or
that are currently identified as not having a significant impact
on the business, but which, at a later stage, could develop
into a material impact. Our risk management systems
endeavor to ensure the timely identification and actioning of
risk trends.
Risk management in 2015
Enterprise Risk Management is a company-wide activity
under the responsibility of the Executive Committee. It
includes a bottom-up process which aims to provide full
coverage of the organization and ensure that we focus on
the areas of major risk exposure. The scoping of our 2015
risk management activities was performed by the Executive
Committee, business management and corporate directors,
in association with the risk management function. In addition
to focusing on the coverage of our organization, emphasis is
put on key strategic projects and those parts of the company
that are most affected by change.
During the year, we facilitated 89 Enterprise Risk
Management workshops. In these workshops, more than
1,800 unique risk scenarios were identified and prioritized
by the responsible management teams and functional
experts. All major risks were responded to by the unit
that identified them. The outcomes of all risk analyses
are included in risk profiling and trend analysis and made
available to higher management. Risk profiles and trends
were shared by managers across the company. In the
bottom-up consolidation process, the risks were taken to
the next management level, where they were re-assessed,
either because of the materiality of the risk exposure and/or
because of the accumulated effect.
As reported in last year’s annual report, during the fourth
quarter of 2014, one of the company’s subsidiaries in the
US was the target of an external fraud. Immediate actions
were taken. The investigation found that customary and
appropriate controls were in place, but those controls were
breached, and that this was an isolated event not linked
to the operations of the company or its businesses. We
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AkzoNobel Report 2015 | Strategic performance
Medium-term risks
The table below summarizes the major risk factors for the company in the next three to five
years. The symbols represent management’s assessment of how these risks are expected to
develop compared with the previous year.
External – Strategic
• Worsening of economic conditions
• International operations
Internal – Strategic
• Innovation and identification of
major transforming technologies
Internal – Operational
• Attraction and retention of talent
• Production process risks
• Management of change
External – Operational
• Sourcing of raw materials
and energy
• Product liability
• Environmental risks and liabilities
• Information Technology
External – Financial
• Post-retirement benefits
• Access to funding
• Fluctuations in exchange rates
• Decline of asset values
External – Compliance
• Complying with laws and regulations
Risk has been assessed to increase
Risk has been assessed to decrease
Risk has been assessed to remain fairly stable
5454
External - Strategic
Worsening of economic conditions
The global economy remains fragile and it continues to be
difficult to predict customer demand and raw material costs.
AkzoNobel is susceptible to decreased growth rates within
high growth markets and/or continued economic and market
downturn in mature markets. The effects could lead to a
decline in demand and deteriorating financial results,
which in turn could result in the company not realizing its
financial targets.
Mitigating actions
• Continue our strategy to bring down our operational cost
base and reduce complexity
• Leverage our Global Business Services to further
standardize core functional processes in all regions across
the organization
• Further deploy the commercial excellence programs and
more sustainable product solutions to capture organic
growth and offset the effects of decreased economic
growth rates
• Have contingency plans prepared for a selected
number of scenarios, dealing with geographical or
segment slowdowns
Strategic performance | AkzoNobel Report 2015
External - Strategic
External - Operational
International operations
We are a global business with operations in more than 80
countries. We are therefore exposed to a variety of risks,
many of them beyond our control. Unfavorable geo-political,
social or economic developments and developments in
laws, regulations and standards could adversely affect our
business and results of operations. Our ambition to grow
the business in a balanced way across the globe will further
expose us to these risks.
Mitigating actions
• Strategically spread our activities geographically and serve
many sectors to benefit from opportunities and reduce the
risk of instability
• Carefully monitor the political, economic and legislative
conditions across the company
• All significant investments, and the countries and industry
segments in which AkzoNobel conducts its business, are
decided on by the Executive Committee
Sourcing of raw materials
and energy
Prices of key raw materials and energy can be volatile
and are affected by economic conditions and regulations.
This can limit our ability to protect our margins. The chart
below shows our relative spend on these key raw materials,
excluding energy. The risk may further increase as a result
of the non-level playing field for energy and raw materials
on a global level (for example shale gas, national policies,
subsidies) and emission trading rights, which affect the
competitive position of businesses and our customers.
Mitigating actions
• AkzoNobel’s Procurement sourcing processes (ALPS,
Source) and organization are designed to actively leverage
the cost, quality and delivery of raw materials and energy,
including the performance of suppliers. This includes
managing the risks related to single sourced materials, the
forecasting of price trends and governance to ensure the
supply base provides the best terms and conditions
• A combination of country organizations and service
• Our supplier sustainability program, focused on
centers is in place in order to address country-specific and
local business risks
sustainable raw materials and carbon reduction, includes
internal programs for key suppliers and critical suppliers
and participation in the Industry group with external
assessments and audits
Breakdown of total raw material spend in %
External - Operational
Product liability
Product liability claims could adversely affect our company’s
business and results of operations. Claims with high impact
on our organization, while unlikely, could follow from the use
of former, current or new technologies and compounds.
Mitigating actions
• Quality improvement programs are in place in our different
Business Areas
• Product stewardship is embedded in the company’s HSE
and sustainability agenda. Product stewardship is also
integrated into product slate decisions
• We have a central policy to optimize insurance coverage,
which relates to specific insurance programs covering
product liability
A Resins
24
B Chemicals & intermediates 22
C Additives
D Packaging
E Solvents
F Coatings specialties
G Titanium dioxide
H Pigments
15
10
9
9
7
4
5555
AkzoNobel Report 2015 | Strategic performanceABCDEFGH
External - Operational
External - Operational
External - Financial
Environmental risks and liabilities
Information Technology
Post-retirement benefits
One effect of the company’s longer term Information
Technology strategy is increased reliance on fewer,
consolidated, critical applications, including our industrial
process control systems. The amount of digital exchanges
of business transactions with customers, suppliers and
other stakeholders is increasing. Non-availability of our
critical IT systems, or unauthorized access through
cybercrime or other events, can have a direct impact on
our production processes, our competitive position and the
reputation of our company.
Mitigating actions
• Continuously test and update the systems used for
information security
• Further implement measures such as redundant design,
back-up processes, virus protection, anti-spoofing and
forensic scans
• Centrally monitor access control processes to our
key IT systems
• Launch training on IT security via e-learning
• Roll-out of the new IM security standard for industrial
control systems to our manufacturing locations
Our current policy is to contribute to defined contribution
schemes wherever possible, although we still have a number
of defined benefit pension and healthcare schemes from the
past. Generally, these schemes have been funded through
external trusts or foundations, where AkzoNobel faces the
potential risk of funding shortfalls.
Mitigating actions
• Our policy is to offer defined contribution schemes to new
employees and, where appropriate, to existing employees.
The most significant defined benefit schemes are the
ICI Pension Fund and the AkzoNobel (CPS) Pension
Scheme in the UK. Both are closed to new entrants.
They are managed and controlled by independent
trustees. The funded status of these schemes is affected
by the trustees’ investment decisions, market conditions,
demographic experience and any regulatory actions.
This may require additional funding from the former
employing entities and may adversely impact our business
and results
• We practice proactive pension risk management and
continuously review options to reduce the financial risks
associated with all of our defined benefit plans
(see Note 14 of the Consolidated financial statements)
We use, and have used in the past, organic and inorganic
compounds (some of which are hazardous to the
environment) in product development programs and
manufacturing processes. We have been, and may still be,
exposed to risks of contamination and associated substantial
costs related to compliance with environmental laws and
regulations, and claims relating to property damage and
personal injury.
The trend that with time, regulations and standards are
becoming increasingly stringent, continues and is in part a
reflection of growing public concern about human health and
the environment in general.
Mitigating actions
• Conduct all our activities in the safest and most
responsible manner
• Contingency plans and assignment arrangements are in
place to mitigate known material operational risks and
monitor progress
• A dedicated group of experts assesses, manages and
resolves environmental liabilities. Sites with a higher
environmental risk profile are subject to management
review periodically
• Mandatory annual environmental liability reviews are
conducted to review risks, monitor progress in resolving
our liabilities and assess changes in company exposure
• Corporate directives are issued for recurring risk
categories such as manufacturing sites that are closing
• Accrue and charge environmental clean-up costs or
indemnifications against earnings when it is probable that
a potential liability has materialized and an amount can
be reliably estimated (see Note 19 of the Consolidated
financial statements)
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Strategic performance | AkzoNobel Report 2015 External - Financial
External - Financial
External - Financial
Access to funding
Fluctuations in exchange rates
Decline of asset values
The fragility of the global economy and the financial systems
could have an impact on free cash flow generation and may
limit our access to funding, thereby reducing our strategic
degrees of freedom.
Mitigating actions
• Maintain a strong investment grade credit rating: our long-
term senior unsecured debt rating is BBB+ by Standard &
Poor’s and Baa1 by Moody’s
• Focus on cash management is stressed in our monthly
Operational Control Cycle meetings and relevant metrics
are included in our remuneration policies
• Engage in restructuring of underperforming parts of our
portfolio if deemed strategically appropriate
• We have a prudent financing strategy and a strict
cash management policy, which are governed by our
centralized treasury function
Exchange rate fluctuations can have a positive and negative
impact on our financial results. We have operations in more
than 80 countries and report in euros. We are particularly
sensitive to movements in the US dollar, pound sterling,
Swedish krona and Latin American and Asian currencies.
Mitigating actions
• A centralized treasury function and hedging policy is in
place for certain currency exchange rate risks (see
Note 22 of the Consolidated financial statements)
• At a more operational level, risks are reduced by the
prevalence of local-for-local production
• Reduce as much as possible the impact of transactional
exposure on the results of our businesses by striving for
natural hedges in our main currencies
Impairments and book losses could adversely affect our
financial results.
Mitigating actions
• Perform impairment tests for intangibles with indefinite
lives (goodwill, some brands) every year and whenever
an impairment trigger exists. For tangibles and other fixed
assets, impairment tests are only carried out whenever
an impairment trigger exists (see Notes 7 and 8 of the
Consolidated financial statements)
• Continuous monitoring of acquisition and divestment
opportunities, and the management of assets held for
sale, are performed by the Executive Committee
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AkzoNobel Report 2015 | Strategic performance External - Compliance
Internal - Strategic
Internal - Operational
Complying with laws and
regulations
Our international footprint exposes us to continuously
expanding laws and regulations. We may be held responsible
for any liabilities arising out of non-compliance with these
laws and regulations.
Mitigating actions
• Monitor and adapt to significant changes in the legal
systems, regulatory controls, customs and practices in the
countries in which we operate
• Remain dedicated to minimizing AkzoNobel’s compliance
risk by fostering an open and transparent culture,
continuously educating our employees worldwide and
increasing awareness
• Monitor overall compliance through our comprehensive
annual non-financial letter of representation process, as
well as our annual competition law compliance declaration
• Embed company-wide standard setting and compliance
awareness through activities and training programs,
including training on the new Code of Conduct
Innovation and identification of
major transforming technologies
Our success depends on the sustainable growth of our
business through research, development and innovation.
If we are not able to identify and adopt major transforming
technologies in a timely manner, this may lead to loss of our
leadership positions, and adversely affect our business.
Mitigating actions
• Advance our technology road maps and innovation
strategies with appropriate research and development
spend. In 2015, this amounted to 2.3 percent
(€347 million) of total revenue
• Bring to market suitable new technologies using
Attraction and retention of talent
We face the challenge of ensuring continued alignment
between a rapidly evolving business environment and
qualifications, capabilities and talent of our workforce. This is
an increasingly complex process as the labor market poses
different challenges across disciplines and regions. Having
the right people, with the right capabilities, experience and
background will, to a large extent, determine the success
of our organization and requires the development of an
increasingly longer term view on future talent needs.
Mitigating actions
• Strengthen AkzoNobel Employee Value Proposition based
innovation core processes to assess market needs and
relevant know-how
on revised company purpose and stronger company
brand strategy
• Enhance our global open innovation capability to
• Further improve talent and succession action planning and
identify, assess and acquire the most recent promising
technologies
• When applicable and appropriate, invest in venture funds
follow up
• Roll-out new leadership behaviors with impactful
leadership assessment and development curriculum and
integration into our Performance and Development Dialog
• Further build and develop the AkzoNobel Academy with
strong functional competency frameworks and well-
defined development curriculum and career planning
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Strategic performance | AkzoNobel Report 2015 Internal - Operational
Internal - Operational
Production process risks
Management of change
Risks in production processes can adversely affect our
results. They arise from areas such as personal health
and safety, process safety and product safety. Unlikely
scenarios can involve major incidents with a high impact
on our organization, causing business continuity risks and
reputation damage.
Mitigating actions
• The AkzoNobel Leading Performance System (ALPS)
is being implemented to reduce complexity and drive
continuous improvement
• Continue the implementation of the Safety Common
Platform introduced in 2013 and the Process Safety
Management (PSM) framework, which was introduced in
2014. The framework provides a set of common, state-of-
the-art safety requirements for all our manufacturing sites
• Carry on with business continuity planning and make sure
there are appropriate risk transfer arrangements in place
In order to achieve our overall strategy, we have
implemented – and continue to implement – numerous
changes in our operating model across all functions and
businesses in order to further enhance cost efficiency and
quality of services.
Mitigating actions
• Ongoing focus on core principles and values intended to
set the desired behavioral changes in motion. The values
and behaviors have been included in the performance
management process
• Senior management is involved in all critical projects that
have been prioritized and are supervised by the Executive
Committee to ensure an aligned and integrated vision for
the company’s change agenda
• Project management and change management are both
included in the curriculum of the AkzoNobel Academy
• Consolidate change management by streamlining and
aligning the work of a range of supporting processes
under the umbrella of Global Business Services
Long-term risks
Long-term risks are risks that could impact AkzoNobel
beyond the five-year time horizon. We monitor the
development of these risks as part of our risk management
process and include them in our overall strategic
assessment. We define long-term as being risks that
are currently not material, but could develop into major
concerns, and existing risks associated with current trends
that are anticipated to increase.
The most significant long-term risks we observe are:
• The accumulation of strategic moves in relevant value
chains (horizontally and/or vertically) may impact
our competitive position and/or increase the vulnerability
of operations
• Emerging technologies transforming our markets and the
application of our products
• Public concern over specific substances and their
environmental impact (such as plastics/synthetic
polymers, fossil fuels), could result in major changes in
our markets
• Meeting the economic challenges associated with an
ambitious sustainability strategy, while operating in
markets with different levels of maturity
• The continued development of digital technology, which
will create risks in business continuity, privacy, legal and
regulatory requirements, market and customer intelligence
and supply chain security. This is especially the case given
the acceleration in speed and growing complexity that
characterize the process of digitization
• Increased instability due to a rise in national sentiment,
increased geo-political tensions and failure of national and
supranational governance, having a negative impact on
our business
5959
AkzoNobel Report 2015 | Strategic performance Taking care of you in the airIf you’ve ever caught a plane, chances are it featured our paint. We’re a global leader in the manufacture, development and supply of essential coatings for the commercial airline and general aviation markets. Business performance
The following section gives a detailed summary of how each
of our Business Areas performed during 2015. Information
on market characteristics is also provided.
Decorative Paints
Performance Coatings
Specialty Chemicals
62
74
86
6161
61
Business performanceAkzoNobel Report 2015 | Business performance 62
Business performance | AkzoNobel Report 2015
Decorative Paints
“WE MADE
SIGNIFICANT
PROGRESS
AND HAVE
THE RIGHT
STRATEGY
IN PLACE TO
CONTINUE THE
MOMENTUM
WE HAVE
BUILT UP”
Ruud Joosten
Member of the Executive Committee
responsible for Decorative Paints
We performed in line with our expected outcomes during
2015 and were able to remain on track despite difficult
market circumstances.
In Europe, we introduced a new operating model at the end
of 2014, which gave more focus to marketing and sales
and enabled cost reductions, increasing efficiency and
generating economy of scale. In 2015, we began to benefit
from this new approach. Markets remained volatile, however,
and growth was limited. China in particular experienced
challenging conditions, while there was turbulence in Russia,
Turkey and Brazil. It remains difficult to predict what will
happen in these markets in the longer term. There was more
positive news in South East Asia, where we achieved growth
in India, Vietnam and, to a lesser extent, Indonesia. Argentina
also performed well in difficult circumstances.
Having remodeled the business in recent years, our scale
and diversification – along with our resilience to local shocks
– provides us with the flexibility to shift our focus to regions
where we see opportunities for profitable growth. This
increased agility will make us more competitive and will help
drive our new strategy, which is focused on winning locally
while leveraging our scale.
So on an operational level, 2015 was very much about
continuous improvement and preparing for growth –
although the markets offered no assistance. As we move
forward, we will continue to look for further efficiency
improvements on an ongoing basis.
Looking at some of the other developments during the year,
it was pleasing to see our innovation pipeline continue to
deliver a series of new products. One of the big successes
was Dulux Easycare, a paint which allows you to easily clean
common household stains and spills off your wall, without
having to worry about damaging the surface. It proved to be
particularly popular in Poland, where it reached its full-year
targets in just three months.
The Visualizer app launched in 2014 also enjoyed further
success. Having won multiple awards, it has been
downloaded more than eight million times to date and is
available in over 40 markets. An update for the app was
released towards the end of the year, but this is just the
beginning, because we are making a big effort to explore
more digital possibilities and develop exciting new ways to
deliver essential color to our customers.
Sustainability is another key focus area, with our percentage
of revenue from eco-premium solutions with downstream
benefits increasing to 28 percent. We are focusing in
particular on moving to more waterborne solutions
globally. A notable highlight with regard to becoming more
sustainable took place in the UK, where we launched
a new paint recycling scheme. The initiative involves
remanufacturing waste paint and using it to inject color into
local communities. Our ambition is to increase the amount of
waste paint collected for reuse in the UK ten-fold – to three
million liters – by 2020. Our safety performance was another
pleasing aspect of 2015. Our total reportable injury rate
(TRR) was 1.2, well in line with the company’s 2015 target of
less than 2.0.
2015 outcomes
ROS 8.6%
ROI 11.7%
Overall, we made significant progress in 2015 and have
the right strategy in place to continue the momentum we
have built up over the last few years. We’ve transformed
the business and believe we are well positioned to achieve
our vision of becoming the leading global decorative paints
company in size and performance.
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AkzoNobel Report 2015 | Business performance Decorative Paints
strategy
Having improved considerably
since 2012, we continued to make
progress in 2015. Both our return
on sales of 8.6 percent and return
on investment of 11.7 percent
were in line with our expected
outcomes (7.5 percent and
12 percent respectively). As a
result, we are much closer to our
vision of becoming the leading
global decorative paints company
in size and performance.
This improvement in performance was mainly achieved
by addressing the two key market challenges of fixing
Europe while growing profitably outside of Europe. Within
Europe, we reduced operating costs, while outside of
Europe we grew volumes, adjusted pricing where
appropriate and controlled costs. As our performance level
is now substantially higher than it was in 2012, we have
updated our strategy to better reflect our current strategic
challenges. The updated strategy is based on winning locally,
supported by select initiatives to leverage our scale.
64
Actions
Winning locally
We have a unique portfolio of businesses in that we are
one of only three very large players in decorative paints and
the only one that serves a geographically diverse portfolio
of countries with a substantial proportion of our business
outside of mature markets. Our portfolio, therefore, has
the potential for higher growth levels, while allowing for
diversification of individual country risk. It also means we
have to compete successfully and win in markets that
are very different in terms of value chain, competitive
environment and customer and consumer behavior.
In order to win in each of these local markets, we will
continue to develop relevant and specific local plans. Of
particular importance to our overall success at Business
Area level are the local plans.
Listed below is a snapshot from four countries:
• The UK is one of the largest markets in Europe and we
are the market leader. Growing at a modest rate, the
region is benefiting from sustained economic recovery
and improved consumer confidence. Our focus in the
UK is on increasing the overall market size by improving
the painting experience. One way we are achieving this
is through the launch of the Dulux Amazing Paint service.
We are also continuing our strong focus on innovation,
introducing new products with clear customer benefits in
terms of energy savings and well-being
• China is a large market where the growth rate has been
very high in the recent past. It is now moderating to a
level only slightly above mature country levels. We have a
strong number two position in China and are growing
our business in traditional trade through strong Dulux
brand color leadership and our highly successful Easy
Paint Service
• Brazil is a major market – roughly the same size as the UK
– where we have joint leadership. Although the market has
been shrinking due to local macro-economic conditions,
most analysts are predicting a return to growth. If this
occurs, the likelihood is for above GDP growth due to
market recovery. We will continue to build and leverage
our very strong brand awareness, built in part through
activities such as the largest ever “Let’s Colour” event,
which was staged in Rio de Janeiro’s famous Santa Marta
favela as part of the city’s 450th anniversary celebrations
• Indonesia is the largest market in South East Asia and
the growth potential is good. We are the market leader
and have been significantly improving our market share
over the last few years. However, the level of competition
has been increasing, so we will continue to focus on
reinforcing our strong position
Business performance | AkzoNobel Report 2015 Sustainability
We are recognized around the world for our commitment
to sustainability, which is a key driver in all our plans to win
locally as part of the overall AkzoNobel Planet Possible
agenda. This recognition is based on a very strong product
portfolio from a sustainability perspective. In China, for
example, PCHouse (the number one vertical website) has
indicated that our “non-additive” products are ranked by
Chinese consumers as the most preferred paint products.
However, this recognition also goes beyond products. In
the UK this year, we were awarded the Carbon Trust Triple
Standard, becoming one of the first companies to be
recertified for all three Carbon Trust Standards for reductions
in greenhouse gas emissions, waste and water usage.
We continue to reduce the environmental impact of our own
operations and products and are increasingly working with
our suppliers to do the same. We are focusing in particular
on reducing our carbon footprint (including VOCs), identifying
opportunities to promote waterborne paints where possible,
and offering products with additional sustainability benefits.
Leveraging our scale
We are one of only three large players within decorative
paints globally. Our size provides us with a considerable
strategic advantage. It allows us to make the kind of
investments in brands, innovation and sustainability that
smaller players would find difficult to emulate. We carefully
select initiatives where scale advantage exists and focus our
efforts on activities that support our approach of winning
locally. We have defined eight areas where leveraging our
scale makes sense. Examples are:
Innovation
Our global innovation agenda is focused on addressing key
end-user, consumer and/or customer needs, including mass
market growth, increased need for well-being, regulatory
compliance, differentiation in large-scale outlets, energy
efficient solutions and differentiation in color. These needs
translate into an innovation agenda which has a very strong
sustainability orientation.
Many examples of successful product innovations consistent
with this agenda are already on the market. For example,
in China we recently launched a solvent-free concrete floor
paint with excellent wear, impact and chemical resistance
properties. This is an important part of our country strategy
to improve our position in the projects market, while also
being highly sustainable. We have already enjoyed success
with this product, which was selected for the prestigious
Vanke Daming Palace project in Xi’an.
Digital
With investments across multiple digital platforms, the star
performer in our global digital agenda is our award-winning
Visualizer app. First launched in June 2014, it has been
downloaded more than eight million times to date, in over 40
markets. Towards the end of 2015, we launched version 2.0,
which includes additional features such as the ability to use
the Visualizer on exterior walls. It also has enhanced photo
functionality (allowing users to share ideas on social media),
scrapbook registration and improved color visualization.
Painters
We have considerable experience of successfully selling
to professional painters around the world. Given their
importance to our business, we make it a top priority to
better understand painters while also providing support and
inspiration. A good example of this commitment can be seen
in Brazil, where enhancing our relationship with professional
painters forms a key part of our plan to win locally. Our
painter program includes producing so-called “hero”
products, which have strong attributes relevant to painters.
Two such products are:
• Coral Rende Muito – a value-for-money proposition which
leads the standard walls segment in Brazil
• Coral Acrílico Total – a premium walls proposition
delivering superior opacity, resistance and washability
when compared with other Brazilian premium wall paints
To support conversion to these products, we provide
significant training and support, while e-enabled loyalty
programs reinforce the relationship – our “Clube de Cor”
program has 45,000 active members and is the largest in
Brazil. We also place particular emphasis on making an
emotional connection with painters and building pride and a
sense of purpose.
Supply chain
Our Integrated Supply Chain agenda has been linked to
our strategic agenda for some time. Having completed
a major footprint rationalization, our focus is now shifting
towards operational excellence based on the company-wide
AkzoNobel Leading Performance System (ALPS).
Brands
We continue to drive the “flourish” brand. At the same time,
we are continuing to build and strengthen our regional
professional brands, while also ensuring full alignment across
brands, businesses and initiatives. For example, all of our
“Let’s Colour” activities are fully aligned with, and supportive
of, the company’s Human Cities initiative. We are also
fully in line with, and actively promote, the Planet Possible
sustainability agenda.
65
AkzoNobel Report 2015 | Business performance Our largest ever “Let’s Colour” event was staged in Rio de Janeiro’s Santa Marta favela as part of
the city’s 450th anniversary celebrations.
66
Business performance | AkzoNobel Report 2015 End-user segment outlook
All revenue generated by our
Decorative Paints Business
Area comes from either the New
build projects or Maintenance,
renovation and repair sub-
segments of the Buildings and
Infrastructure end-user segment.
The latter sub-segment is more
important than the former for
AkzoNobel, given the large size
of the installed base in mature
markets and the higher growth
rate outlook in maintenance in
key countries such as China and
Brazil. We estimate that roughly
75 percent of our revenue comes
from maintenance and 25 percent
from new build.
Consumer confidence is an important driver of the Buildings
and Infrastructure end-user segment and trends in consumer
confidence are changing. Specifically, although consumers
are still pessimistic in most European countries, consumer
confidence has been increasing over the last year or so. At
the same time, although consumers are optimistic in most
high growth countries, consumer confidence has been
decreasing over the same period in most of these regions,
apart from India. Due in part to these changes, we are
seeing shifts in the construction outlook, with higher growth
expected in mature geographies and lower growth in China.
Similar shifts are taking place in the Maintenance, renovation
and repair sub-segment. Expected growth rates are
somewhat higher than in New build for all geographies of
importance to AkzoNobel. Overall, maintenance growth rates
are expected to be higher than they have been in Europe,
which indicates positive momentum for our business.
However, it is worth noting that the main reason for expected
higher growth rates is significant improvement in countries
such as Italy and Spain. Growth in the UK is expected to
continue, but at a lower pace.
In all countries, higher growth rates are expected for
products that provide functional benefits, such as helping to
keep buildings cool in hot climates, or making interiors feel
brighter and more spacious.
The market
According to figures published by Orr & Boss in a report
commissioned by the International Paints and Printing Inks
Council (IPPIC), the global market for decorative paints is
42 percent of the roughly €100 billion global paints and
coatings market. This share has decreased somewhat
over the last few years due to the increased importance of
emerging markets (where performance coatings tend to be
more important), as well as issues in the European Buildings
and Infrastructure end-user segment. In general, regional
Buildings and Infrastructure growth rates have a high
correlation with paints growth rates, although other factors
also play a part.
AkzoNobel market positions
Decorative Paints Europe, Middle East and Africa
1st
1st
1st
Eastern and Southern Europe and Africa
North and West Europe
UK, Ireland and Middle East
Decorative Paints Latin America
1st
South America
Decorative Paints Asia
2nd
2nd
China and North Asia
South East and South Asia
67
AkzoNobel Report 2015 | Business performance Decorative Paints value creation summary 2015
As a leading global supplier of
decorative paints, our brands are crucial
to our success. Our Decorative Paints
activities are fully focused on the Buildings
and Infrastructure end-user segment,
serving the do-it-yourself market and
professional painters. In order to create more
economic, social and environmental value,
our innovation is geared towards reducing
our upstream and downstream supply
chain impact by changing formulations to
waterborne technology.
Many of our brands are household names
and we work closely with local communities
via a series of national and international
initiatives, some of which involve volunteer
support from our employees. This benefits
the creation of more social value.
All these initiatives will contribute to our
financial performance and ultimately lead to
more economic value for our investors.
Economic value: Organization
€4.0 billion
revenue
€158 million
capital expenditures
€345 million
operating income
During 2015, we invested in growth markets
and in creating efficiency in Europe through
optimization of our production footprint.
Revenue development in % versus 2014
Increase
Decrease
-1%
0%
0%
4%
3%
€2.6 billion
invested capital
Volume
Price/
mix
Aquisitions/
divestments
Exchange
rates
Total
Environmental value: Input
Organization
2.4 million tons
upstream CO2(e) emissions
1,800 TJ
energy use
We continue to improve efficiency by
reducing our energy use per ton of
production, and are working towards
improving our share of renewable energy.
We continue to improve the environmental
footprint of our operations by focusing on
operational eco-efficiency.
Social value: Input
Organization
14,900
employees at year-end 2015
1.2
total reportable rate of injuries
Total reportable rate of injuries
per million hours worked
Employee safety is a key priority and we are
actively driving towards a reduction in the
number of incidents.
2.7
1.9
1.6
1.2
2012
2013
2014
2015
68
Business performance | AkzoNobel Report 2015 Revenue breakdown by business unit
in %
Revenue breakdown by end-user segment
in %
Outcomes
C
B
A
A
Eco-premium solutions with
customer benefits
% of revenue
A Decorative Paints Europe, Middle East and Africa 56
A Buildings and Infrastructure
B Decorative Paints Latin America
C Decorative Paints Asia
14
30
B Transportation
C Consumer Goods
D Industrial
Outcomes
100
0
0
0
27
27
28
22
2012
2013
2014
2015
0.1 million tons
CO2(e) emissions own operations
1.1 million tons
downstream CO2(e) emissions
3.6 million tons
CO2(e) emissions cradle-to-grave
8.6% ROS
11.7% ROI
28%
of revenue from eco-premium solutions
RD&I investments have resulted in
28 percent of revenue derived from eco-
premium solutions with customer benefits.
4%
decrease CO2(e) per ton of sales from 2012
cradle-to-grave carbon footprint
34 kilotons
total waste
Outcomes
€692 million
employee benefits
4.13
employee engagement score
5 million
lives positively impacted by our
“Let’s Colour” program
We highly value, and actively work on
improving, employee engagement.
We’re investing in training and development
and continue to work on achieving a more
diverse workforce.
4,250
people trained as painters
We participate in community programs
and local sponsorships.
69
AkzoNobel Report 2015 | Business performance
Key business developments
Decorative Paints Europe, Middle East and Africa
• We continued to be negatively impacted by the housing market slowdown and euro crisis
• We changed our operating model in EMEA to drive improved performance and agility,
making us better positioned to achieve profitable growth
• The UK and Ireland invested in a complete rebrand of Dulux Trade and launched Armstead
Trade – its first new brand in 20 years. In consumer, we invested in a new integrated Dulux
marketing campaign: “Change Your Story”
• We started the roll-out of the Sikkens 5051 color collection. Together with its service
packages, it emphasizes the brand’s professional dedication to color
• There was also a successful launch of the Fit by Marshall mid-tier brand in Turkey, while
the performance and protection sub-brand Expert was introduced in Benelux
Revenue in € millions
2,508
2,269
2,263
2013
2014
2015
Key brands
Some of our customers
• B&Q
• Bricomarche
• Leroy Merlin
• OBI
Top raw materials
• Binders/resins
• Titanium dioxide
• Packaging materials
Key cost drivers
• Oil price
• Energy prices
• Steel prices
70
Business performance | AkzoNobel Report 2015 Decorative Paints Latin America
Decorative Paints Asia
• Despite macro-economic headwinds in the region, our performance was solid in both
Brazil and Argentina
• A new proposition for exterior walls was successfully launched in Brazil.
• The region achieved solid growth this year
• Dulux Weathershield Powerflexx was launched across South East Asia
• Dulux Superclean won Product of the Year in India. It features stain-beading technology
The new product, Coral Acrílico Total, reinforced Coral’s position in the premium segment
which offers the key performance benefit of stain repellency
• In Argentina, the Alba brand defied the crisis and achieved a good performance
• We have staged 1,250 “Tudo de Cor” events (“Let’s Colour”) in Brazil to date, including
a major event at the Santa Marta favela in Rio de Janeiro, which positively impacted
thousands of people. “Tudo de Cor” is now also gaining traction in Argentina
• Our Dulux websites were relaunched across the region – bringing a richer, inspirational
experience to consumers – while the Dulux Easy Paint Service continued to grow in the
redecoration market in China
• A new plant is being built in Chengdu, China. Due to open in 2016, full operation is
expected by 2017
Revenue in € millions
591
568
561
Revenue in € millions
1.075
1.074
1.185
2013
2014
2015
2013
2014
2015
Key brands
Key brands
71
AkzoNobel Report 2015 | Business performance Now you can wash
your worries away
As life gets busier and
more hectic, it’s a relief
to free yourself from
the worry that everyday
living could damage
the look of your home.
A simple stain or
spill and all that hard
work you put in could
be ruined.
That’s why we don’t just focus on color and quality when we develop new paint
products. We also look to introduce new benefits for consumers that make life
easier or better for them.
A great example of one of our more recent innovations is Dulux Easycare. Featur-
ing stain repellent technology, it’s an interior paint which enables you to easily clean
common household stains off your walls without worrying about damaging the
surface. Ten times tougher than conventional paint, it’s scrubbable, splash resistant
and repels stains to keep walls beautiful for longer.
Initially launched in Ireland and Asia, the product recently enjoyed much success
when it was introduced in Poland during 2015. Within just three months it was
available in 1,156 stores, beat its full-year sales targets and gained double-digit
market share in the premium segment.
Easycare also highlights how we are continuing to meet growing demand from
consumers for more sustainable solutions. Like many of our decorative paint offer-
ings, Easycare is low odor and low VOC and is another example of how we are
trying to move the industry away from solvent-based products.
72
Business performance | AkzoNobel Report 2015
10x
tougher
more durable, scrubbable, splash
resistant and repels stains
Scan and explore
AkzoNobel Report 2015 | Business performance
73
74
Business performance | AkzoNobel Report 2015 “WE DELIVERED
A STEP CHANGE
IN PROFITABILITY
AND POSITIONED
OURSELVES
FOR PROFITABLE
ORGANIC
GROWTH”
Conrad Keijzer Member of the
Executive Committee responsible for
Performance Coatings
Performance Coatings
We had a record year in 2015, achieving a significant
improvement in our results while exceeding our expected
outcomes for ROS and ROI. We put a clear focus on
market strategies and operational initiatives and are
delivering on our vision of leading market positions delivering
leading performance.
We streamlined our organization with fewer management
layers and a much stronger customer focus. The
rationalization of our global manufacturing network has
reduced the number of sites from 102 to 84 since 2012.
While we benefited from cost management, lower raw
material prices and currency tailwinds, our volumes were
challenged by headwinds in some of our key end-user
segments. In the global oil and gas industry, ongoing capital
spending declines and the slower growth in some
markets – notably Brazil and China – affected our business.
We offset some of these challenges by repositioning
ourselves towards growing segments and delivering on our
productivity improvements.
Examples of where we are repositioning to offset market
challenges are in our Protective and Marine Coatings
businesses. In Protective Coatings, we are increasing our
focus on downstream oil and gas and in power generation.
A particular area of focus is in offshore wind farms.
In Marine Coatings, we launched the second generation
of Intersleek coatings, which reduce fuel consumption
and emissions. This was supported by our carbon credits
initiative which allows our customers to collect carbon credits
from switching to our biocide-free Intersleek coatings
Our strong customer relationships and clear market
strategies are helping us to gain new business. For example,
in 2015 we became one of the approved suppliers of
vehicle refinishes to Daimler dealerships and approved
bodyshops worldwide. We extended our supplier relationship
with McLaren Racing and McLaren Automotive.
We continued to invest in growth markets and announced
a multi-business manufacturing site in Thailand. In China,
construction is well underway on a large and efficient powder
coatings plant.
Meanwhile, in North America, we opened a new research,
development and innovation (RD&I) center in Strongsville,
Ohio, and announced an investment in our RD&I capabilities
in Houston, Texas. We also opened a new technical
application center in Malmö, Sweden, which allows us to
simulate customer specific conditions and deliver market
leading solutions.
Our safety performance continued at the improved level
of 2014, which was a record best year. The total rate of
reportable injuries was 1.8. We will continue to rigorously
embed the AkzoNobel Safety Common Platform for people
and safety processes on our journey to zero injuries at work.
2015 outcomes
ROS 13.3%
ROI 29.4%
Going forward, we will continue to create value by delivering
essential color and protection in all the markets we serve.
Having exceeded our expected financial outcomes for 2015,
we are now shifting our focus towards profitable, organic
growth and continuous improvement. Our aim is to build on
the strong foundation and achieve leading performance in all
of our markets.
75
AkzoNobel Report 2015 | Business performance
Performance Coatings
strategy
In 2015, we delivered return on
sales of 13.3 percent and return
on investment of 29.4 percent,
surpassing our expected 2015
outcomes of 12 percent and
25 percent, respectively.
We are continuing to progress
towards our vision of leading
market positions delivering
leading performance.
Our simplified organization model has been a significant
enabler for performance improvement. We have now
streamlined the organization into seven strategic market
units (SMUs) operating in six defined regions. Management
layers have also been reduced from an average of nine to
six. This new set-up has already had a substantial impact
in terms of cost reduction. Going forward, we expect the
benefits to be much more comprehensive, resulting from
higher levels of customer proximity and collaboration, more
rapid decision-making and clearer lines of accountability.
Our three overarching performance initiatives have also
contributed to profitability improvement, as explained
elsewhere on this page. Given the scope of the change
we are undergoing, we have established a dedicated
transformation office to lead our change process.
76
Actions
Pursue differentiated growth strategies
Having completed our major restructuring activities, the next
step in delivering our leading performance vision is to deliver
profitable organic growth and continuous improvement.
We are focusing and prioritizing our growth activities by
pursuing differentiated growth strategies. In roughly half of
our businesses, our strategy is to outgrow the market. These
sectors, with examples of growth priorities, are listed below:
• Marine Coatings: Continuing to invest in fouling control,
sustainable innovation and enhanced services
• Protective Coatings: Continuing to build our business
beyond upstream oil and gas
• Powder Coatings: Continuing to take a segmented
approach and look for opportunities to provide an
integrated liquid and powder offering
In other parts of our Performance Coatings portfolio – where
our position is often strong, but the headroom for growth
more limited – we want to grow with our markets while
driving operational excellence and controlling costs.
Drive overarching performance
improvement initiatives
Reduce external spend
Procured raw materials make up a significant percentage
of our Performance Coatings cost base, so appropriate
management is a fundamental component of performance
improvement in this Business Area.
Improve our operations
Although operations comprise a smaller percentage of
our cost base, there is still room for improvement.
Over the last few years, our focus has been on footprint
optimization. Between 2012 and the end of 2015, we
reduced the number of manufacturing plants from 102 to 87.
During the same period, we have also commissioned
new, state-of-the-art plants to respond to changes in
geographic demand. Throughout this time of major changes,
we have maintained our commitment to safety and have
stabilized our performance.
We are now focusing on achieving operational excellence
through continuous improvement, based on the AkzoNobel
Leading Performance System (ALPS). A top priority is to
further improve customer service and we are already seeing
the benefits of this program.
Drive commercial excellence
The focus has been on salesforce efficiency and margin
management to support our improvement in bottom
line performance. Going forward, our common
processes and tools are increasingly oriented towards
salesforce effectiveness.
Deliver business-specific innovation plans
Continued success in Performance Coatings is
fundamentally based on our ability to innovate. Our
innovation program is aimed at developing products,
services, processes and tools that address four
strategic drivers:
• Customer operational efficiency (a higher production rate
through product design or application process)
• Customer benefits in terms of sensory perception,
substrate protection and coating functionality
• Global future trends such as sustainability, carbon footprint
and scarcity of natural resources
• Internal AkzoNobel efficiency
These strategic drivers provide a framework for innovation
across the whole Business Area, while we also work across
AkzoNobel to optimize efficiency and effectiveness.
There is an opportunity to leverage our scale by working
across sectors.
Examples of innovations we have already introduced include:
• Intertrac Vision: A tool which accurately predicts the
potential fuel and CO2 savings that fouling control can offer
to the marine industry
Business performance | AkzoNobel Report 2015 • Interplan: A mobile-enabled survey tool which delivers
corrosion information directly to customers of
our protective coatings to help them predict their
maintenance requirements
• Automatchic Vision: A lightweight device (the smallest of
its kind) which provides a fast and reliable color match
to bodyshops, saving time and paint consumption in the
vehicle repair process
• We are well positioned for the continued global market
conversion to high performance packaging coatings that
avoid the use of bisphenol A-based epoxies, addressing a
key consumer and customer demand
• We continue to deliver lower temperature curing for our
powder coatings, which help to improve energy efficiency
and reduce customer production costs, as well as
improving finish effects
• In our Aerospace business, we continue to introduce
products that provide our customers with increased
productivity and resource efficiency. For example, we
have recently introduced a basecoat/clear coat system. In
addition to reducing drying time, this system also provides
protection against weathering and fading
• Sikkens Autoclear UV: A new eco-premium solution
within Vehicle Refinishes. Sikkens Autoclear UV is a UV
curable high gloss clearcoat which meets the needs of
the fast track/stationary repair trend and reduces energy
consumption and material usage
• Interpon ReFlex: A reflective powder coating which
increases the effective output of commercial lighting.
Because the product is solvent-free (like all powder
coatings), it has a lower environmental impact than
competing materials used in the lighting market
• Chartek 8E: A new Chartek® passive fire protection
product aimed at the offshore oil and gas industry.
Chartek 8E provides a significant reduction in applied
weight, addressing a key customer need
77
AkzoNobel Report 2015 | Business performance End-user segment outlook
Our Performance Coatings
Business Area serves all four
of our end-user segments.
Although there are relevant
end-user segment trends that
remain positive, our outlook
remains cautious.
78
Transportation
Transportation is the largest end-user segment for
Performance Coatings. Around two-thirds of our
Transportation revenue is derived from the two automotive
sub-segments – Automotive OEM, parts and assembly and
Automotive repair. We see continued growth in Automotive
OEM, particularly in China, although this is of less benefit
to AkzoNobel as our position in this sub-segment is
quite limited. We expect much lower growth rates in the
Automotive repair sub-segment, but the growth is more
stable and less cyclical. Growth rates in Automotive repair
will continue to be higher outside of Europe and North
America as the car park and rate of insurance coverage
continue to grow.
Our remaining revenue in Transportation comes from the
Marine and air transport sub-segment, into which we sell
both marine and aerospace coatings. The long-term outlook
for marine remains quite positive, as wealth and international
trade should continue to increase. There is also evidence
that the bottom of the cycle has been reached in marine
new build, although the market takes longer than expected
to recover. In fact, new contracting dropped significantly
in 2015. Meanwhile, the maintenance market continues
to grow at a moderate rate, mainly because the growth in
the global merchant fleet is offset by declining freight rates
– which have not yet recovered significantly – dampening
demand for maintenance activities. Aerospace is a much
smaller market than marine, but we do expect continued
robust growth.
Demand in the Transportation end-user segment also
relates to sustainability. Therefore, products sold into this
segment that help utilize less energy and other resources
will grow disproportionately.
Consumer Goods
We sell powder coatings, wood finishes and adhesives and
specialty finishes into the Consumer durables end-user
sub-segment, mainly contributing to the manufacture of
furniture, domestic appliances and consumer electronics.
We also sell packaging coatings into the Consumer
packaged goods sub-segment, for use in food and
beverage packaging.
Growth rates in the Consumer durables sub-segment are
largely expected to be at, or somewhat above, regional
GDP growth rates overall. Some shifts in outlook have been
evident, however, as domestic market growth rates in China
have reduced. External analysts are currently predicting
a stronger growth outlook for furniture than for domestic
appliances. We expect continued reasonable growth overall
in the more technology-driven aspects of the Consumer
durables sub-segment, although it is important to note that
trends differ significantly by type of product.
In the Consumer packaged goods sub-segment, we e
xpect growth to be slightly below regional GDP growth
rates in both high growth and mature geographies.
This sub-segment tends to be more stable and less cyclical
over time.
Buildings and Infrastructure
The Buildings and Infrastructure end-user segment is
undergoing considerable change. Growth rates have
reduced significantly in China, especially in the New
build projects sub-segment, which is important for the
performance coatings market. On the other hand, we are
seeing evidence of a modest return to growth in Europe.
Growth is higher in North America.
Similar shifts are taking place in the maintenance, renovation
and repair sub-segment. Maintenance growth rates are
expected to be somewhat higher than they have been in
Europe and growth rates are decreasing in China.
Business performance | AkzoNobel Report 2015
Industrial
In the Industrial end-user segment we sell protective and
powder coatings for industrial uses, primarily for the oil
and gas industry. This industry has come under significant
pressure due to lower oil prices, resulting in delays and
cancellations of capital spend. In new construction, we
are seeing drastically reduced investment in oil and gas
upstream, with downstream projects remaining more solid.
With regard to maintenance, some upstream businesses
are no longer profitable for our customers and we are
therefore seeing a shutdown of high cost production units,
disproportionately affecting North America and land rigs.
AkzoNobel market positions
1st
Coil coatings
Marine coatings
Powder coatings
Protective coatings
Specialty plastic coatings
Wood finishes
Yacht coatings
1st/2nd
Aerospace coatings
2nd
Packaging coatings
3rd/4th
Vehicle refinishes
The Kelpies in Scotland – the largest horse sculptures in the world – feature around 10,000 liters
of our protective coatings. Photograph by The Helix.
79
AkzoNobel Report 2015 | Business performance Performance Coatings value creation summary 2015
Our Performance Coatings businesses serve
all four end-user segments, supplying high
performance coatings primarily to business-
to-business customers. We are increasingly
incorporating low energy processes and
working to reduce our carbon footprint
across the value chain. Innovation is also
key to our product development, which is
often highly technical in order to meet strict
customer specifications.
Particular emphasis is placed on supplying
products that offer environmental benefits
for our customers. These initiatives will
help us to create economic, social and
environmental value. We continue to be
committed to safety, as well as our talent
development programs and our contribution
to various community activities.
All these initiatives will contribute to our
financial performance and ultimately lead to
more economic value for our investors.
Economic value: Organization
€6.0 billion
revenue
€147 million
capital expenditures
Revenue development in % versus 2014
Increase
Decrease
-2%
1%
0%
8%
7%
€792 million
operating income
€2.5 billion
invested capital
During 2015, we invested in both RD&I
facilities and production facilities in mature
and growth markets, to increase capacity
and to improve efficiency.
Volume
Price/
mix
Aquisitions/
divestments
Exchange
rates
Total
Environmental value: Input
Organization
4.0 million tons
upstream CO2(e) emissions
4,500 TJ
energy use
We continue to improve efficiency by
reducing our energy use per ton of
production, and are working towards
improving our share of renewable energy.
We continue to improve the environmental
footprint of our operations by focusing on
operational eco-efficiency.
Social value: Input
Organization
19,300
employees at year-end 2015
1.8
total reportable rate of injuries
Total reportable rate of injuries
per million hours worked
Employee safety is a key priority and we are
actively driving towards a reduction in the
number of incidents.
2.6
2.8
1.8
1.8
2012
2013
2014
2015
80
Business performance | AkzoNobel Report 2015 Revenue breakdown by business unit
in %
Revenue breakdown by end-user segment
in %
Outcomes
C
A
B
D
A
C
B
A Marine and Protective Coatings
B Automotive and Specialty Coatings
C Industrial and Powder Coatings
26
26
48
A Buildings and Infrastructure
B Transportation
C Consumer Goods
D Industrial
Outcomes
0.3 million tons
CO2(e) emissions own operations
8.0 million tons
downstream CO2(e) emissions
Eco-premium solutions with
customer benefits
% of revenue
13
13
15
15
2012
2013
2014
2015
24
40
22
14
12.3 million
tons
CO2(e) emissions cradle-to-grave
13.3% ROS
29.4% ROI
15%
of revenue from eco-premium solutions
RD&I investments have resulted in
15 percent of revenue derived from eco-
premium solutions with customer benefits.
2%
increase CO2(e) per ton of sales from 2012
cradle-to-grave carbon footprint
54 kilotons
total waste
Outcomes
€1.1 billion
employee benefits
We highly value, and actively work on
improving, employee engagement.
We’re investing in training and development
and continue to work on achieving a more
diverse workforce.
3.91
employee engagement score
We participate in community programs
and local sponsorships.
81
AkzoNobel Report 2015 | Business performance
Key business developments
Marine and Protective Coatings
Automotive and Specialty Coatings
• Revenue was up 11 percent, driven by favorable price/mix, a recovery of the marine new
• Revenue was up 7 percent, driven by favorable price/mix, with currencies also offsetting
construction market in China and favorable exchange rates
lower volumes
• Marine Coatings delivered strong growth in the new build market, despite challenging
• In Vehicle Refinishes, we launched Automatchic Vision, an innovative color measurement
market conditions
device which improves right-first-time color matching
• We were awarded 223,000 carbon credits from the Gold Standard as part of our award-
• We established strong partnerships with leading bodyshop groups across the globe to
winning program related to sales of our Intersleek foul release coatings
expand our position in this growing segment
• Intertrac Vision was launched, the industry’s first consultancy tool to provide ship operators
• Our UV curing product proposition was completed, enhanching our position in terms of
with predictions on the fuel and CO2 savings potential of fouling control coatings
• In Protective Coatings, we expanded our position in the area of power generation
• We launched a new high temperature resistant coating for the protection of
subsea equipment
rapid repair and energy efficiency
• In Specialty Coatings, our Aerodur technology was selected as the exclusive basecoat/
clear coat by one of the world’s largest aircraft manufacturers
• Specialty Coatings’ champagne gold was selected by a major computer technology
• We also introduced, under the Intertherm brand, a water-based insulation system which
manufacturer to enhance the aesthetics of their products
protects workers from burns
• We won business with a large airline with our chrome-free paint system for commercial
fleet maintenance
Key brands
Revenue in € millions
Key brands
Revenue in € millions
1,381
1,414
1,572
1,440
1,440
1,545
• Hyundai Heavy
Some of our customers
• APM Maersk
• Bechtel
• Brunswick
• ExxonMobil
• GE
• Hapag Lloyd
Industries
• Rio Tinto
• Sandvik
• Shell
• Siemens
Top raw materials
• Epoxy resins and
organic solvents
• Copper/zinc
• Curing agents
Key cost drivers
• Oil feedstock chain
• Metals, base chemical prices
82
2013
2014
2015
Geo-mix revenue by destination in %
A
B
C
A EMEA
B Americas
C Asia Pacific
Some of our customers
• Airbus
• Amazon
• Boeing
• Dell
• Etihad Airways
• Geely
• General Motors
• HP
• Hyundai
• Samsung
• Toyota
Top raw materials
• Pigments
• Acrylic resins
• Acrylic dispersions
Key cost drivers
• Metals, base chemicals prices
• Oil, energy prices
28
22
50
2013
2014
2015
Geo-mix revenue by destination in %
C
A
B
A EMEA
B Americas
C Asia Pacific
38
31
31
Business performance | AkzoNobel Report 2015
Industrial and Powder Coatings
• Revenue was up 4 percent, due to favorable currencies and price/mix development, which
helped to offset lower volumes
• In Wood Coatings, we sustained growth in North America and Asia due to the strong
housing and construction market and the growth of imports
• Our innovative waterborne wood finish Aquasilk was launched on to the furniture market in
China, supporting the regulatory momentum in leading cities such as Beijing
• In Packaging Coatings, we are growing our volume in Europe and are well positioned to
convert to BPA-free products globally
• In Powder Coatings, we saw strong regional growth in North America across all sectors
• We are in the process of building a large powder coatings production plant to support our
growth ambitions in China
• Our presence in the Middle East and Africa is continuing to grow, with a new plant opened
in Dubai
Key brands
Some of our customers
• Arcelor Mittal
• Armstrong
• Ardagh
• Ball/Rexam
• Bluescope Steel
• Bosch
• Crown
• Ikea
• Lacquer Craft Furniture
• Masterbrand Cabinets,
Inc.
• Mercedes-Benz
Top raw materials
• Polyester and epoxy resins
• Glycol, ether and aromatic solvents
• Titanium dioxide
• Latex resins
Key cost drivers
• Basic feedstock prices
• Oil and natural gas prices
• Propylene and VAM
• Philips
• TATA
• Whirlpool
• Nitrocellulose
• Methanol, urea
• Butyl acetate, acetone and xylene solvents
Revenue in € millions
2,780
2,769
2,867
2013
2014
2015
Geo-mix revenue by destination in %
C
B
A
• Agrochemical feedstocks (urea)
• Cotton
A EMEA
B Americas
C Asia Pacific
43
32
25
83
AkzoNobel Report 2015 | Business performance
Adding color expertise
to high performance
When you think of
performance coatings,
it’s their functional
benefits that usually
spring to mind.
Whatever the surface,
they offer essential
protection for everything
from fridges to
bridges and buildings
to boats.
But performance coatings aren’t just about durability and making things last
longer. They also provide essential color and aesthetics (just take a look at your
laptop or mobile phone).
We’ve been in love with color for centuries. Our expertise and understanding
has been shaped and defined by countless influences and experiences. We use
this wide-ranging knowledge when developing all our products, be they for use
on metal, wood or plastic.
Most of our color know-how for the Performance Coatings business is
channeled through our Global Design Team, which works out of dedicated
centers located in Germany, the US, China and South Korea.
Every year, they produce a design trends guide for the automotive and con -
sumer electronics market. It offers a comprehensive overview of what is
happening in color and design and defines the consumer trends that will
in fluence our color and material choices for the coming year. As well as offering
a glimpse at the design direction for cars, smartphones and tablet computers,
it also includes the company’s color of the year for those markets (identified as
My Gold for 2016).
A great example of what we offer in terms of color expertise is our Automatchic
Vision tool for the automotive repair market. With more than 250,000 colors
in existence (and more than a million different shades) getting the right color
match is becoming increasingly difficult. But thanks to the latest digital tech-
nology, Automatchic Vision guarantees precise and reliable measurements of
color, even on curved parts of a vehicle, which are traditionally difficult to read.
“We want to inspire our industrial customers and together develop the colors,
effects and textures for the products of the future,” explains Stephie Sijssens,
Color Design Manager for AkzoNobel Performance Coatings. “We work closely
with our customers to help them interpret their design brief into the techno-
logies we can provide. We try to develop a special relationship with each and
every customer to make certain that the result is something special.”
84
Business performance | AkzoNobel Report 2015 70+
color effects and textures,
eight palettes and four key
trends for 2016
Scan and explore
85
AkzoNobel Report 2015 | Business performance
86
Business performance | AkzoNobel Report 2015
Specialty Chemicals
“OUR
COMMITMENT
TO DELIVERING
ESSENTIAL
INGREDIENTS
HELPED DRIVE
PERFORMANCE
AND ENHANCED
OUR CUSTOMER
FOCUS”
Werner Fuhrmann Member of the
Executive Committee responsible for
Specialty Chemicals
For Specialty Chemicals, 2015 was a year where we
achieved a significant improvement in our results. However,
although we felt a strong tailwind from currencies and, to a
lesser extent, raw materials, overall we were operating in a
low to no growth environment.
and chlorine at our site in Ibbenbüren, Germany. The site
will secure the long-term supply of chlorine and hydrogen,
as well as improve our environmental profile and
operational efficiency.
The slowdown was most noticeable in China and other South
East Asian countries, while the economies in Russia and Brazil
fell into recession. There was some recovery in Europe and a
few bright spots in the US. Our portfolio proved to be resilient,
even under volatile market conditions. We made major
improvements in terms of performance and enhancing the
quality of the business, achieved mainly through operational
excellence and our focus on continuous improvement.
Looking at 2015 in more detail, the Industrial Chemicals
business benefited from higher availability of assets –
including the newly converted Frankfurt chlorine plant –
which came fully on stream in the second quarter. Pulp and
Performance Chemicals also took advantage of high asset
utilization and continued to perform well.
At the end of 2014, we restructured Functional Chemicals into
two business units. The newly-created Ethylene and Sulfur
Derivatives business had a good first year. Headquartered in
Shanghai, we’ve worked hard to optimize the ethylene oxide
value chain, which helped improve results. Polymer Chemistry,
based in Chicago, was more or less stable. Thankfully, no
Polymer Chemistry employees were hurt due to the Tianjin
port disaster, but the business was significantly impacted by
constraints put in place by the authorities during Q4.
Surface Chemistry, meanwhile, was hampered by lower
activities in oil and gas.
Early in the year, we completed the divestment of our Paper
Chemicals business to Kemira. This included maintaining
a strong supply relationship with the buyer through toll
manufacturing agreements and a strong partnership for
the supply of colloidal silica. We also started a joint venture
with Evonik Industries to build and operate a membrane
electrolysis facility for potassium hydroxide solution
Another highlight was the multi-year agreement to purchase
sustainably generated steam from Dutch energy provider
Eneco. The partnership will help to reduce our CO2
emissions by over 100,000 tons a year. It’s a major deal
which underlines our ongoing commitment to the company’s
Planet Possible approach of doing more with less. In fact,
70 percent of our innovations over the last five years
have been eco-premium solutions and this trend is
expected to continue.
Our safety performance improved further in 2015 and we
met our internal target. Our process safety performance also
continues to be encouraging. Specialty Chemicals received
an award from the American Chemistry Council for product
safety, while AkzoNobel as a whole was recognized by
the European Chemicals Industry Association (Cefic) for
product stewardship.
2015 outcomes
ROS 12.2%
ROI 17.2%
We are now focusing on profitable, organic growth. We have
identified three specific areas that we will be concentrating
on alongside our continued productivity improvements:
growing with our customers through commercial excellence,
leveraging geographical opportunities and delivering growth
through product and process innovation. We have a clear
vision on how to achieve leading performance through our
focus on organic growth and operational excellence.
87
AkzoNobel Report 2015 | Business performance
Specialty Chemicals
strategy
We have met our 2015 financial
expectations, with return on
sales of 12.2 percent (expected
outcome 12 percent) and return
on investment of 17.2 percent
(expected outcome 15 percent).
As a result, we are closer to
our vision of delivering leading
performance, based on strong
chemical platforms driving
profitable growth in selected
markets. We will continue working
towards this vision until we
are satisfied that it has been
fully achieved.
Our 2015 return on sales level is within our future
performance range (11.5 to 13 percent). However, we
expect continued improvement in return on investment at a
minimum of 16 percent going forward. We are also including
financial guidance on our growth rate. Specifically, we have
a clear aim to build on the foundations we have created
and grow in line with, or faster than, our relevant market
segments. We will deliver on these financial expectations by
continuing with our five strategic actions.
88
Actions
Build on our strong chemical platforms to deliver
profitable growth in selected markets
To ensure that we maintain our current return on sales and
investment levels, we will prioritize resources and investment
capital against the most attractive opportunity areas.
There are two main platforms where we have strong
competitive positions in growing markets – the Bleaching
Chemicals and Surfactants platforms. In these businesses,
we are investing to outgrow the market.
• Our Bleaching Chemicals platform is expected to benefit
from continued growth in chemically bleached pulp in
South America. Although there are challenges in many
sectors of the Brazilian economy, growth of chemically-
bleached pulp production in Brazil is expected to
continue. Given our Chemical Island business model,
we have a strong position in this business from both
a cost and sustainability perspective. In Europe (where
growth is also expected) and North America (where the
market is contracting), we will defend and protect our solid
market positions
• We are also investing selectively in growth in the
Surfactants platform. In 2015, low oil prices led to a
sharp decline in the oil and gas drilling sector. However,
we remain convinced of the long-term growth potential
in this sector. There are also other sectors where growth
continues to be robust. We have a strong position
in specialty surfactants and, in particular, in nitrogen
derivatives. Because our surfactants are centered on
a few key technology platforms, we can effectively and
efficiently leverage our production capacity for use across
all segments as we focus on growth
In our other three main platforms, our focus is on growing
with the market from a volume perspective while
improving bottom line performance through enhanced
operational excellence.
• As market growth is limited in the North Western Europe
Salt-Chlorine chain and our competitive position is strong,
our main strategic focus is on efficient capital expenditure,
successful plant utilization and operational excellence.
We are also taking action where opportunities exist to
reinforce our position, particularly where we can utilize
our process technology know-how while conserving our
capital. A recent example is a cooperation with ICL for
salt, which has allowed us to maintain our leadership
position in chemical transformation salt, while also offering
specialty salt growth opportunities. The deal has an
excellent sustainability profile, as it draws on salt-based
waste streams. The second example is a 50/50 joint
venture we formed with Evonik Industries to convert our
Ibbenbüren plant in Gemany from mercury to membrane
technology for the production of potassium hydroxide,
chlorine and hydrogen
• We also have a strong position in our Polymer Chemistry
platform. Given our strong share in this market, our plan
is to grow with the market, improving our performance
by focusing on specific niches and leveraging our global
reputation for safety. For example, we are continuing to
gain traction in the market with our Continuous Initiator
Dosing (CiD) technology. Designed to reduce energy use
and deliver higher PVC quality, it also helps to increase the
capital productivity of our customers by up to 30 percent
while improving safety levels. To maintain our position, we
are investing in a large dicumyl peroxide (DCP) site (which
we operate in Ningbo, China) which supplies the global
market for chemicals that cross-link plastics and rubbers
• In the Ethylene Oxide Network, our emphasis is primarily
on increasing the operational leverage of our existing
assets to further improve our performance levels. We are
also investing in growth in specific applications, such as
specialty chelates and certain cellulosic products
Business performance | AkzoNobel Report 2015 • Reduced chemicals growth rates in China. Although
growth rates are lower than they have been, China is still
growing at levels higher than global GDP growth. We
are responding to changes in growth rates by focusing
on serving local markets, leveraging our existing local
production capacity
• Growth in pulp production in Brazil. We are continuing
to respond to this by constructing closed loop, highly
sustainable, local production capacity
• Requirement to reduce carbon footprint, consistent with
our Planet Possible sustainability agenda. We continue
to make progress on reducing carbon emissions through
a combination of improved energy efficiency, higher use
of renewable energy and higher use of bio-based raw
materials. As an example of the type of improvements we
are making, we have increased renewable energy use by
nearly 20 percent since 2013
• Human Cities. Chemicals make an important contribution
to society, helping to make cities more liveable and
inspiring. Engaging with stakeholders on this topic
provides us with additional impetus for organic growth
Drive functional excellence
In order to further improve our return on sales and our return
on investment, we will continually improve our productivity
levels, both in terms of supply chain and operations and
commercial excellence. A strong talent management
approach utilizing our AkzoNobel process will help us to
achieve this productivity improvement.
• Supply chain and operations. Specialty Chemicals
continues to implement the AkzoNobel Leading
Performance System (ALPS). This operational excellence
program continues to drive targeted improvements in
financial performance, customer satisfaction and safety
• Commercial excellence. Our commercial excellence
program supports our enhanced organic growth focus.
We have four main objectives – increase customer
retention, win with key accounts, invest in higher
growth regions and sectors and open channels to
(new) customers
• Talent management. Having built a flatter organization, we
are improving the levels of professionalism and diversity.
We are focusing on recruitment and engagement of high
quality individuals; continued development of a strong
and diverse pipeline; creation of appropriate learning and
development programs and performance management
Reduce organizational complexity
On a portfolio level, in 2015 we divested our Paper
Chemicals business to Kemira. On a more operational
level, our performance improvement was the result of
various actions, such as rationalizing our manufacturing
footprint, standardizing work processes in all functions and
ERP consolidation across the whole Business Area. Going
forward, a key area of focus will be the reduction of raw
material and product complexity.
Strengthen product and process innovation
We have identified a number of end-user requirements/trends
that will drive our product and process innovation agenda.
These include resource preservation, increasing end-use
demands, accelerated technology development and changing
demographics and spending patterns.
Our innovation agenda is robust. We have overarching
technology programs around process technology, shared
applications and bio-based chemicals, as well as specific
development programs supporting our platforms as
appropriate. This approach has a major sustainability focus,
in line with our Planet Possible agenda.
• Product innovation. In our Surfactants platform, examples
of successful recent innovations include improved
agricultural adjuvants that enhance the effectiveness of
crop protection, delivering customer value by reducing the
amounts required and offering improved eco-profiles
• Process innovation. In our Salt-Chlorine chain platform,
an example of process improvements we are pursuing
can be seen in our MCA business, where we have carried
out significant de-bottlenecking. This resulted in better
product quality and reduced energy consumption as well
as capacity expansion
Capitalize on industry changes
We continue to adjust our strategy and footprint to respond
to industry changes including:
• Reduction in oil prices. On a macro-economic level, oil
price reduction is creating more disposable income for
consumers, driving GDP growth. On a regional level,
the oil price reduction is providing temporary relief for
China and Europe in terms of raw material input costs.
However, in some sectors – such as surfactants for oilfield
applications – the downturn has had a negative impact
on demand
89
AkzoNobel Report 2015 | Business performance End-user segment outlook
Industrial
Accounting for around 50 percent of our revenue, the
Industrial end-user segment is by far the largest for the
Specialty Chemicals Business Area and is served by all of
our chemical platforms. We generate significant revenue
from the sale of chemical intermediates, such as salt,
chlorine, caustic soda, organic peroxides, metal alkyls and
ethylene-based products into the plastics (polymer) industry
and other chemical industries. We also sell surfactants and
ethylene-derived products into the oil and gas, metals and
mining and agrochemical industries. In addition, we sell
bleaching chemicals (primarily sodium chlorate) for use in the
production of pulp.
We expect that in the long term, market development in
chemicals will be disproportionately strong in the Middle
East (due to access to low cost raw materials) and in the US
(due to shale gas). In the short to medium term, the regional
outlook is less clear due to lower oil prices. In the Middle
East, downstream investments are being postponed or even
cancelled. In North America, there has been a reduction in
the cost advantage in terms of shale gas-based ethylene
feedstocks and this is moderating regional chemical growth
rates somewhat.
Although growth rates are expected to be lower in Europe
than they are in other regions, Europe is currently continuing
to post record trade surpluses in chemicals and we expect
this to continue, particularly in the chemical sectors relevant
to AkzoNobel. Due to local demand, we also expect
continued growth in the large and important Chinese market,
albeit at a lower level than we have seen in the recent past.
From a sub-segment perspective, we continue to expect
above GDP growth in polymer markets, where there is
continued demand growth as global wealth increases and
products continue to be converted to plastics for a variety of
reasons, including weight reduction. We expect GDP-level
growth in segments such as agrochemicals. While overall
growth in chemically-bleached pulp is below GDP, we
90
Examples of successfull recent innovations in our Surfactants platform include improved
agricultural adjuvants that enhance the effectiveness of crop protection.
Business performance | AkzoNobel Report 2015 AkzoNobel market leadership positions
Functional Chemicals
1st
Chelates and micronutrients
Organic peroxides
Industrial Chemicals
1st
Chlorine merchant (Europe)
Monochloroacetic acid (MCA)
Pulp and Performance Chemicals
1st
Bleaching chemicals
Colloidal silica dispersions
Surface Chemistry
1st
Industrial applications
Agricultural applications
expect, continued strong growth in Brazil, due to the cost
competitiveness of the region.
Buildings and Infrastructure
Our main involvement in the Buildings and Infrastructure
end-user segment is through the Salt-Chlorine Chain and
Polymer Chemistry platforms. We produce salt, chlor-alkali
products, organic peroxides, metal alkyls and various other
products used to manufacture plastics that are, in turn, used
to manufacture plastics for a wide variety of construction
components. We also supply products for more direct use,
such as cellulosic products for paints and redispersible
polymer powders (RPP) for concrete admixtures.
As our Salt-Chlorine Chain platform is almost entirely
based in Europe, and a substantial proportion of our RPP
and cellulosic business is also in Europe – where building
regulations are more stringent – the European outlook is very
important. Most analysts are predicting continued modest
construction recovery, which should have a positive impact
on the growth outlook for the markets in which we compete.
However, this is mitigated somewhat by lower than historical
growth levels in China, which is another area of regional
strength for our business.
Consumer Goods
We sell a wide variety of surfactants and ethylene-based
products for consumer goods applications such as cleaning,
dishwashing and pharmaceutical products. We also sell
chlor-alkali products, organic peroxides and metal alkyls
for the production of plastics (polymers) that are used in
packaging, as well as consumer durables such as toys and
furniture. We also sell consumer salt.
As a general rule, expected growth in Consumer Goods
roughly follows GDP growth. Currently, this translates into
above average growth in North America, balanced by more
moderate growth in Europe. In China, growth rates have
fallen off from the high rates experienced in the recent
past. Growth is still expected, however, fueled by increased
domestic demand as wealth levels continue to rise, as
well as exports to North America, where growth rates are
also robust.
Transportation
The Transportation end-user segment is the smallest for our
Business Area. Similar to other end-user segments, we sell
a wide variety of products, generally from our Salt-Chlorine
Chain and Polymer Chemistry platforms. For example, our
products are used in plastics (polymers) for the manufacture
of cars and other forms of transportation. These markets
have almost entirely recovered from the 2008-2009
recession and are, in general, growing at or above GDP
growth levels. The trend towards smaller, lighter weight cars
supports the continued conversion to plastics, so growth in
these businesses is disproportionately high.
The market
The global chemicals industry is very large (more than
€3.5 trillion globally) and diverse. China has become the
global leader in terms of chemical production. Market
development is also disproportionately strong in the Middle
East (due to access to low cost raw materials) and in the US
(due to shale gas). Europe continues to post record trade
surpluses in chemicals in all major regions and we expect
this to continue, particularly in the chemical sectors relevant
to AkzoNobel. Growth rates in Europe are expected to be
substantially lower than in other regions, though, due to a
combination of limited local demand growth (as described
in the end-user segment analysis above) and a higher local
raw material and energy cost base.
91
AkzoNobel Report 2015 | Business performance Specialty Chemicals value creation summary 2015
We are a major producer of specialty
chemicals, supplying key products to
business-to-business customers in all four of
our end-user segments. We utilize inherently
high energy processes and focus strongly on
reducing carbon footprint and energy use,
while saving costs in our own operations.
Developing close relationships with our
customers – and helping them to create
value – is key to our ongoing success, along
with efficient processes, an increased focus
on eco-premium solutions and renewable
energy and a high level of innovation.
These initiatives will create economic, social
and environmental value. Social value is
increased by our continued focus on safety,
as well as our talent development programs
and our contribution to various
community activities.
All these initiatives will contribute to our
financial performance and ultimately lead to
more economic value for our investors.
Economic value: Organization
€5.0 billion
revenue
€331 million
capital expenditures
€609 million
operating income
€3.4 billion
invested capital
During 2015, several asset integrity and
efficiency improvement projects, as well as
growth projects for specific segments, were
carried out.
Revenue development in % versus 2014
Increase
Decrease
0%
-1%
-2%
5%
2%
Volume
Price/
mix
Aquisitions/
divestments
Exchange
rates
Total
Environmental value: Input
Organization
3.3 million tons
upstream CO2(e) emissions
89,200 TJ
energy use
We continue to improve efficiency by
reducing our energy use per ton of
production, and are working towards
improving our share of renewable energy.
We continue to improve the environmental
footprint of our operations by focusing on
operational eco-efficiency.
Social value: Input
Organization
9,100
employees at year-end 2015
1.9
total reportable rate of injuries
Total reportable rate of injuries
per million hours worked
Employee safety is a key priority and we are
actively driving towards a reduction in the
number of incidents.
2.2
2.4
1.8
1.9
2012
2013
2014
2015
92
Business performance | AkzoNobel Report 2015 Revenue breakdown by business unit
in %
Revenue breakdown by end-user segment
in %
Outcomes
D
C
A
B
D
A
B
C
A Functional Chemicals
B Industrial Chemicals
C Surface Chemistry
D Pulp and Performance Chemicals
36
24
21
19
A Buildings and Infrastructure
B Transportation
C Consumer Goods
D Industrial
Outcomes
Eco-premium solutions with
customer benefits
% of revenue
16
16
17
17
2012
2013
2014
2015
19
6
28
47
3.4 million tons
CO2(e) emissions own operations
1.9 million tons
downstream CO2(e) emissions
8.6 million tons
CO2(e) emissions cradle-to-grave
12.2% ROS
17.2% ROI
17%
of revenue from eco-premium solutions
RD&I investments have resulted in
17 percent of revenue derived from eco-
premium solutions with customer benefits.
6%
decrease CO2(e) per ton of sales from 2012
cradle-to-grave carbon footprint
66 kilotons
total waste
Outcomes
€780 million
employee benefits
We highly value, and actively work on
improving, employee engagement.
We’re investing in training and development
and continue to work on achieving a more
diverse workforce.
4.12
employee engagement score
We participate in community programs
and local sponsorships.
93
AkzoNobel Report 2015 | Business performance
Key business developments
Functional Chemicals
Industrial Chemicals
• Revenue was up 4 percent due to positive currency effects; while volumes overall were
slightly negative
• Volumes in the oil drilling segments decreased due to low demand, while in China,
• Revenue was down 2 percent, mainly due to tough conditions in our main markets
combined with the impact of interruptions in the manufacturing and supply chain in
Rotterdam, the Netherlands. Overall volumes were slightly negative
volumes were down primarily due to the incident at the port of Tianjin
• Following the successful conversion of the Frankfurt plant in Germany during the second
• Construction of our dicumyl peroxide plant at Ningbo, China is on schedule for completion
by the end of 2016. The plant will serve the global market for the crosslinking of plastics
and rubbers
• Production levels for our performance additives plant in Ningbo further increased,
quarter, our chlor-alkali and chloromethane results were robust
• We formed a 50/50 joint venture with Evonik Industries to convert our Ibbenbüren plant
in Germany from mercury to membrane technology for the production of potassium
hydroxide, chlorine and hydrogen
supported by higher captive sales to AkzoNobel Decorative Paints
• Salt continued its solid performance, benefiting from technology and market
• Our sites in Mons (Belgium), Los Reyes (Mexico), Pasadena and Battleground (US) were
leadership positions
modernized and expanded
• Continuous Initiator Dosing (CiD) technology, an innovation which offers a safer and more cost-
efficient initiator system for PVC production, continues to gain traction with customers globally
• Our Ethylene and Sulfur Derivatives business commercialized six new products, including
Bolikel XP and offerings in our Bermocoll and ELOTEX lines
• We established a cooperation with ICL in Spain to convert a sodium chloride by-product
stream from its potassium mine into high quality vacuum salt
• We continued to reduce the use of fossil fuels and improve our carbon footprint by
investing in the production of steam generated from waste wood in Delfzijl, the Netherlands
Key brands
Revenue in € millions
Key brands
Revenue in € millions
Ferrazone®
T h i s I r o n W o r k s .
1,739
1,756
1,822
1,291
1,230
1,204
Chemical platforms
Polymer Chemistry and Ethylene Oxide Network
2013
2014
2015
Geo-mix revenue by destination in %
Chemical platform
Salt-Chlorine Chain
2013
2014
2015
Geo-mix revenue by destination in %
Some of our customers
• Air Products
• Fenzi
• FMC Corporation
• Formosa
• Henkel
(P&G)
• Sabic (OP)
• Yara
• Procter and Gamble
C
A
Some of our customers
• Covestro
• Huntsman
• Shin-Etsu
Top raw materials
• Ethylene
• Acid chlorides,
chloroformates
Key cost drivers
• Polymer emulsions
• Ammonia, HCN
• Sulfur
• Ethylene
• Energy
• Sulfur
• Salt
B
A EMEA
B Americas
C Asia Pacific
Top raw materials
• Fuels (for cogeneration)
• Power
• Acetic acid
38
34
28
Key cost drivers
• Oil, gas and coal
• Methanol
94
C
B
A
A EMEA
B Americas
C Asia Pacific
89
5
6
Business performance | AkzoNobel Report 2015
Pulp and Performance Chemicals
Surface Chemistry
• Revenue was down 2 percent, due to the divestment of our Paper Chemicals business
to Kemira in May. This was partly offset by favorable currencies and higher volumes in
growth segments
• Revenue was up 5 percent, mainly due to positive currency effects, partly offset by lower
volumes and price pressure
• Volumes were down in the oil drilling segments, partly offset by stronger performance in
• Overall volumes were higher than 2014, excluding the divestment effect. Core growth
agro, lubes/fuels, mining and higher growth in Europe
segments continued to deliver volume increases in line with our plans
• The lower demand in the oil drilling segments significantly affected the
• Innovations in differentiated applications and technologies in colloidal silica and expandable
North American business
microspheres fueled growth
• Investments in growth areas allowed us to meet customer demands in a more efficient way
• We rolled out our four-dimensional profit & loss (4D P&L) reporting methodology to a
• Sales in Europe were strong and we made good progress in China
• Significant investment in supply chain and key sites helped improve supply reliability
• Twenty new products were launched, including Armohib CI-5150, an effective, eco-friendly
number of additional businesses. Introduced last year, this model is aimed at measuring
environmental, human, social and financial impact across the whole value chain
corrosion inhibitor for the oilfield market, as well as new offerings in personal care,
cleaning and agro formulations
Key brands
Revenue in € millions
Key brands
Revenue in € millions
1,036
1,009
989
1,012
1,010
1,060
Chemical platform
Bleaching Chemicals
Some of our customers
• Cabot
• Diam
• Domtar
• Fibria
• Fujimi
• Georgia Pacific
• Kemira
• Sanofi
• SCA
• StoraEnso
• Suzano
• Sodium silicate
Top raw materials
• Energy
• Salt
Key cost drivers
• Energy
• Logistic costs
2013
2014
2015
Geo-mix revenue by destination in %
Chemical platform
Surfactants
2013
2014
2015
Geo-mix revenue by destination in %
A
C
B
Some of our customers
• Baker Hughes
• BYK Additives
• Lubrizol
• Monsanto
• Procter & Gamble
• Ferrexpo Poltava
Mining
Top raw materials
• Animal fats
• Vegetable oils
• Starch
(corn, potato, tapioca)
A EMEA
B Americas
C Asia Pacific
37
49
14
Key cost drivers
• Natural oils and fat
• Ethylene
• Oil and gas
A EMEA
B Americas
C Asia Pacific
A
C
B
33
54
13
95
AkzoNobel Report 2015 | Business performance
Changing the energy
landscape
Over the last five years,
around 70 percent
of the innovations
developed by our
Specialty Chemicals
business have been
eco-premium solutions.
While this trend is set to continue, we are also looking to step up our innovation
in other areas, where we can also benefit from a more sustainable approach to
our activities.
During 2015, we signed a 12-year agreement to purchase sustainably
generated steam from Dutch energy provider Eneco. This will involve piping
steam from Eneco’s biomass facility in Delfzijl, the Netherlands, to AkzoNobel’s
nearby production facility.
In addition, we will supply steam to neighboring customers, with Groningen
Seaports providing the necessary infrastructure, such as a steam distribution
pipeline that will also be accessible to other interested parties. The partnership
will help to reduce our CO2 emissions by more than 100,000 tons a year –
equivalent to what is produced annually by 12,500 households.
It’s a development which clearly illustrates a deliberate shift in the energy
landscape. As reliance on fossil fuels continues to dwindle, there has been a
gradual move from coal to gas and now renewable energy. Although this is
nothing new for AkzoNobel, we’ve been focusing on alternative forms of energy
for many years.
For example, our Hengelo site in the Netherlands already takes sustainable
steam from one of its neighbors, while we’ve long operated a woodchip-fired
boiler at our salt production site in Mariager, Denmark. More recently, our
chlorine plant in Frankfurt, Germany, was converted to membrane electrolysis
technology. In fact, 38 percent of the company’s total energy use globally
comes from renewable resources.
The supply of sustainably generated steam in Delfzijl is expected to begin in
December 2016.
96
Business performance | AkzoNobel Report 2015 Our Delfzijl site will reduce its
CO2 emissions by more than
100,000
tons/year
97
That’s the same as
12,500 households
produce each year
Scan and explore
AkzoNobel Report 2015 | Business performance Keeping the wheels turningRoads – we wouldn’t get far without them. Did you know we’ve been serving the road industry since the 1940s? We supply a wide variety of advanced products that are essential to keeping us all connected and on the move. Leadership
In this section we introduce our Board of Management and
Executive Committee, as well as our Supervisory Board.
We also present the Report of the Supervisory Board and
provide detailed overviews of their activities during 2015.
Our Board of Management and Executive Committee
100
Statement of the Board of Management
Our Supervisory Board
Supervisory Board Chairman’s statement
Report of the Supervisory Board
102
103
104
106
99
AkzoNobel Report 2015 | LeadershipLeadership Our Board of Management
and Executive Committee
Ruud Joosten
Member of the Executive Committee responsible
for Decorative Paints
(1964, Dutch)
After graduating from Amsterdam Free University
with a Masters in Economics, Ruud Joosten joined
AkzoNobel in 1996 as International Marketing Manager
for Decorative Paints. Since then, he has held various
management positions within Decorative Paints
and Specialty Chemicals, including BU Manager for
Decorative Paints North and Eastern Europe and
Managing Director of Pulp and Performance Chemicals.
Ton Büchner
CEO and Chairman of the Board of Management
and the Executive Committee
(1965, Dutch)
Prior to joining AkzoNobel, Ton Büchner was President
and CEO of Sulzer Corporation. An engineer by
training, he gained a Master of Science in Civil
Engineering at Delft University of Technology in the
Netherlands, and a Master in Business Administration
from IMD in Lausanne. His early career in the oil and
gas construction industry involved roles at Allseas
Engineering and AkerKvaerner.
Werner Fuhrmann
Member of the Executive Committee responsible
for Specialty Chemicals
(1953, German)
Werner Fuhrmann was appointed to his current role
in 2012. He was previously Managing Director of the
company’s Industrial Chemicals business, a position he
first took up in 2005. He was Chairman of the Dutch
Association of the Chemicals Industry (VNCI) from
2010 until 2015. Currently he is a Board member of
both the European Chemicals Association (Cefic) and
American Chemistry Council.
Sven Dumoulin
General Counsel and
Member of the Executive Committee
(1970, Dutch)
Sven Dumoulin joined AkzoNobel as General Counsel
in 2010 and holds a PhD in Law from the University
of Groningen. Previously he was Group Secretary
at Unilever. Outside AkzoNobel, he is a member of
various legal professional associations in both the
Netherlands and abroad. From 2003 to 2007, he held
professorships in company law at the Universities of
Groningen and Tilburg.
Marten Booisma
Member of the Executive Committee responsible
for Human Resources
(1966, Dutch)
Marten Booisma joined AkzoNobel as Chief Human
Resources Officer in 2013. He spent the previous six
years in this position at Royal Ahold. Having graduated
from the University of Amsterdam with a Master of
Science in Politics, he started his career in HR at Shell
and Unilever. He then moved on to assume various
senior management positions at Ahold.
Maëlys Castella
CFO and Member of the Board of Management
and the Executive Committee
(1966, French)
Maëlys Castella was Group Deputy CFO at Air Liquide
before joining AkzoNobel in 2014. She gained an
Engineering degree at Ecole Centrale Paris. She also
has a Master’s degree in Energy Management & Policy
from the University of Pennsylvania and the French
Institute of Petroleum. Her early career included finance
roles in the oil and gas industry.
100
Conrad Keijzer
Member of the Executive Committee responsible
for Performance Coatings
(1968, Dutch)
Conrad Keijzer joined AkzoNobel in 1994 as Market
Development Manager for Industrial Chemicals. Since
then, he has held a variety of management positions
within Performance Coatings and Specialty Chemicals.
These include being appointed Global Director
for Automotive Plastic Coatings and serving as
Managing Director for both the Packaging Coatings
and Industrial Coatings businesses.
For further information please
see About us > Management on
akzonobel.com
From left to right:
Ruud Joosten; Werner Fuhrmann; (next to the couch)
Maëlys Castella; Sven Dumoulin; (behind the couch)
Marten Booisma; Ton Büchner and Conrad Keijzer
(on the couch).
Leadership | AkzoNobel Report 2015 101
AkzoNobel Report 2015 | Leadership Outlook
We expect 2016 to be a challenging year. Difficult
market conditions continue in Brazil, China and
Russia. No significant improvement is anticipated
in Europe, particularly in the Buildings and
Infrastructure segment. Deflationary pressures
continue and currency tailwinds are moderating.
Amsterdam, February 9, 2016
The Board of Management
Ton Büchner
Maëlys Castella
Statement of the
Board of Management
The Board of Management’s
statement on the financial
statements, the management
report and internal controls.
We have prepared the Report 2015, and the undertakings
included in the consolidation taken as a whole, in
accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU and additional Dutch disclosure
requirements for annual reports.
To the best of our knowledge:
• The financial statements in this Report 2015 give a true
and fair view of our assets and liabilities; our financial
position at December 31, 2015; and the result of our
consolidated operations for the financial year 2015
• The management report in this Report 2015 includes a
fair review of the development and performance of our
businesses and the position of AkzoNobel, as well as the
undertakings included in the consolidation taken as a
whole, and describes the principal risks and uncertainties
that we face
The Board of Management is responsible for the
establishment and adequate functioning of a system of
governance, risk management and internal controls in our
company. Consequently, the Board of Management has
implemented a broad range of processes and procedures
designed to provide control by the Board of Management
over the company’s operations. These processes and
procedures include measures regarding the general control
environment, such as a Code of Conduct – including
business principles and a corporate complaints procedure
(SpeakUp!) – corporate directives and authority schedules,
as well as specific measures, such as a risk management
system, a system of controls and a system of letters of
representation by responsible management at various levels
within our company.
All these processes and procedures are aimed at providing
a reasonable level of assurance that we have identified and
managed the significant risks of our company and that we
meet our operational and financial objectives in compliance
with applicable laws and regulations. The individual
components of the above set of internal controls are in line
with the COSO Enterprise Risk Management Framework.
With respect to supporting and monitoring of compliance
with laws and regulations – including our Code of Conduct –
a Compliance Committee has been established. The
Internal Control function maintains AkzoNobel’s Internal
Control Framework, monitors the compliance and includes
updates regarding the emergence of new risks. They support
the annual review of the effectiveness of the system of
governance, risk management and internal controls of the
Board of Management. Internal Audit provides reasonable
assurance to the Board of Management, as well as the
Supervisory Board, that our system of risk management
and internal controls, as designed and represented by
management, are adequate and effective.
While we routinely work towards continuous improvement of
our processes and procedures regarding financial reporting,
the Board of Management is of the opinion that with regards
to financial reporting risks, the internal risk management and
control systems:
• Provide a reasonable level of assurance that the financial
reporting in this Report 2015 does not contain any errors
of material importance
• Have worked properly during the year 2015
For a detailed description of the risk management
system and the principal risks identified, reference is
made to the Risk management chapter in the Strategic
performance section, as well as the Compliance and
integrity management chapter of the Governance and
compliance section. We have discussed the above opinion
and conclusions with the Audit Committee, the Supervisory
Board and the external auditor.
102
Leadership | AkzoNobel Report 2015
Our Supervisory Board
Antony Burgmans
(1947, Dutch)
Chairman
Initial appointment: 2006
Current term of office: 2014-2018
Sari Baldauf
(1955, Finnish)
Initial appointment: 2012
Current term of office: 2012-2016
Peggy Bruzelius
(1949, Swedish)
Initial appointment: 2007
Current term of office: 2015-2019
Byron E. Grote
(1948, American and British)
Initial appointment: 2014
Current term of office: 2014-2018
Former Chairman and CEO of Unilever N.V. and plc.;
Non-executive Director of BP plc.;
Member of the Supervisory Boards of SHV Holdings N.V.
and Jumbo Group Holding B.V.;
Chairman of the Supervisory Board of TNT Express N.V.
• Chairman of the Nomination Committee as of
May 1, 2014
• Member of the Remuneration Committee
Former member of the Group Executive Board of
Nokia Oyj;
Former non-executive Director of F-Secure Oyj;
Chairman of the Board of Fortun Oyj;
Supervisory Board member of Daimler AG and
Deutsche Telekom.
• Chairman of the Remuneration Committee
as of May 1, 2014
• Member of the Nomination Committee
Former CEO of ABB Financial Services;
Former Executive Vice-President of SEB;
Non-executive Director of Axfood AB, Lundin Petroleum AB,
Skandia Mutual Life Insurance and Diageo plc.;
Chairman of Lancelot Asset Management AB.
Non-executive Director of Tesco plc.;
Non-executive Director of Anglo-American plc.;
Non-executive Director of Standard Chartered plc.;
Former Board member BP plc.;
Former non-executive Director of Unilever N.V. and plc.
• Member of the Audit Committee
• Chairman of the Audit Committee as of April 22, 2015
Louis Hughes
(1949, American)
Initial appointment: 2006
Current term of office: 2014-2018
Dick Sluimers
(1953, Dutch)
Initial appointment: 2015
Current term of office: 2015-2019
Ben Verwaayen
(1952, Dutch)
Initial appointment: 2012
Current term of office: 2012-2016
Former President and COO of Lockheed Martin;
Former Executive Vice-President of General Motors;
Chairman of InZeroSystems LLC;
Member of the Board of Directors of ABB group
and Alcatel-Lucent SA;
Executive Advisor of Wind Point Partners.
Extraordinary Councillor of State;
Member of the Supervisory Board of Atradius N.V. and
NIBC Bank N.V.;
Trustee of the IFRS Foundation and Erasmus University
Trust;
Board member of the Amsterdam Concert Hall Fund.
• Member of the Audit Committee
• Member of the Audit Committee
Former CEO Alcatel-Lucent;
Former Chief Executive/Chairman of the Board’s
Operating Committee of BT group;
Non-executive Director of Akamai Technologies Inc.
and Bharti Airtel Ltd.
• Member of the Remuneration Committee
• Member of the Nomination Committee
103
AkzoNobel Report 2015 | Leadership Supervisory Board
Chairman’s statement
The company successfully
generated operational efficiencies
during 2015 and made solid
progress with its continuous
improvement program, despite
challenging market conditions.
This contributed towards
AkzoNobel delivering on its 2015
targets and moving closer to
achieving its vision of leading
market positions delivering leading
performance. A notable highlight
was being ranked top of our
industry group on the Dow Jones
Sustainability Index for the fourth
year in a row.
For 2016 and beyond, the
focus will shift towards hardwiring
the culture of continuous
improvement, continued
operational excellence and
organic growth.
During the year, the Supervisory Board continued to monitor
and review the company’s operational performance, its
risk management processes and its strategic direction.
Business Area performance updates were received at
each Supervisory Board meeting, along with information
on the most significant risks facing the businesses and
corresponding mitigation measures. Specific updates from
individual functions were also received throughout the
year. In addition, the Supervisory Board held a full strategy
day dedicated to a corporate level review, which included
Business Area by Business Area analyses and a five-year
forward looking outlook.
of €1.20 for the financial year 2015 represents an increase
of 7 percent on last year and is a clear indication of the
company’s strategic success. Further details relating to the
dividend are available in the Report of the Supervisory Board.
It was a year which also saw AkzoNobel implement its new
Code of Conduct, which continues to reflect the company’s
core principles of Safety, Integrity and Sustainability. These
core principles affirm what AkzoNobel stands for as a
company. Evidence of how these principles have been
successfully embedded can be seen across the company’s
performance indicators and throughout this Report 2015.
A particular strategic achievement has been the
implementation of the company’s Global Business
Services (GBS) model, officially launched on January 1,
2016. The intention is to combine the shared activities for
Human Resources, Information Management, Finance
and non-product related (NPR) Procurement under one
GBS organization. GBS will span Europe, North America,
Latin America, North East Asia, India and South East Asia.
The Supervisory Board is confident that the Executive
Committee’s approach in this regard will move AkzoNobel
closer to its vision of operational and functional excellence
and continuous improvement.
As a Supervisory Board, we are committed to the company’s
focus on sustainability and discussed and reviewed the
sustainability performance and objectives in detail during
2015. The number one DJSI ranking in the Materials industry
group for the fourth consecutive year was a major success.
It was also the tenth consecutive year that AkzoNobel has
been ranked in the top three. We would like to congratulate
all our employees for this decade of achievement. The
Supervisory Board continues to believe that a sustainable
business ensures increased value for all our stakeholders,
while complementing our objective of long-term success.
In October, an interim dividend of €0.35 was approved. This
distribution represents an increase of 6 percent over the
previous year’s interim dividend. The proposed final dividend
Another area of attention involved further enhancing the
company’s controls and processes, through the roll-out of
Directives, Rules, Manuals and Guidelines via the company’s
Directives framework. The Supervisory Board appreciates
the management’s active encouragement for the use of the
company’s SpeakUp! procedure for reporting any (potential)
compliance or conduct issues.
Fundamentally, the achievement of AkzoNobel’s operational
performance and objectives, including its core principles
of Safety, Integrity and Sustainability, are underpinned
by sound corporate governance. The Supervisory Board
recognizes its own role in the company’s corporate
governance structure, with members receiving adequate
updates, information and training to fulfill their roles. In
particular, during 2015, the Supervisory Board undertook
ongoing compliance training to maintain its awareness and
effectiveness in ensuring compliance. You can find full details
about the company’s corporate governance framework,
Remuneration Policy, compliance codes and systems,
integrity management and details on shareholder relations
in the Governance and compliance section of this Report
2015. This year the Supervisory Board and its committees
also underwent a thorough independent external evaluation
of their performance and effectiveness. More information
on the external evaluation can be found in the Report of the
Supervisory Board.
104
Leadership | AkzoNobel Report 2015 At the Annual General Meeting of shareholders held in April
2015, the Supervisory Board thanked Dr. Uwe-Ernst Bufe for
his 12 years of service after he reached the end of his tenure.
At the same meeting, Mr. Dick Sluimers was welcomed as
a newly appointed Supervisory Board member. Mr. Sluimers
was nominated following a rigorous and targeted search
for candidates, undertaken via an external search agency.
Mr. Sluimers brings a wealth of experience in both public
and commercial enterprise, including finance and reporting
expertise. He is a trustee of the International Financial
Reporting Standards (IFRS) Foundation and has valuable
experience as the CEO of a major pension and investment
management company. Accordingly, and in recognition of his
profile, the Supervisory Board has appointed Mr. Sluimers as
a member of the company’s Audit Committee.
Looking forward to the 2016 AGM, in accordance with the
Supervisory Board’s (re)appointment scheme, discussions
have taken place regarding the forthcoming end of terms for
Ms. Sari Baldauf and Mr. Ben Verwaayen, also against the
background of the Supervisory Board’s profile, the Corporate
Governance Code and legal provision regarding a balanced
composition of the Supervisory Board. The commitment and
contributions of Ms. Baldauf and Mr. Verwaayen continue
to provide significant value to the Supervisory Board and its
Nomination and Remuneration Committees. Accordingly,
the Supervisory Board will make a recommendation for the
reappointment of Ms. Baldauf and Mr. Verwaayen.
During 2015, the Supervisory Board assessed the
performance of the company’s CEO, Mr. Ton Büchner,
and discussed his proposed reappointment at the 2016
AGM. The Supervisory Board has been pleased with the
performance of the CEO to date. Mr. Büchner continues to
lead the company’s Board of Management and Executive
Committee in its promotion of operational and functional
excellence. In light of this performance, the Supervisory
Board has proposed to reappoint Mr. Büchner for an
additional four-year term. Further details can be found in the
report of the Nomination Committee.
Discussions on the reappointment of the CEO formed
part of a strong focus on succession planning and talent
management during 2015. The Supervisory Board is
working to construct a diverse executive talent pool for
future development and succession planning at the Board of
Management, Executive Committee and top management
level. More details can be found in the Report of the
Supervisory Board.
In addition to executive succession planning, executive
remuneration has been a topic of discussion. In 2015, the
Remuneration Committee reviewed and proposed revisions
to the company’s Remuneration Policy. These proposals
have been reviewed and supported by the Supervisory
Board and will be submitted for approval at the 2016
AGM. Further information can be found in the report of the
Remuneration Committee, and in the Remuneration report.
I would like to conclude by expressing my gratitude to my
fellow Supervisory Board members for their commitment and
diligence during 2015. Together, we would also like to thank
the company’s CEO, Ton Büchner, CFO, Maëlys Castella,
the other members of the Executive Committee and all
employees for their dedication and hard work in achieving a
successful 2015.
Antony Burgmans
Chairman of the Supervisory Board
105
AkzoNobel Report 2015 | Leadership Report of the
Supervisory Board
Meetings
The Supervisory Board held nine meetings during 2015. Six
were plenary sessions with the full Executive Committee
present for all or part of the meetings. Three meetings were
held without the full Executive Committee present; the Board
of Management attended seven of the nine meetings. Almost
all plenary sessions of the Supervisory Board were preceded
or succeeded by an executive session of the Supervisory
Board, with the CEO in attendance. An attendance overview
of the meetings of the Supervisory Board and its committees
can be seen on this page.
Supervisory Board
attendance record
The table on the right provides an overview of the
attendance record of the individual members of the
Supervisory Board. The Supervisory Board attaches great
value to the attendance of its meetings by each Supervisory
Board member. However, if Supervisory Board members are
unable to attend a Supervisory Board or committee meeting,
they inform the relevant Chairman, stating the reason.
They also have the opportunity to discuss any agenda items
with the relevant Chairman. Attendance is expressed as
the number of meetings attended out of the number eligible
to attend.
Supervisory Board attendance record
Antony Burgmans
Sari Baldauf
Peggy Bruzelius
Uwe-Ernst Bufe
Byron E. Grote
Louis Hughes
Dick Sluimers
Ben Verwaayen
SB
9/9
9/9
9/9
3/3
8/9
9/9
6/6
9/9
AC
–
–
6/6
1/2
6/6
6/6
4/4
–
RC
4/4
4/4
–
–
–
–
NC
3/3
3/3
–
–
–
–
4/4
3/3
The table indicates the meeting attendance for the Supervisory Board (SB), the Audit
Committee (AC), the Remuneration Committee (RC) and the Nomination Committee (NC).
Supervisory Board activities 2015
Q1
Q2
Q3
Q4
• Financial statements & profit
allocation
• Final dividend 2014
• Business Area reviews
• Remuneration target setting
• Strategy reviews: RD&I, Sourcing
• Risk management: Initial outcomes
• Nomination Supervisory Board
candidate Mr. Sluimers
• Supervisory Board evaluation
• CEO, CFO & Executive Committee
evaluation
• Review Q1 2015 financials and
performance
• Business Area reviews
• Annual General Meeting 2015
• Talent management & succession
planning
• Strategy reviews: Human
Resources, Legal
• Strategy Day 2015: project
analyses and BA strategy updates
• Review forward planning and
five-year outlook
• Sustainability strategy
• Competitor analysis
• Review Q2 2015 financials and
performance
• Business Area reviews
• Review dividend policy
• Country visit to Northern France
including customer sessions and
site visit
• Competitor analysis
• Risk management: implementation
of risk mitigating measures
• New Code of Conduct and
Business Partner Code
• Company strategy and Capital
Markets Day
• Review Q3 2015 financials and
performance
• Business Area reviews
• Interim dividend proposal 2015
• Remuneration Policy review
• Performance and budget planning
• Supervisory Board and executive
succession planning
• Strategy reviews: Supply Chain,
Global Business Services
• Compliance training
• Budget and operational plan 2016
106
Leadership | AkzoNobel Report 2015
Performance and budget planning
A primary aspect of the Supervisory Board’s ongoing work
is assessing management’s performance in the pursuit
of the company’s targets and objectives. During the year,
the Supervisory Board’s work in performance assessment
included the review and discussion of the company’s
performance at each Supervisory Board meeting. These
meetings also undertook in-depth Business Area by
Business Area performance reviews and received updates
on forward-looking targets.
In 2015, the Supervisory Board took particular note of the
company’s improved performance and successes to date,
including its focus on cost reductions through operational
excellence and continuous improvement. Accordingly,
the Supervisory Board resolved to propose an increased
dividend for the year 2015. Further details on the 2015
dividend proposal are provided in the “Financial statements
and profit allocation” paragraph.
The Supervisory Board’s ongoing assessment of the
company’s performance during the year provided a basis
for its discussions on the forward-looking budget and
operational plan. Both the proposed budget and operational
plan for 2016 were provided by the Board of Management
for Supervisory Board’s review and analysis during the final
quarter of the year. The budget and plans were assessed in
the light of the company’s performance to date and in the
context of the five-year outlook, which was discussed as
part of the Supervisory Board’s strategic reviews. Following
in-depth discussions, the Supervisory Board has approved
the proposed budget and operational plan for 2016.
Strategy reviews
Throughout the year, the Supervisory Board reviewed the
company’s strategy and risks, as well as its implementation
and embedding of operational and functional excellence.
In doing so, the Supervisory Board undertook a high level
review of operational and commercial strategy, including
the company’s five-year outlook. It supplemented these
high level discussions with detailed functional reviews
and Business Area action plan updates and analyses.
Throughout the year, the Supervisory Board’s strategy
reviews included a full Strategy Day, analysis of potential
project options under management consideration, and
functional discussions on Research, Development and
Innovation, Integrated Supply Chain, Legal, Human
Resources, Global Business Services and Sustainability.
Furthermore, the three Executive Committee members with
Business Area responsibilities provided regular updates
to inform the Supervisory Board on health, safety and
environmental matters, in-depth competitor analyses,
ongoing projects and year-to-date financials.
The Supervisory Board would like to draw particular
attention to the company’s Global Business Services (GBS)
implementation. Since 2013, the Supervisory Board has
been monitoring the company’s implementation of process
and tool standardization, and alignment of the organization
towards shared service centers, centers of expertise and
business partners. The Supervisory Board has recognized
the success of this initiative in reducing general and
administrative costs.
In 2015, these programs culminated in the company’s
announcement that it will transfer shared service activities to
Global Business Services as of January 2016. This transfer
will combine the shared activities for Human Resources,
Information Management, Finance and non-product related
(NPR) Procurement under one organization. GBS will span
Europe, North America, Latin America, North East Asia, India
and South East Asia. The Supervisory Board is confident that
the Executive Committee’s approach in this regard will move
AkzoNobel closer to the vision of operational and functional
excellence and a platform for continuous improvement.
Sustainability strategy
The Supervisory Board lends particular importance to
sustainability in its discussions on strategy and performance.
Sustainability continues to represent a core principle of
the business, a guideline for how the company conducts
itself and an indicator of what AkzoNobel stands for. The
company has a Sustainability Council which is led by the
CEO and advises the Executive Committee on sustainability
developments. More information can be found in the
Governance and compliance and Sustainability statements
sections of this Report 2015. The Supervisory Board reviews
sustainability performance and seeks to ensure that both the
Business Areas the functional management – teams such
as Procurement, Supply Chain, and Research, Development
and Innovation – have objectives that complement, support
and engrain the sustainability principles. AkzoNobel’s
sustainability strategy is therefore a cross-Business Area,
cross-functional program, taking into account the most
important sustainability trends in the company’s four key
end-user segments and touching on all aspects of its
business. During 2015, the Supervisory Board reviewed the
company’s performance indicators for safety performance,
eco-efficiency and employee engagement, including diversity,
inclusion and talent management. We focus on these
performance indicators because the company’s current
sustainability strategy is based on identifying opportunities
for value creation through resource efficiency, innovation,
employee engagement and the continued integration of
sustainability at all stages of the value chain.
This approach has been paramount in AkzoNobel’s
achievement of its status as an industry leader in
sustainability and the Supervisory Board wishes to
acknowledge the company’s success in maintaining its
number one position for the fourth consecutive year in the
Materials industry group on the Dow Jones Sustainability
Index. This is the tenth year in which AkzoNobel has
been ranked in the top three and represents a decade of
achievement in implementation of its sustainability initiatives.
The Supervisory Board supports the continuation of these
achievements through the 2020 sustainability strategy
and the Planet Possible agenda, which is fully focused on
creating more value from fewer resources and ultimately, the
achievement of long-term sustainable business.
107
AkzoNobel Report 2015 | Leadership Risk management
In addition to reviewing and discussing the strategic direction
of the company, the Supervisory Board takes steps to
assure itself of the appropriate awareness of risks facing
the company and to assess the adequacy of the controls
in place to mitigate those risks. The company maintains
a risk management framework and a system of internal
controls under the auspices of the Board of Management
and Executive Committee. In 2015, the company’s
enterprise risk management function undertook enterprise
risk management workshops, the results of which were
prioritized and presented to the Supervisory Board as
scenarios. The Supervisory Board uses these scenarios to
assess the company’s risk environment and to contribute to
the definition of appropriate control and mitigating measures
for the top risks facing the company. Subsequently, feedback
on the progress of risk mitigating actions that result from
these discussions is also provided to the Supervisory Board
at subsequent Supervisory Board meetings. Further details
are included in the Risk management chapter in the Strategic
performance section.
Country visit
The Supervisory Board continues to supplement its analyses
and discussions with in-depth operational and Business Area
reviews. In September, the Supervisory Board, accompanied
by the Executive Committee, undertook its annual visit
to one of AkzoNobel’s international locations. This year
the decision was taken to visit AkzoNobel’s operations
in France. The agenda for the visit included visits to key
customers in the region, relevant Decorative Paints stores,
and the Decorative Paints site in Montataire. The visit was
an opportunity to address and discuss some of the issues
faced by the business directly with the local and regional
management and employees. In addition, updates from
the Performance Coatings and the Specialty Chemicals
Business Areas in the region were presented. Broader topics
such as industry developments, forecasts and the macro-
economic outlook for the region were addressed as well.
Talent management and succession planning
Talent management has been a strong focus for the
Supervisory Board in 2015. Throughout the year, the
Supervisory Board discussed and undertook detailed
analysis of executive succession planning. A talent pool was
defined for the purposes of senior level talent development
and executive level succession. This talent pool will be
monitored and taken forward in the future work of the
Nomination Committee, and of the full Supervisory Board.
During 2015, the reappointment of the CEO, Mr. Büchner,
was discussed. Mr. Büchner’s current four-year term of office
will expire in 2016. The Supervisory Board reviewed and
discussed Mr. Büchner’s continued performance in leading
the Board of Management and Executive Committee, the
company’s management and performance in the pursuit of
its defined strategic objectives. The Supervisory Board is
satisfied with Mr. Büchner’s performance as CEO and feels
that the company’s current strategy of pursuing operational
and functional excellence should be maintained. As a result,
the Supervisory Board, following the recommendation of the
Nomination Committee, has proposed that Mr. Büchner be
nominated for reappointment as CEO at the forthcoming
2016 AGM.
In 2015, the Supervisory Board discussed its composition
and succession to ensure appropriate candidates were
nominated for appointment and succession at the AGM.
These discussions were oriented around recommendations
made by the Nomination Committee.
The work of the Nomination Committee led to the
identification and recommendation of Mr. Grote for
appointment as Audit Committee chairman during the
year and the nomination of Mr. Sluimers as a candidate
for Supervisory Board membership. Mr. Sluimers’ profile
is one of senior management and leadership in (among
other industries) public and private sector finance and
his appointment was approved by the AGM in April. His
experience in financial reporting led the Supervisory Board to
appoint Mr. Sluimers as an Audit Committee member.
Mr. Sluimers has participated in a tailored induction
program covering AkzoNobel’s governance, compliance
and businesses. This included one-on-one meetings with
the CEO, CFO and all other Executive Committee members
and governance-related corporate functional directors. The
Supervisory Board continued to engage in its own ongoing
training during the year.
Supervisory Board evaluation
Each year, the Supervisory Board undertakes an assessment
of its effectiveness. This is normally done through an
internal evaluation of its performance, those of its individual
members, its Audit Committee, its Remuneration Committee
and its Nomination Committee. Once every three years,
instead of an internal evaluation, the Supervisory Board
undergoes an independent external assessment facilitated
by a specialist.
In 2015, the Supervisory Board underwent this external
assessment of performance with regard to the year
2014. The approach to the assessment was two-fold: all
members of the Supervisory Board were asked to complete
a questionnaire; subsequently, a personal interview was
conducted with each individual by an external consultant,
using the results of the questionnaire as a platform for a
more in-depth discussion regarding the effectiveness and
performance of the Board, its committees, the Chairman and
the chairmen of the relevant committees.
Items addressed during the evaluation were overall
performance and composition of the Supervisory Board,
the Audit Committee, the Nomination and Remuneration
Committees, strategic issues and key areas for 2015. Other
points discussed were the nature and impact of discussions,
meeting processes and procedures, strategy review and
oversight, risk management and internal control, talent
management and succession planning.
Following the evaluation process, the Supervisory Board
discussed the results of the evaluation and the functioning
of the Supervisory Board, the Board of Management, the
108
Leadership | AkzoNobel Report 2015 The Supervisory Board recommends that the AGM adopts
the financial statements as presented in this Report 2015
and, as proposed by the Board of Management, approve
the proposed total dividend for 2015 of €1.55 per common
share outstanding. This represents an increase of 7 percent
over the previous year and demonstrates our commitment
to the company’s aim of providing a stable to rising dividend.
It is proposed that this amount, less the interim dividend of
€0.35 per common share – which was paid in November
2015 – be made payable on May 19, 2016. The dividend
will, at the shareholders’ discretion, be paid either in cash
or in shares. In addition, we request that the AGM
discharges the members of the Board of Management from
their responsibility for the conduct of business in 2015
and the members of the Supervisory Board for their
supervision in 2015.
Executive Committee and the performance of their individual
members. The Supervisory Board invited the Board of
Management to join part of the evaluation discussion. These
discussions were led by the independent external consultant
and recorded. Conclusions and actions were discussed
and approved.
We are pleased to confirm that our external evaluation
concluded that the Supervisory Board and its committees
operate effectively. In particular, the evaluation found that the
Supervisory Board composition, and that of its committees,
consists of a good mix of competencies and experienced
professionals who deal with key areas of supervision in an
appropriate manner. The evaluation was positive about
the competence and capabilities of the Supervisory Board
Chairman and those of the committees’ chairmen. Certain
areas for improvement were identified. These improvement
areas will be taken forward in 2016.
Financial statements and profit allocation
The financial statements of Akzo Nobel N.V. for the financial
year 2015 were audited by KPMG Accountants N.V.
The Board of Management submitted the report and
financial statements, including the report of the Board of
Management, and the management letter of the external
auditor to the Supervisory Board for review and approval.
The financial statements, the report and management
letter of the external auditor were discussed by the Audit
Committee extensively with the external auditors, in the
presence of the CEO and CFO, and by the full Supervisory
Board with the Board of Management and the General
Counsel. Based on these discussions, the Supervisory Board
is of the opinion that the 2015 financial statements of Akzo
Nobel N.V. form a good basis to account for the supervision
provided (see the Financial information section). The Audit
Committee monitors the follow-up by management of the
recommendations reported by the external auditor.
109
AkzoNobel Report 2015 | Leadership Audit Committee
Mr. Hughes operated as Audit Committee chairman
ad-interim until the appointment of Mr. Grote as permanent
Audit Committee chairman during 2015. The other members
of the Audit Committee during the year were Mrs. Bruzelius
and, following his appointment to the Supervisory Board
at the AGM in April, Mr. Sluimers. All members of the
Audit Committee have extensive accounting and financial
management expertise. The Audit Committee held six
meetings during 2015. The attendance record of the
members can be seen in the previous attendance chart.
Issues discussed in Audit Committee meetings were
reported back to the full Supervisory Board in subsequent
meetings. Occasionally, the Chairman of the Supervisory
Board and other Supervisory Board members upon their
request, attended Audit Committee meetings as well.
Review of Audit Committee charter
As part of its annual review of the Audit Committee charter,
the Audit Committee proposed an amendment to expressly
formalize the Audit Committee’s involvement in supervising
the activities of the Board of Management with respect to
information and communication technologies in use by the
company. The amendments were proposed and approved
by the full Supervisory Board.
Results and financial statements
Before each publication of the quarterly results and the
annual financial statements, the Audit Committee reviewed
the financial results. In addition, the Audit Committee was
consulted on the reports and press releases to be published,
along with those issues reviewed by the company’s
Disclosure Committee. Based on these discussions, advice
was provided by the Audit Committee to the Supervisory
Board in regard to the publications and disclosures. Approval
of the full Supervisory Board is required ahead of any
quarterly or annual release of financial results.
Audit Committee activities 2015
Q2
Q1
Q3
Q4
• Review Q4 financial statements
and annual results
• Review annual report and
accounts
• External audit report
• Review governance risk
management and internal control
• Final dividend 2014
• Sustainability and HSE audit
findings
• Review of Audit Committee charter
• Audit Committee evaluation
• Review full-year compliance
report
• Review Q1 2015 financial
statements
• Engagement of external auditor
• Appoint Audit Committee
Chairman
• Review compliance report
• Review year-to-date audit findings
• Strategy reviews Treasury and Tax
• External audit plan 2015
• Transition plan for handover
audit work of KPMG to PWC
• Review Q2 2015 financial
statements
• Post CAPEX project reviews
• Review updates to IFRS and
corporate governance standards
• Review compliance cases to date
• Strategy review for Information
Management function
• Review cyber security
• Review intangible assets
• Review Q3 2015 financial
statements
• Post CAPEX project reviews
• Review compliance cases year-
to-date
• Hardclose report of the external
auditor
• Review 2015 outlook and budget
2016
• Review audit findings year-to-date
• Internal audit plan 2016
• Dividend direction review
• Introduction PwC lead and
key partner
110
In order to ensure its effectiveness and expertise, the
Audit Committee is provided regular updates on IFRS
developments and the anticipated impact of these
developments on the financial statements. In addition, the
Audit Committee was briefed on management assertions
made in regard to relevant accounting treatments.
Governance, risk management and internal control
systems
The Audit Committee reviewed AkzoNobel’s overall approach
to governance, risk management and internal control
systems, its processes, outcomes and disclosures.
It reflected on the uncertain market conditions in Europe, the
slowdown in emerging markets, the impact of restructuring
and discussed contingency planning.
In addition, the Audit Committee reviewed the annual
operational plan (including budget) and AkzoNobel’s dividend
proposals. On fulfilling its oversight responsibilities in relation
to governance, risk management and internal control
systems, the Audit Committee met regularly with senior
executives. The General Counsel reported regularly to the
Audit Committee on the company’s compliance framework
and compliance matters and activities, and on major
litigation and liability exposure. The Internal Auditor reported
to the Audit Committee on their assessment of the status
of the system of governance, risk management and internal
controls throughout 2015.
Internal audit plan
The Internal Auditor reports to the CEO, but also directly to
the Audit Committee and presents all main audit findings.
The Audit Committee reviewed the internal audit plan, risk
assessment and strategy and agreed upon its budget and
resource requirements. The evaluation of the performance
and quality of the Internal Audit function by the external
auditor was discussed, with members being satisfied with
the effectiveness of the function. The Audit Committee met
independently with the Internal Auditor during the year and
discussed the results of the audits performed.
Leadership | AkzoNobel Report 2015
In 2015, the Audit Committee underwent this external
evaluation of its effectiveness and performance with regard
to the year 2014. As with the process adopted for the
Supervisory Board as a whole, the evaluation consisted of
a questionnaire completed by Audit Committee members
with a subsequent personal interview between each member
and an external consultant. Results of the evaluation were
subsequently reviewed by the Audit Committee and the
Supervisory Board.
The Audit Committee is pleased to confirm that the results
of the evaluation were such that the Audit Committee was
found to be operating effectively. The evaluation determined
that Audit Committee discussions are appropriately focused
and that the Audit Committee’s composition provides a good
framework for new impetus and discussion. The reporting
of matters by the Audit Committee to the Supervisory Board
was similarly found to be clear and adequate.
External audit report
KPMG Accountants N.V., AkzoNobel’s external auditor,
reported in-depth to the Audit Committee on the scope and
outcome of the annual audit of the financial statements,
including the consolidated financial statements and the
company financial statements.
The Audit Committee held independent meetings with the
external auditor during the year and reviewed and challenged
the external auditor’s approach to auditing the company,
engagement letter, fees, risk assessment and audit plan.
Other topics discussed included:
• The hard close which was discussed with the intention
of improving efficiency of the year-end process and
to highlight important issues for the annual financial
statements. AkzoNobel performed a hard close as of
October 31, 2015. Aligned with this, the external auditor
performed certain procedures in respect of the financial
outcomes as of the same date
• The quality of external audit
• Impact of new accounting rules
The Audit Committee performed the annual review of the
services of the external auditor, and continues to closely
monitor international discussions on auditor independence.
Despite the 2015 revision by the European Union allowing
for a longer period prior to the mandatory first rotation year,
the April 2014 AGM’s decision to appoint PWC as external
auditor as of the review of the 2016 financial statements will
be maintained. Further details on the external auditor can be
found in the Governance and compliance section.
Audit Committee evaluation
Every year the Audit Committee undergoes an annual
evaluation of its effectiveness and performance. In general,
this process involves the Audit Committee undertaking
a self-evaluation of its performance in conjunction with
the Supervisory Board. Once every three years, the Audit
Committee instead undergoes an independent external
assessment of its effectiveness and performance facilitated
by a specialist.
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AkzoNobel Report 2015 | Leadership The 2015 evaluation of the performance and effectiveness of
the Remuneration Committee found that the Remuneration
Committee is operating effectively and highlighted certain
areas for improvement which will be taken forward in 2016.
Remuneration Committee
The Remuneration Committee consists of three members
and is chaired by Ms. Baldauf. The other members of
the Remuneration Committee are Mr. Verwaayen and the
Chairman of the Supervisory Board, Mr. Burgmans. The
Remuneration Committee held four meetings in 2015. The
attendance record of the members can be seen in the
previous attendance chart.
Review management performance 2014
One of the key tasks of the Remuneration Committee in
the first quarter of the year is the performance review of the
Board of Management members and other members of
the Executive Committee. The Remuneration Committee
performed a thorough performance review of the CEO and,
together with the CEO, of the CFO and the other Executive
Committee members for the year 2014.
Review management base salaries 2015
The Remuneration Committee reviewed the base salaries
and the establishment of relevant forward-looking target
ranges for variable remuneration for Board of Management
members and other members of the Executive Committee.
Proposals for the remuneration of Executive Committee
members were reviewed and discussed with the
CEO. Information on the remuneration of the Board of
Management and the Supervisory Board can be found in
the Remuneration report and in Note 21 of the Consolidated
financial statements.
Remuneration Policy review
In 2015, the Remuneration Committee reviewed the
Remuneration Policy to assess whether it was still aligned
with the external market and the objectives of the company.
Following these discussions, the Remuneration Committee’s
recommendations have been provided to the Supervisory
Board.
For further details, reference is made to the Remuneration
Report.
Remuneration Committee evaluation
The Remuneration Committee’s evaluation of performance
and effectiveness undertaken during 2015 forms part
of the overall Supervisory Board evaluation. Once every
three years, this takes the form of an independent external
assessment of the Remuneration Committee’s effectiveness
and performance facilitated by a specialist.
In 2015, the Remuneration Committee underwent this
external evaluation of its effectiveness and performance
with regard to the year 2014. As with the process that
was adopted for the Supervisory Board as a whole, the
evaluation consisted of a questionnaire, followed by a
personal interview with an external consultant. Results of the
evaluation were subsequently reviewed by the Remuneration
Committee and the Supervisory Board.
Remuneration Committee main 2015 activities
Q1
Q2 & Q3
• Review of management performance 2014
• Target setting 2015
• Review of management base salaries for 2015
• 2014 Remuneration report
• Remuneration Committee evaluation
• Review remuneration strategy
(including LTI and STI plans)
• Remuneration Policy review
Q4
• Forward-looking 2016 target-setting
• Detailed scenario analysis
• Remuneration Policy review
112
Leadership | AkzoNobel Report 2015
Nomination Committee
The Nomination Committee consists of three members and
is chaired by Mr. Burgmans. The other two members are
Ms. Baldauf and Mr. Verwaayen. The Nomination Committee
held three meetings in 2015. The attendance record of the
members of the Nomination Committee can be seen in the
previous attendance chart.
Talent management and executive succession
During the year, the Nomination Committee took time to
address the structure and composition of the Board of
Management. 2016 will see the end of the current term of
office for the company’s CEO, Mr. Büchner, and accordingly
the Nomination Committee has reviewed, assessed
and discussed the performance of Mr. Büchner and the
adequacy of his nomination for reappointment for a further
four-year term as CEO at the AGM 2016.
To facilitate its discussions on the topic of executive
succession planning generally, the Nomination Committee
was presented with talent management updates from
Human Resources. In 2015, the Supervisory Board and the
Nomination Committee worked to define and identify a talent
pool which can be called upon for the purposes of executive
succession planning in the future and this will continue
in 2016.
Supervisory Board succession
An additional aspect of the Nomination Committee’s work
is reviewing the appointment schedule for the Supervisory
Board itself and making relevant recommendations accordingly.
Early in 2015, the Nomination Committee discussed the
size, structure and composition of the Supervisory Board in
order to determine appropriate criteria for the selection of
candidates for Supervisory Board membership. An external
search agency was engaged for the fielding of candidates
for succession and nomination to the Supervisory Board.
The agency employed a rigorous search process after
first gaining a thorough understanding of the culture of
AkzoNobel, its strategic ambitions, the specific leadership
roles and competencies needed to meet those ambitions.
Based on the results of these Nomination Committee
discussions and the work of the external search agency,
the Nomination Committee was able to recommend to the
Supervisory Board the nomination of Mrs. Bruzelius for
reappointment at the AGM 2015 and the nomination of
Mr. Sluimers as a new Supervisory Board member at the
same meeting.
During 2015, the Nomination Committee addressed the
forthcoming end of the terms of office for both Ms. Baldauf
and Mr. Verwaayen. For both Ms. Baldauf and Mr. Verwaayen
this will be the end of their first term. In accordance with the
Nomination Committee main 2015 activities
Q1
Q2 & Q3
• Supervisory Board profile review
• Supervisory Board succession: Identification
and nomination of Mr. Sluimers for appointment
to the Supervisory Board
• Nomination Committee evaluation
• Nomination of Mrs. Bruzelius for reappointment
at the AGM 2015
• Board of Management succession planning
• Review talent management
• Development of talent pool
Q4
• Review Supervisory Board (re)appointment
scheme
• Recommendation of Ms. Baldauf for
reappointment at the AGM 2016
• Recommentation of Mr. Verwaayen for
reappointment at the AGM 2016
• Executive succession: Recommendation of
CEO Mr. Büchner for reappointment
Supervisory Board’s Rules of Procedure, both Ms. Baldauf
and Mr. Verwaayen are eligible to be reappointed. It is
felt that Ms. Baldauf and Mr. Verwaayen continue to
contribute their expertise constructively to the work of the
Supervisory Board. Accordingly, the Nomination
Committee has addressed relevant recommendations to
the Supervisory Board.
Nomination Committee evaluation
As with the Remuneration Committee, the Nomination
Committee undergoes an annual evaluation of its
effectiveness and performance as part of the Supervisory
Board evaluation. Once every three years, this takes the form
of an independent external assessment of the Nomination
Committee’s effectiveness and performance facilitated
by a specialist.
In 2015, the Nomination Committee underwent this external
evaluation of its effectiveness and performance with regard
to the year 2014. As with the process that was adopted for
the Supervisory Board as a whole, the evaluation consisted
of a questionnaire, followed by a personal interview with
an external consultant. Results of the evaluation were
subsequently reviewed by the Nomination Committee and
the Supervisory Board.
This evaluation found that the Nomination Committee
continues to operate effectively and highlighted certain areas
for improvement which will be taken forward in 2016.
Additional remarks
All members of the Supervisory Board would like to express
their gratitude to the Executive Committee, as well as to all
employees around the world, for their dedication and hard
work for the company in 2015.
Amsterdam, February 9, 2016
The Supervisory Board
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AkzoNobel Report 2015 | Leadership
Millions of satisfied customersToday’s busy lifestyles often mean we have to eat and drink on the go. Good thing we’re a leading global supplier of coatings and inks for the essential protection and decoration of beverage, food, aerosol and general line cans. Governance and compliance
In this section, we outline our corporate governance
structure and explain the remuneration of our
Board of Management. Information about compliance
and integrity management and AkzoNobel on the capital
markets is also included.
Corporate governance statement
Compliance and integrity management
Remuneration report
AkzoNobel on the capital markets
116
124
130
137
115115
AkzoNobel Report 2015 | Governance and complianceGovernance and compliance Corporate governance statement
AkzoNobel aspires to the highest standards
of corporate governance and seeks
to consistently enhance and improve
corporate governance performance,
emphasizing transparency in accordance
with applicable laws, regulations
and codes.
Shareholders
Supervisory Board
Board of Management
Executive Committee
Functions
Decorative Paints
Business Area
Performance Coatings
Business Area
Specialty Chemicals
Business Area
Countries
Decorative Paints
businesses
Performance Coatings
businesses
Specialty Chemicals
businesses
116
Governance and compliance | AkzoNobel Report 2015 Akzo Nobel N.V. is a public limited liability company
(Naamloze Vennootschap) established under the laws of
the Netherlands, with common shares listed on Euronext
Amsterdam. AkzoNobel has a sponsored level 1 American
Depositary Receipt (ADR) program and ADRs can be traded
on the international OTCQX platform in the US.
The company’s management and supervision is organized
under Dutch law in a so-called two-tier system, comprising a
combined Board of Management and Executive Committee,
solely composed of executive members, and a Supervisory
Board, solely composed of non-executive directors. The
Supervisory Board supervises the Board of Management
and Executive Committee, and ensures a strong external
presence in the governance of the company. The two Boards
are independent of each other and are accountable to the
Annual General Meeting of shareholders (AGM) for the
performance of their functions.
Our corporate governance framework is based on the
company’s Articles of Association, the requirements of the
Dutch Civil Code, the Dutch Corporate Governance Code
(the Code), and all applicable laws and regulations, including
securities laws. The Code contains principles and best
practices for Dutch companies with listed shares. Deviations
from the Code are explained in accordance with the Code’s
“apply or explain” principle. With the exception of those
aspects of our governance which can only be amended with
the approval of the AGM, the Board of Management and the
Supervisory Board may make adjustments to the way the
Code is applied, if this is considered to be in the interests of
the company. If adjustments are made, they will be reported
and explained in the annual report for the relevant year.
The Board of Management and Executive Committee have
established a Code of Conduct, directives, rules, guidelines
and manuals incorporated in the company’s Directives
Framework, in order to drive governance, consistency and
functional excellence throughout the company.
Board of Management and
Executive Committee
General
The Board of Management is entrusted with the management
of the company. It operates in the context of an Executive
Committee. The Executive Committee comprises the
members of the Board of Management, (currently the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO)),
the leaders of each Business Area and leaders with functional
expertise, allowing both the functions and the Business
Areas to be represented at the highest level in the organization.
The functions currently represented in the Executive Committee
directly are Finance, Human Resources and Legal.
Among other responsibilities, the Board of Management
and the Executive Committee define the strategic direction,
establish the policies and manage the company’s day-to-day
operations. In performing their duties, they are guided by
the interests of the company and its affiliated enterprises,
taking into consideration the relevant interests of the
company’s stakeholders.
The members of the Board of Management remain
jointly and individually accountable for all decisions made
by the Executive Committee. All Executive Committee
decisions require a majority of the members of the Board of
Management. The Board of Management can at all times
decide to reserve decisions for the Board of Management.
The Board of Management is accountable for its
performance to the Supervisory Board. The Board of
Management is also answerable to the shareholders of the
company at the AGM. The Executive Committee members
who are not also a member of the Board of Management
report to the CEO.
The Supervisory Board has regular direct interaction
with all members of the Executive Committee and all
Executive Committee members attend a major part of most
Supervisory Board meetings.
The CEO leads the Executive Committee in its overall
management of the company to achieve its performance
goals and objectives. He is the main point of liaison with the
Supervisory Board. The CFO is responsible for overseeing
AkzoNobel’s finances and information management.
The tasks and responsibilities and internal procedures of
the Board of Management and Executive Committee are set
out in the Rules of Procedure for the Board of Management
and Executive Committee. These rules have been approved
by the Supervisory Board and are available on the
company’s website.
Authority to represent the company is vested in the two
members of the Board of Management acting jointly.
This includes the signing of documents. The Board of
Management has also delegated a level of authority to
corporate agents, including the other members of the
Executive Committee. The list of authorized signatories is
filed with the public registry and is available on request from
the Dutch Chamber of Commerce (Kamer van Koophandel).
The managing directors of our businesses, the corporate
functional directors in charge of the different functions
and the country directors report to individual Executive
Committee members with specific responsibility for their
activities and performance.
Appointment
Board of Management members are appointed and removed
from office by the Annual General Meeting of shareholders.
The other members of the Executive Committee are
appointed by the CEO, subject to approval of the
Supervisory Board.
Members of the Board of Management are appointed
for four-year terms (or less), with the possibility
of reappointment.
117
AkzoNobel Report 2015 | Governance and compliance As described later in this section, the Meeting of Holders of
Priority Shares has the right to make binding nominations for
the appointment of members of the Board of Management
and the Supervisory Board. However, as the company
subscribes to the principles of the Code in general, members
of the Supervisory Board and the Board of Management
are (with the exception of those circumstances described
later in this section), appointed on the basis of non-binding
nominations by the Supervisory Board. In such cases,
resolutions to appoint a member of the Supervisory Board
or the Board of Management will require a simple majority of
the votes cast by shareholders.
In addition, under certain conditions specified in the Articles
of Association, shareholders may also be entitled to nominate
Supervisory Board or Board of Management members for
appointment. Such nominations require a two-thirds majority,
representing at least 50 percent of the outstanding share
capital in order to be adopted at a General Meeting.
Outside directorships
Members of the Board of Management and Executive
Committee are not allowed to hold more than one
supervisory board membership or non-executive directorship
in another listed company. This is more stringent than
the Code (provision II.1.8) and the Act on Management
and Supervision (Wet bestuur en Toezicht), which allows
members of a board of management two such supervisory
board memberships or non-executive directorships. The
exception to this rule is that in the 18 months prior to their
retirement, Executive Committee members are allowed to
hold more than one such supervisory board membership or
non-executive directorship in order to allow them to prepare
for retirement, as long as this does not interfere with the
performance of their tasks as members of the Executive
Committee. Furthermore, an exception can be made for
an executive joining the Executive Committee. However,
a maximum of two supervisory board memberships
or non-executive directorships will apply. Acceptance of
external supervisory board memberships or non-executive
directorships in other listed companies by members of the
Executive Committee is always subject to approval by the
Supervisory Board, for which authority has been delegated
to the Chairman of the Supervisory Board.
Conflicts of interest
Members of the Board of Management and the other
members of the Executive Committee shall not participate
in the discussions and decision-making on a subject or
transaction in relation to which they have a conflict of interest
with the company. Decisions to enter into transactions under
which members have conflicts of interest that are of material
significance to the company – and to the relevant Board of
Management or Executive Committee members – require
the approval of the Supervisory Board. Any such decisions
involving members of the Board of Management will be
recorded in the annual report for the relevant year, with
reference to the conflict of interest and a declaration that
the relevant best practice provisions of the Code have been
complied with. During 2015, no transactions were reported
under which a member of the Board of Management or
Executive Committee had a conflict of interest that was of
material significance to the company.
Remuneration
In line with the remuneration policy adopted by the AGM, the
remuneration of the members of the Board of Management
is determined by the Supervisory Board on the advice of its
Remuneration Committee. The Supervisory Board decides
on the remuneration of the other members of the Executive
Committee on the proposal of the CEO. The composition
of the remuneration of Board of Management members, as
well as the remuneration policy itself, are described in the
Remuneration report and the Consolidated financial statements
(see Note 21). The service contracts of the members of the
Board of Management do not contain change of control
provisions and are compliant with the Code. The main elements
of these contracts are available on our corporate website.
Operational Control Cycle
To facilitate efficient management and oversight of
operations, the Board of Management and Executive
Committee have established an Operational Control
Cycle, which is conducted once per month. For each
Business Area, the Operational Control Cycle consists of
Operational Review Meetings comprising of the CEO, the
CFO, the General Counsel and the relevant Business Area’s
leadership. These meetings provide a forum for operational
review and decision-making on subjects relevant to the
Business Areas. The functional agendas of Sustainability and
HSE, Human Resources, Commercial Excellence, Integrated
Supply Chain and Research, Development and Innovation
are discussed twice per year in these meetings. In addition,
Functional and Country Review Meetings are held monthly to
review upcoming proposals and progress on the functional
and country agendas.
Executive Committee meetings are usually held once per
month following the Operational Review Meetings and
Functional and Country Review Meetings, while additional
meetings are held to discuss strategic and specific
other topics.
The Executive Committee has delegated authorities to
those Executive Committee members responsible for each
Business Area, to the Operational Review Meetings of each
Business Area and to certain committees.
Committees
Sustainability Council
The Executive Committee has established a Sustainability
Council to advise on sustainability developments. The
council monitors the integration of sustainability into
management processes and oversees the company’s
sustainability targets and overall sustainability performance.
The council is chaired by the CEO and includes members
of the Executive Committee, Managing Directors from our
businesses and Corporate Directors of Strategy, Human
Resources, Sustainability and HSE, Integrated Supply Chain/
Research, Development and Innovation, Procurement,
and Communications.
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Governance and compliance | AkzoNobel Report 2015 Progress regarding sustainability objectives, development,
target-setting and implementation is reviewed quarterly by
the Executive Committee, semi-annually by the Supervisory
Board, and is verified annually by KPMG Sustainability
(part of KPMG Advisory N.V.). The Audit Committee
takes an active role in assessing the quality and reliability
of sustainability performance reporting. Our
sustainability framework is further explained in the
Sustainability statements.
Corporate Compliance Committee
The company has a Compliance Committee to support
the Executive Committee with its responsibility in assuring
and managing compliance, and with its reporting to the
Supervisory Board. The Corporate Compliance Committee
systematically identifies material compliance risks, assists
in assurance of compliance with laws, regulations and
ethical standards, monitors compliance and reports findings
and recommendations to the Executive Committee. The
Corporate Compliance Committee consists of the General
Counsel (chair), Corporate Secretary, and Corporate
Directors of Internal Audit, Control, Compliance, Human
Resources (HR) and Sustainability and HSE. Other members
may be added to the Committee at the discretion of the
Executive Committee.
AkzoNobel has a company-wide compliance monitoring tool
in place to discuss and monitor progress with respect to
compliance-related issues. More detail on the compliance
and integrity management system, including the so-called
Non-financial letter of representation process, is available in
the Compliance and integrity management chapter.
Executive Committee Pensions
The Executive Committee Pensions oversees the general
pension policies of the various pension plans of the company
and their financial consequences for the company. The
committee is chaired by the CFO and includes the Executive
Committee member responsible for HR, the General
Counsel, the Treasury function, and Rewards.
Supervisory Board
General
This section provides an overview of the responsibilities and
governance of the Supervisory Board of AkzoNobel. For an
understanding of the activities of the Supervisory Board over
the past year, please refer to the Chairman’s statement and
the Report of the Supervisory Board. The responsibility of
the Supervisory Board is to supervise the policies adopted
by the Board of Management and the Executive Committee
and to oversee the general conduct of the business of the
company. In practice, this means supervising the corporate
strategy, the achievement of the company’s operational
and financial objectives, the design and effectiveness of the
internal risk management and control systems, the main
financial parameters, compliance with applicable laws and
regulations and risk factors. The Supervisory Board advises
the Board of Management and Executive Committee, while
taking into account the interests of AkzoNobel and its
stakeholders. Major investments, acquisitions and functional
initiatives are subject to Supervisory Board approval.
The Chairman of the Supervisory Board determines the
agenda, chairs Supervisory Board meetings and the Annual
General Meeting of shareholders, monitors the proper
functioning of the Supervisory Board and its committees,
arranges for the adequate provision of information to its
members and acts on behalf of the Supervisory Board as the
main contact for the Board of Management and Executive
Committee. He initiates the evaluation of the functioning
of the Supervisory Board, its committees, its individual
members and the functioning of the Board of Management.
Throughout the year, the Chairman of the Supervisory
Board ensures that regular updates on AkzoNobel’s
businesses, legal matters, social and corporate governance,
environmental, accounting, investor relations, compliance,
risk management and internal controls are provided to the
Supervisory Board.
The Supervisory Board is governed by its Rules of
Procedure, which are available on the company’s corporate
website. The Rules of Procedure include the profile and
the Charters of the Committees and set out the tasks and
responsibilities of the Supervisory Board, as well as its
operational processes.
Composition
The list of Supervisory Board members, including their
biographies, can be found in the Leadership section. The
Supervisory Board is constituted in a balanced manner to
reflect the nature and variety of the company’s businesses,
their international spread and expertise in fields such as
finance, economic, Information Technology (IT), societal,
environmental and legal aspects of business, government
and public administration. Consequently, the current
members have a diverse and appropriate mix of expertise
and experience of the markets in which AkzoNobel
operates, as well as knowledge of different markets and
non-operational areas.
According to the Dutch Civil Code, a supervisory board of a
large Dutch public company has a balanced composition if it
consists of at least 30 percent female and at least 30 percent
male members. The current composition of the Supervisory
Board is such that two of its seven members are female,
resulting in a composition of 28.6 percent female members.
However, in compliance with provision III.3.1 of the Code, the
Supervisory Board’s composition reflects both society at large
and the markets in which the company operates – by ensuring
that at least three members meet the diversity criteria of either
gender (female) and/or nationality (outside of the European
Union). AkzoNobel acknowledges that gender is one part of
diversity and Supervisory Board members will continue to
be selected on the basis of their wide-ranging experience,
background, skills, knowledge and insight. Our Supervisory
Board represents five nationalities, all of whom bring
experience from a diverse range of international business,
professional and non-profit organization backgrounds. When
nominating and selecting new candidates for the Supervisory
Board in future, the requirements of the Act on Management
and Supervision, as well as provision III 3.1 of the Code, will
continue to be taken into account.
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AkzoNobel Report 2015 | Governance and compliance Appointment
Members of the Supervisory Board are nominated,
appointed and dismissed in accordance with procedures
identical to those previously outlined for the members
of the Board of Management. In accordance with the
Code, members of the Supervisory Board are eligible for
re-election only twice, each time for a period not exceeding
four years. Terms of appointment are based on a rotation
schedule, available on our corporate website. In 2015, one
appointment and one reappointment to the Supervisory
Board were proposed to and approved by the AGM.
For 2016, two reappointments are currently scheduled
for proposal to the AGM. Reference is made to the Notice
of meeting.
To this end, the company takes steps to verify that:
• There are no cross ties between Supervisory Board
members and members of the Board of Management
• There have been no employment relationships between
Supervisory Board members and AkzoNobel during the
five years preceding their last appointment
• No personal financial compensation has been paid, other
than in relation to work as a Supervisory Board member
• No Supervisory Board member has had important
business relationships with the company in the year prior
to their last appointment
• There are no significant shareholding ties (amounting to
more than 10 percent of the share capital of the company)
between Supervisory Board members and the company
Induction and training
Following appointment to the Supervisory Board, new
members receive a comprehensive induction tailored to their
individual needs. This includes extensive briefings about all
major business and functional aspects of the company and
its corporate governance and compliance requirements.
The induction includes meetings with the CEO, the CFO, all
other Executive Committee members and relevant members
of staff. This enables new Supervisory Board members to
build up an understanding of AkzoNobel’s businesses and
strategy, as well as the key risks and issues the company
faces. In addition, the Chairman ensures the Supervisory
Board is provided with regular updates and that the
Supervisory Board undertakes training, for example in the
area of compliance and ethics.
Conflict of interest
Members of the Supervisory Board shall not participate
in the discussions and decision-making on a subject or
transaction in relation to which they have a conflict of interest
with the company. Decisions to enter into transactions under
which Supervisory Board members have conflicts of interest
that are of material significance to the company, and to the
relevant Supervisory Board member, require the approval of
the Supervisory Board. Any such decisions will be recorded
in the annual report for the relevant year, with reference to
the conflict of interests and a declaration that the relevant
best practice provisions of the Code have been complied
with. During 2015, no transactions were reported under
which a member had a conflict of interest which was of
material significance to the company.
Independence of the Supervisory Board
Supervisory Board members are required to act critically and
independently of one another, the Board of Management
and the Executive Committee and the company’s
stakeholders. Each member of the Supervisory Board
meets the independence requirements as stated in the
Code provisions III.2.1 and III.2.2 and has completed the
annual independence questionnaire addressing the relevant
requirements for independence.
Remuneration
Supervisory Board members receive a fixed annual
remuneration and attendance fee, which is determined by
the AGM. More information on the remuneration of the
members of the Supervisory Board can be found in Note 21
of the Consolidated financial statements.
Supervisory Board Committees
The Supervisory Board has established three committees:
the Audit Committee, the Nomination Committee and the
Remuneration Committee. This section explains aspects
of the governance and roles and responsibilities of these
committees. Information on the work, composition and
attendance of the Supervisory Board members at the
meetings of the committees during the year is set out in the
Report of the Supervisory Board.
Each committee has a charter describing its role and
responsibilities, as well as the manner in which it discharges
its duties and reports to the full Supervisory Board. These
charters are included in the Supervisory Board Rules of
Procedure, published on the company’s corporate website.
The committees report on their deliberations and findings to
the full Supervisory Board.
Audit Committee
The Audit Committee assists the Supervisory Board in
overseeing the quality and integrity of the accounting,
reporting, risk management and internal control practices of
the company, as well as the company’s compliance with legal
and regulatory requirements, the performance of the Internal
Audit function and the qualifications, performance and
independence of the external auditor. The Audit Committee
has a role in assessing the quality and integrity of reporting
on sustainability performance and takes an active role in
reviewing the company’s sustainability performance data. As
a rule, the CFO, Corporate Director of Control, Corporate
Director of Internal Audit and the lead partner of the external
auditor attend all regular meetings. After most Audit
Committee meetings, members hold a separate meeting with
only the internal auditor present, and a separate meeting
with only the external auditor present. In addition, there are
regular meetings with only the CFO present. Other members
of the Executive Committee attend as and when requested.
The General Counsel reports to the Audit Committee on
compliance matters at every regular Audit Committee
meeting and provides a claim and liability report to the
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Governance and compliance | AkzoNobel Report 2015 Audit Committee once a year. The Chairman of the Audit
Committee is primarily responsible for the proper functioning
of the Audit Committee and reports the activities and findings
of the committee to the Supervisory Board, which discusses
these activities and findings when necessary. The Chairman
also initiates the evaluation of the functioning of the Audit
Committee and its individual members, without the members
of the Board of Management being present.
Shareholders and the
Annual General Meeting (AGM)
The Annual General Meeting of shareholders (AGM) reviews
the annual report and decides on the adoption of the
financial statements and the dividend proposal, as well as
the discharge of the members of the Supervisory Board and
the Board of Management.
Nomination Committee
The Nomination Committee focuses on drawing up selection
criteria and appointment procedures for Supervisory Board
and Board of Management members. The Nomination
Committee assesses the size and composition of both
Boards, evaluates the functioning of the individual members,
makes proposals for appointments and reappointments
and supervises the Board of Management on the selection
of senior management. The Nomination Committee also
considers nominations by the CEO of Executive Committee
members who are not also a member of the Board of
Management. When selecting candidates for appointment to
the Supervisory Board, account is taken of the Supervisory
Board profile, the diversity requirements of the Dutch Civil
Code and the Code, as well as the need for knowledge of
the markets in which the company operates and insights
from other markets and non-operational areas.
Remuneration Committee
The Remuneration Committee is responsible for making
proposals to the Supervisory Board on the Remuneration
Policy for the Board of Management, for overseeing the
remuneration of the individual members of the Board of
Management and the remaining members of the Executive
Committee, and for overseeing the remuneration schemes
for AkzoNobel executives involving the company’s shares.
The Remuneration Committee conducts the periodic
review of the performance of the members of the Board
of Management and the Executive Committee. The
Remuneration Committee also reviews the remuneration
of the members of the Supervisory Board and prepares
proposals for adjustments, if necessary.
The AGM also approves or adopts, among others, the
following matters:
• The election of members of the Board of Management
and the Supervisory Board
• The remuneration of the members of the Supervisory
Board
• Material changes to the remuneration policy of the Board
of Management
• Other important matters, such as major acquisitions or
the sale of a substantial part of the company, as required
by law
• The authorization of the Board of Management to issue
new shares
The AGM is convened by public notice. AkzoNobel provides
remote voting possibilities for its shareholders. The AGM
agenda, the notes to the agenda and the procedure for
attendance – including the record date and the procedure for
granting a proxy to a third party – are published in advance
and posted on the company’s corporate website.
Holding shares in the company on the record date
determines the right to exercise voting rights and other
rights relating to the AGM. The notes to the agenda contain
relevant information with respect to the proposed resolutions.
All resolutions are made on the basis of the “one share, one
vote” principle (assuming an equal par value for each class
of shares). All resolutions are adopted by absolute majority,
unless the law or the company’s Articles of Association
stipulate otherwise.
Holders of common shares in aggregate representing at
least one percent of the total issued capital may submit
proposals for the AGM agenda. Such proposals must be
adequately substantiated and must be submitted in writing,
or electronically, to the company at least 60 calendar days
in advance of the meeting. The draft minutes of the AGM
(in Dutch) are made available on the company’s corporate
website within three months of the meeting date. The
final and duly signed minutes are made available on the
company’s website within six months after the meeting date.
Share classes
AkzoNobel has three classes of shares: common shares,
cumulative preferred shares and priority shares. Common
shares are traded on the Euronext Amsterdam stock
exchange. Common shares are also traded over-the-counter
on OTCQX in the US in the form of American Depositary
Receipts (each American Depositary Receipt representing
one-third of a common share). On December 31, 2015, a
total of 248,976,428 common shares and 48 priority shares
had been issued. The company has been informed that
by December 31, 2015, MFS Investment Management
and Causeway Capital Management each held more than
5 percent of the company’s share capital.
The priority shares are held by the Foundation Akzo Nobel
(Stichting Akzo Nobel). The Foundation’s Board consists
of members of AkzoNobel’s Supervisory Board who are
not members of the Audit Committee. The Meeting of
Holders of Priority Shares has the nomination rights for the
appointment of members of the Board of Management and
of the Supervisory Board, as well as the right to approve
amendments to the Articles of Association of the company.
No cumulative preferred shares have been issued to date.
Cumulative preferred shares merely have a financing
function, which means that if necessary, and possible, they
will be issued at or near to the prevailing quoted price for
common shares.
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AkzoNobel Report 2015 | Governance and compliance The AGM held on April 22, 2015, authorized the Board of
Management for a period of 18 months after that date –
subject to approval from the Supervisory Board – to issue
shares in the capital of the company free from pre-emptive
rights, up to a maximum of 10 percent of the issued share
capital or 20 percent in case of a merger or acquisition. At
the same meeting, the Board of Management was given a
mandate to acquire up to a maximum of 10 percent of the
issued share capital of the company.
Anti-takeover provisions and control
According to provision IV.3.11 of the Code, the company is
required to provide an overview of its actual or potential anti-
takeover measures, and to indicate in what circumstances it
is expected that they may be used. The priority shares may
be considered to constitute a form of anti-takeover measure.
In relation to the right of the Meeting of Holders of Priority
Shares to make binding nominations for appointments to
the Board of Management and the Supervisory Board,
the Foundation Akzo Nobel has confirmed that it intends
to make use of such rights in exceptional circumstances
only. These circumstances include situations where, in the
opinion of the Board of the Foundation, the continuity of
the company’s management and policies is at stake. This
may be the case if a public bid for the common shares of
the company has been announced, or has been made, or
the justified expectation exists that such a bid will be made,
without any agreement having been reached in relation to
such a bid with the company. The same shall apply if one
shareholder, or more shareholders acting in a concerted way,
hold a substantial percentage of the issued common shares
of the company without making an offer. Or if, in the opinion
of the Board of the Foundation Akzo Nobel, the exercise of
the voting rights by one shareholder or more shareholders,
acting in a concerted way, is materially in conflict with the
interests of the company. In such cases, the Supervisory
Board and the Board of Management, in accordance with
their statutory responsibility, will evaluate all available options
with a view to serving the best interests of the company,
its shareholders and other stakeholders. The Board of the
Foundation Akzo Nobel has reserved the right to make
use of its binding nomination rights for the appointment
of members of the Supervisory Board and of the Board of
Management in such circumstances.
Although a deviation from provision IV.1.1 of the Code, the
Supervisory Board and the Board of Management are of the
opinion that these provisions will enhance the continuity of
the company’s management and policies.
In the event of a hostile takeover bid, or other action which
the Board of Management and Supervisory Board consider
to be adverse to the company’s interests, the two Boards
reserve the right to use all available powers (including the
right to invoke a response time in accordance with provisions
IV.4.4 and II.1.9 of the Code), while taking into account the
relevant interests of the company and its affiliate enterprise
and stakeholders.
Auditors
The external auditor is appointed by the AGM on proposal of
the Supervisory Board. The appointment is reviewed every
four years and the results of this review and assessment are
reported to the AGM.
The external auditor attends all meetings of the Audit
Committee, as well as the meeting of the Supervisory Board
at which the financial statements are adopted. During these
meetings, the auditor discusses the outcome of the audit
procedures and the reflections thereof in the auditors’ report
and the management letter. In particular, the key audit
matters are highlighted. The auditor receives the financial
information and underlying reports of the quarterly figures
and is given the opportunity to comment and respond to this
information.
The lead external auditor is present at the AGM and may be
questioned with regard to his statement on the fairness of
the financial statements.
Auditor independence and mandatory succession
of audit firm
The Audit Committee and the Board of Management report
their dealings with the external auditor to the Supervisory
Board annually and discuss the auditor’s independence.
Based on auditor independence requirements, the lead
auditor in charge of the AkzoNobel account is changed every
seven years.
The Dutch Audit Profession Act (Wet op het accountants-
beroep), requires rotation of our audit firm after the audit
firm has performed the statutory audits of the company for
a period of eight consecutive years. In 2015, European law
was adopted which prevails over Dutch law, changing the
mandatory rotation terms to five years for the lead partner
and ten years for the audit firm, with an extension of the
mandatory first rotation varying with the length of the tenure
of the existing firm. The AGM on April 29, 2014, appointed
PwC in respect of the audits of the financial statements as
of 2016 and, despite a potential respite by virtue of the new
European legislation, the Supervisory Board has decided
not to propose a reversal of this 2014 decision to end the
mandate of KPMG following the reporting on the financial
year 2015.
Non-audit services
One area of particular focus in corporate governance is the
independence of the auditors. The Audit Committee has
been delegated direct responsibility for the compensation
and monitoring of the auditors and the services they provide
to the company. Pursuant to the Audit Profession Act, the
auditors are prohibited from providing the company with
services in the Netherlands other than “audit services aimed
at providing reliability concerning the information supplied
by the audited client for the benefit of external users of this
information and also for the benefit of the Supervisory Board,
as referred to in the reports mentioned.” The company
has taken the position that no additional services may be
provided by the external auditor and its global network
that do not meet these requirements, unless local statutory
requirements so dictate. In order to anchor this in our
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Governance and compliance | AkzoNobel Report 2015 procedures, the Supervisory Board adopted the AkzoNobel
Rules on External Auditor Independence and Selection and
the related AkzoNobel Guidelines on Auditor Independence.
All these documents are available on the company’s
corporate website.
automated controls. The committee also further enhanced
the quality and transparency of processes and controls
through the global introduction of standard ways of working,
and the consolidation of activities in both outsourced and
captive shared service centers.
Internal Audit
The AkzoNobel internal control framework
The Internal Audit function is mandated to provide the Board
of Management and Executive Committee and the Audit
Committee with independent, objective assurance on the
adequacy of the design and operating effectiveness of the
internal control framework described below. The Corporate
Director of Internal Audit reports to the CEO and has direct
access to the Audit Committee and its Chairman. The
function performs its mandate based on an independently
developed risk-based audit plan, which is approved by the
Audit Committee. It reports a summary of the audit findings
bi-annually to the Executive Committee and the Audit
Committee, which culminates in an annual assessment
of the quality and effectiveness of the company’s internal
control systems. More information is available under Audit
Committee earlier in this section.
Internal controls and Risk
management
Internal controls
The company has strict procedures for internal controls.
The Board of Management and Executive Committee have
established an Internal Control Committee to facilitate and
oversee aspects of these procedures. The Internal Control
Committee is responsible for maintaining the company’s
internal control framework. In 2015, the committee continued
work on the reduction of the number of key IT systems in
order to facilitate the implementation of system-embedded,
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Share Dealing Rules and Rules on Disclosure
Control
In accordance with Dutch law and regulations, the company
maintains insider lists and exercises controls around the
dissemination and disclosure of potentially price sensitive
information. The Disclosure Committee monitors the
disclosure procedures established by the company and
advises the Executive Committee to ensure adequate
and timely disclosure of material financial and non-
financial information.
All employees and the members of the Board of
Management, the Executive Committee and the Supervisory
Board, are subject to the AkzoNobel Share Dealing Rules,
which limit their opportunities to trade in AkzoNobel
securities. Transactions in AkzoNobel shares carried out
by Board of Management, Executive Committee and
Supervisory Board members are, as and when required,
notified to the Dutch Authority for the Financial Markets.
The Board of Management, Executive Committee and
Supervisory Board members require authorization from the
General Counsel prior to carrying out any transactions in
respect of AkzoNobel securities, even in a so-called open
period. In relevant cases, the General Counsel can
prohibit carrying out transactions in respect of other
companies’ securities.
Risk management
Our risk management system is explained in more detail
in the Strategic performance section. Reference is made
to the Statement of the Board of Management in the
Leadership section for the statements relating to internal risk
management and control systems.
123
AkzoNobel Report 2015 | Governance and complianceThe AkzoNobel internal control framework provides reasonable assurance in achieving business goals, including strategic, operational and reporting goals, in addition to those covering compliance. Internal control is not only about policies and procedures, but also relates strongly to people, culture and behaviors.Control environmentSetting objectivesResponding to riskControl activitiesMonitoring activities
Compliance and integrity management
Integrity is one of AkzoNobel’s
core principles. We are com-
mitted to conducting our business
in a lawful, fair and honest way
and expect the same from our
business partners. We aim for the
highest standards suitable for
our business and support this with
a robust Compliance Framework.
Risk assessment
We assess compliance risks through several processes,
including Enterprise Risk Management, Internal Control Self-
Assessment, Non-financial letter of representation (NFLoR)
and Internal Audit.
Annually, compliance risks and possible weaknesses in the
compliance and control framework in every business and
function are identified and discussed in the NFLoR review
meeting between the business or functional leader and
the responsible Executive Committee member, Director of
Compliance and Legal Counsel. The outcomes of those
meetings is reviewed by the CEO and the General Counsel
and reported to the Executive Committee, the Audit
Committee of the Supervisory Board and the External Auditor.
The outcome of these risk assessments helps to identify
additional risk mitigation actions, improvement actions
and strategic compliance focus areas. Based on the risk
assessments over 2015 and external trends, the strategic
compliance focus areas are: competition law, export
control, anti-bribery, fraud, data protection, human rights
and our Life-Saving Rules. These focus areas feed into
the Compliance Framework and the annual plan of the
Compliance function reporting to the General Counsel, and
helps to ensure that the compliance activities remain risk-
based and meet the needs of our operations.
Compliance Framework
Risk
assessment
Reporting
structure
Compliance
governance
Business partner
compliance structure
Internal directives
and rules
Incident
management
process
Education
program
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Governance and compliance | AkzoNobel Report 2015 Compliance governance
Compliance organization
Corporate Compliance Committee
The Corporate Compliance Committee supports the
Executive Committee in establishing, monitoring and
assessing the company’s Compliance Framework and with
its responsibility to report to the Audit Committee of the
Supervisory Board. The Corporate Compliance Committee
consists of the General Counsel (chair), the Directors of
Compliance, Internal Audit, Control, Human Resources and
Sustainability and Health, Safety, Environment, as well as the
Corporate Secretary.
Compliance function
The Compliance function manages the Compliance
Framework on behalf of the Corporate Compliance
Committee. It makes the Code of Conduct and directives
available, manages the compliance education program,
develops and communicates rules and procedures
necessary to implement compliance programs and manages
and supervises investigations of compliance incidents. The
Compliance function reports on compliance risks and trends,
on compliance breaches and on progress in compliance
programs to the Executive Committee and the Audit
Committee of the Supervisory Board. Legal experts provide
advice in key compliance areas, monitor developments in
laws and regulations and drive change to ensure that our
rules and Compliance Framework remain up to standard and
are suitable for purpose.
Compliance Committees and Compliance Officers
Business and functional management is responsible
and accountable for raising awareness of laws and
regulations that apply to their operations and for ensuring
compliance with the same. Each business and function
has a Compliance Committee and a Compliance Officer.
The Compliance Officers are responsible for managing the
compliance programs and processes in their business or
function. They are responsible for ensuring that employees
are trained and for managing and reporting on any
compliance incidents. The Compliance Committees, chaired
Audit Committee
Supervisory Board
Executive
Committee
Sensitive Country
Committee
Corporate Compliance
Committee
Privacy
Committee
Business/Function Compliance
Committees
Compliance
function
Compliance Officers/Managers
Export Control Officers
Privacy Officers
Legal Counsel
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AkzoNobel Report 2015 | Governance and compliance by the Managing Directors of the businesses and the leaders
of the functions, each meet quarterly to decide on and
review progress on compliance matters.
Directives portal
Sensitive Country Committee
The Sensitive Country Committee, consisting of the General
Counsel (chair), an Executive Committee member with
business responsibility and the Director of Compliance,
reviews countries with risks relating to export controls,
corruption, human rights, safety and security and finance
transactions and makes proposals on such matters to the
Executive Committee.
Privacy Committee
In 2015, a Privacy Committee was established, which
consists of the members of the Corporate Compliance
Committee, along with representatives from Sales,
Information Management and Legal. The Privacy Committee
is responsible for creating and maintaining the privacy
framework and is chaired by the Director of Compliance.
Directives and rules
Code of Conduct
In 2015, we renewed our Code of Conduct in line with our
three Core Principles of Safety, Integrity and Sustainability.
The Code of Conduct informs employees and external
stakeholders about what we stand for. It explains our three
Core Principles and what they mean in practice. The Code of
Conduct was made available to employees in 32 languages.
Our employees were invited to attend online training and
workshop sessions to familiarize themselves with the
principles and learn how to deal with practical dilemmas. The
extensive launch program was supported by a company-
wide awareness campaign. The Code of Conduct serves as
a common reference document on which we build a leading
performance culture in safety, integrity and sustainability.
126
Code of Conduct
Core principles
(cid:127) Safety
(cid:127) Integrity
(cid:127) Sustainability
Values
(cid:127) Customer focused
(cid:127) Deliver on commitments
(cid:127) Passion for excellence
(cid:127) Winning together
Directives and rules
Manuals and guidelines
Procedures
Directives Framework
The Code of Conduct is incorporated in the Directives portal,
a one-stop website for all of the directives, rules, manuals,
guidelines and procedures that make up AkzoNobel’s
Directives Framework. These documents, most of which are
mandatory, drive governance, compliance and functional
excellence throughout the company, including controlled
joint ventures. To provide more guidance and ensure
stricter compliance, new directives, rules and guidelines
were introduced on topics such as preventing fraud, record
keeping, avoiding conflicts of interest, our Life-Saving Rules,
use of company resources and business communication.
Education and awareness
Training
Raising awareness through effective training and
communication is pivotal to our Compliance Framework.
A wide range of training methods and programs are used
to train our employees and external parties on the rules
they must apply in their operations. Following a curriculum
set annually by the Corporate Compliance Committee, the
Compliance function provides a variety of mandatory training
on topics covered by the Code of Conduct.
Governance and compliance | AkzoNobel Report 2015 Code of Conduct
In the fourth quarter of 2015, all employees with online
access were asked to complete an online training on the
renewed Code of Conduct. In addition, managers have
been providing workshops to their teams to discuss what
the Code of Conduct means for them, how to deal with
practical dilemmas and what to do if they are in doubt or
see a potential violation. The online training and workshop
materials were made available in 23 languages. Employees
must confirm their attendance of the online training and
workshop by mid-2016. In total, 66 percent of employees
with online access had completed the Code of Conduct
training by the end of 2015.
Other online training
Online training was also provided to designated employees
in the fields of fraud, competition law, our Life-Saving Rules,
anti-bribery and export controls. An extensive program of
face-to-face competition training was rolled out for senior
and middle management, as well as sales and other
designated staff.
Newsletters and bulletins
The training programs are supplemented with compliance
newsletters and bulletins, issued to relevant audiences on
current compliance developments and topics, such as gifts
and entertainment, fraud, information security and privacy.
Incident management
Feedback
AkzoNobel fosters a climate in which employees give
each other feedback on their behavior relating to the Core
Principles. This is an important part of having the right
compliance culture and teaching our employees how to
deal with integrity issues. If an employee becomes aware
of a potential violation of the Code of Conduct, he or she is
encouraged to speak to the individual, raise their concerns
with their Compliance Officer, HR Business Partner or
manager or use our SpeakUp! grievance mechanism.
Integrity management
Code of Conduct reporting
Code of Conduct number of alleged breaches reported
Breakdown: *
Health and safety
Business integrity
Treatment of employees
Code of Conduct investigation
Code of Conduct alleged breaches investigated (in %)
Code of Conduct alleged breaches handled by the Corporate Compliance
Committee (in numbers)
Code of Conduct alleged breaches handled by the relevant businesses
(in numbers)
Substantiated Code of Conduct breaches (within year)
Substantiated Code of Conduct breaches (total, including breaches substantiated
in a later year)
Number of dismissals for Code of Conduct breaches within year
Dismissals for Code of Conduct breaches (total, including employees dismissed
in a later year)
Compliance monitoring
Competition Law Compliance Declaration
(number of confirmations)
Non-Financial Letter of Representation
(% of operational managers)
Code of Conduct training
2012
2013
2014
2015
295
42
152
101
100
24
271
163
178
131
139
151
170
8
82
61
100
9
142
57
64
43
48
15
90
65
100
11
159
67
76
46
50
224
6
123
95
100
10
214
89
– **
52
– **
15,900
12,700
12,184
13,614
100
100
100
100
Code of Conduct trained (% online employees) ***
96
95
90
66
In 2016, categories will be aligned with the set-up of the Code of Conduct
*
** By definition these numbers are not yet known
*** Code of Conduct online training was updated in 2015, training invitations were sent in Q4,
mandatory completion is due by mid-2016.
SpeakUp!
The SpeakUp! grievance mechanism offers employees,
business partners and the general public a confidential
environment in which they can raise any concerns relating
to compliance with our Code of Conduct. Complaints can
be raised without risk of retaliation and anonymously if so
desired. In 2015, the grievance mechanism was updated
to align with the new Code of Conduct, while a new set
of SpeakUp! rules was published and a portal was made
available. With the launch of the new Code of Conduct, the
availability of the SpeakUp! grievance mechanism to raise
concerns was widely communicated.
127
AkzoNobel Report 2015 | Governance and compliance Once a report on a potential violation is made, it is
investigated on its merits in accordance with proper
investigation procedures. If a complaint is found to be
substantiated, the necessary actions are taken, including
disciplinary measures and root cause analysis.
In 2015, a total of 224 alleged violations of the Code of
Conduct were reported, both through SpeakUp! and
other channels. Of these 224 matters, 89 were (partially)
substantiated and 41 were still in progress at year-end. Ten
were managed by the Corporate Compliance Committee
as they met defined criteria. Company-wide, 48 matters
resulted in dismissal of one or more employees on grounds
related to breaches of the Code of Conduct. Other sanctions
and remedial actions in (partially) substantiated matters
included: review of procedures/controls (10), coaching/
training (8), warnings (10), suspension (1), and other
disciplinary actions (9). In three matters no action was taken
or needed as the persons involved had already left the
company.
We believe that the increase of reported alleged Code of
Conduct breaches can be explained to a substantial extent
by the renewed attention given to our Code of Conduct and
SpeakUp! grievance mechanism.
Business partners
Reporting
Business Partner Code of Conduct
At the time of the introduction of our new Code of Conduct,
a separate Business Partner Code of Conduct was also
launched. This Business Partner Code of Conduct - which
replaces our Vendor Policy - informs our business partners
what we expect of them with regard to our Core Principles.
It expands our compliance requirements to include principles
such as those laid down in the Universal Declaration on
Human Rights, the UN Guiding Principles on Business and
Human Rights and the ILO Declaration on Fundamental
Principles and Rights at Work. We expect our business
partners to commit to efficient use of raw materials, energy
and other natural resources while minimizing waste,
emission and noise. We also expect them to care about the
communities in which they operate and to offer a grievance
mechanism to those who have concerns about violations of
laws and our Core Principles. The Business Partner Code of
Conduct also expands the target group to include suppliers,
distributors, agents, research partners and joint ventures not
under our control. Confirming adherence is a condition for
doing business with us.
Agent review
In 2015, we reviewed our businesses’ cooperation with
agents and conducted investigations into a selection of
agents to assess their adherence to our Core Principles.
Conclusions from that review are being integrated in a new
Business Partner Compliance Framework.
Non-financial letter of representation
Annually, management verifies and confirms that they
comply with laws and internal directives and rules through
the NFLoR process. Exceptions must be reported and
actions must be planned and documented. The NFLoR
process starts deep in the organization; results are rolled-up
to leadership of business units, strategic marketing units,
functions and Business Areas. The results are discussed
in review meetings between each of the business and
functional leaders and their responsible Executive Committee
member, in the presence of the Director of Compliance and
Legal Counsel. At the review meetings, risks and possible
weaknesses in the compliance and control framework are
discussed and actions are agreed upon. The responsible
Executive Committee member then reports the results of
the review meetings to the CEO and the General Counsel,
who review the same. A final report is presented to
the Executive Committee, the Audit Committee of the
Supervisory Board and to the external auditor. The outcome
of this NFLoR process, in combination with the internal
control self-assessment process and internal audit results,
forms a basis for the Statement of the Board of Management
in this Report 2015.
Compliance reports
The General Counsel reports to the Executive Committee
and the Audit Committee of the Supervisory Board on
important compliance matters, developments and initiatives.
Twice per year, the General Counsel submits an extensive
written report on the progress of all compliance programs
and on compliance matters from the preceding period to
the Executive Committee and to the Audit Committee of the
Supervisory Board, who review the same and agree on any
necessary actions.
128
Governance and compliance | AkzoNobel Report 2015 Competition Law Compliance Declaration
Employees who meet certain criteria, such as having contact
with customers or suppliers or managing those who have,
confirm their compliance with competition laws as articulated
in our competition law compliance manual through our
annual Competition Law Compliance Declaration program.
In 2015, over 13,000 designated employees signed this
declaration. The declaration reminds employees of the
importance of complying with competition laws, requests
their confirmation of compliance and urges them to disclose
any matters of concern. This is an established process in
the company. In 2015, a video message was added to the
declaration to re-emphasize the importance of competition
law compliance and to remind employees to contact the
Compliance function in case of doubt.
129
AkzoNobel Report 2015 | Governance and compliance Remuneration report
This report describes our
remuneration policy and the
remuneration paid to members
of the Board of Management
in 2015.
The remuneration and the individual contracts of the
members of the Board of Management are determined by
the Supervisory Board. The Supervisory Board makes these
determinations within the framework of our remuneration
policy, which is approved by our shareholders. Our
remuneration policy, including all structures and policies
related to the remuneration and employment contracts of
the members of the Board of Management, is in line with the
Dutch Corporate Governance Code (the Code).
The first part of this report describes the remuneration policy
as it has been adopted by our shareholders over time,
while the second part describes the implementation of the
policy in 2015. The remuneration policy was first adopted
by the Annual General Meeting of shareholders (AGM) in
2005 and has since been amended several times, most
recently in 2013. The performance share plan for the Board
of Management was approved by the AGM in 2004. This
plan has been amended several times, in accordance with
article 2:135 of the Dutch Civil Code by the AGM, most
recently in 2013. The share-matching plan for the Board of
Management was approved by the AGM in 2011.
Remuneration policy
Our remuneration policy has the objective of providing
remuneration in a form which will attract, retain and motivate
members of the Board of Management as top managers of a
major international company, while protecting and promoting
the company’s objectives. It is aligned with the executive
remuneration policy of the company overall. Our policy
seeks to provide remuneration at the median level of the
external market.
130
The remuneration of the members of the Board of
Management consists of the following elements:
• Base salary
• Performance-related short-term incentive (STI),with share-
matching opportunity
• Performance-related long-term incentive (LTI) in the form
of shares
• Post-contract benefits
• Other benefits
The various elements of the remuneration package are set
out in more detail below.
Base salary
The base salary is determined by the Supervisory Board.
Short-term incentive (annual bonus)
The target STI is 100 percent of base salary for the CEO
and 65 percent of base salary for any other member of the
Board of Management. The STI is linked to financial targets
(70 percent) and to individual and qualitative targets of the
members of the Board of Management (30 percent). Targets
are determined annually by the Supervisory Board. In respect
of the financial targets, the Supervisory Board choses two to
three financial metrics and determines their relative weighting
from the following list:
• EBITDA
• Operating income (OPI)
• Operating cash flow (OCF) • Return on investment (ROI)
• EBIT
(to shareholders)
• Net income
These metrics are as used or defined in the company’s
annual report (subject to minor adjustments if
required in order to provide a better indicator of
management’s performance).
Governance and compliance | AkzoNobel Report 2015
For each target, the Supervisory Board sets performance
ranges each year. These performance ranges determine for
each target and relevant part of the STI (i) the performance
level below which no payouts are made, (ii) the performance
level at which 100 percent payout is made and (iii)
the performance level at which the maximum payout of
150 percent payout is capped. STI awards in aggregate
will not exceed 150 percent of base salary for the CEO and
100 percent of base salary for any other member of the
Board of Management.
Long-term incentive
The LTI consists of performance-related shares. Under the
performance share plan, shares are conditionally granted to
the members of the Board of Management. Vesting of these
shares is conditional on the achievement of performance
targets during a three-year period. Achievement of the
performance targets is determined by the Supervisory
Board in the first quarter of the year following the three-
year performance period. The number of vested shares is
adjusted for dividends paid over the three-year performance
period. The retention period for the shares expires five years
after the conditional grant.
The long-term incentive plan is subject to three performance
criteria:
• 35 percent of the conditional grant of shares is dependent
on AkzoNobel’s relative total shareholder return (TSR)
performance compared with companies in a defined
peer group
• 35 percent of the conditional grant of shares is dependent
on the development in ROI during the performance period
• The remaining 30 percent of the conditional grant of
shares is dependent on AkzoNobel’s relative sustainability
performance, measured as the company’s average
position in the RobecoSAM ranking during the three-year
performance period
For each of these performance criteria, the minimum vesting
is 0 percent and the maximum at vesting is 150 percent
of the relevant part of the conditional share grant. Peer
groups and vesting schemes are determined by the
Supervisory Board.
Post-contract benefits
Members of the Board of Management receive a contribution
towards pension and similar retirement benefits, as
determined by the Supervisory Board.
Other benefits
Other benefits – such as a company car and allowances –
are determined by the Supervisory Board.
Claw back and value adjustment
It is noted that the variable pay components are subject to
the claw back and value adjustment provisions of the Dutch
Civil Code and the Code.
Loans
The company does not grant loans to its Board members.
Shareholding requirements and share-matching
The CEO is required to build up, over a five-year period from
the date of first appointment, at least three times his gross
base salary in AkzoNobel shares and hold these shares
for the duration of his tenure as a member of the Board
of Management. For any other member of the Board of
Management, this requirement is at least one time their gross
base salary.
Board members are expected, for these purposes, to use both
their long-term incentive and short-term incentive in the manner
set out below.
Board members who have not yet achieved their minimum
shareholding are required to invest one-third of their short-term
incentive (net after tax and other deductions) in AkzoNobel
shares. As further encouragement to build up the minimum
holding requirement, Board members who invest up to a
second third of their short-term incentive in shares will have
such shares matched by the company, one on one, after three
years, on the condition that the Board member still holds these
shares and showed a sustained performance during the three-
year period, as determined by the Supervisory Board. The
retention period for the matching shares expires two years after
these shares have been awarded.
Board members who continue to invest their short-term
incentives in whole, or in part, in shares after the minimum
holding requirement has been achieved, will have the
opportunity to have such shares matched subject to the same
conditions. However, such shares will be matched with one
share to every two shares thus acquired and no shares will be
matched to the extent that shares were purchased with
more than two-thirds of the Board member’s net annual short-
term incentive.
131
AkzoNobel Report 2015 | Governance and compliance Implementation of the
remuneration policy in 2015
The Supervisory Board is responsible for ensuring that the
remuneration policy, and its implementation, are aligned
with the company’s objectives. Both the policy itself, and
the checks and balances applied in its execution, are
designed to avoid incidents where members of the Board
of Management – and senior executives for whom similar
incentive plans apply – act in their own interest, take risks
that are not in line with our strategy and risk appetite,
or where remuneration levels cannot be justified in any
given circumstance.
To ensure that remuneration is linked to performance, a
significant proportion of the remuneration package is variable
and dependent on the short and long-term performance of
the individual Board member and the company. Performance
targets must be realistic and sufficiently stretching and
– particularly with regard to the variable remuneration
components – the Supervisory Board ensures that the
relationship between the chosen performance criteria and
the strategic objectives applied, as well as the relationship
between remuneration and performance, are properly
reviewed and accounted for, both ex-ante and ex-post.
We aim to maintain overall remuneration levels that are at
the median level of the external market. For benchmarking
purposes, a peer group has been defined by the Supervisory
Board. In 2015, the peer group consisted of the following
companies:
• Royal Ahold
• Arkema
• Clariant
• Royal DSM
• Heineken
• Henkel
• Royal KPN
• LafargeHolcim
• Royal Philips
• Randstad
• Reckitt Benckiser
• Solvay
For communication purposes, the table Compensation
Board of Management 2015 (below) presents an overview
of the remuneration of the members of the Board of
Management who were in office in 2015. See note 21 of
the Consolidated financial statements for more details. The
implementation of the remuneration policy in 2016 will be a
separate agenda item at the 2016 AGM.
Base salary
The base salary of the CEO increased by 3 percent in 2015.
The base salary of the CFO increased by 1.7 percent.
The Remuneration Committee consults professional
independent remuneration experts to ensure an
appropriate comparison. It further reviews the impact on
pay differentials within the company, which is taken into
account by the Supervisory Board when determining the
overall remuneration. When other benefits are granted, the
Supervisory Board ensures that these are in line with
market norms.
Short-term incentive (annual bonus)
The objectives of the short-term incentive in 2015 were
to reward performance on ROI, OPI and OCF, to measure
individual and collective performance and to encourage
progress in the achievement of long-term strategic
objectives. On the outcome of the short-term incentive
elements (ROI, OPI, OCF and personal targets), the
Supervisory Board applied a reasonableness test in which
the actual ambition level of the performance targets was
Compensation Board of Management 2015
In accordance with the requirements of the Code, the
Remuneration Committee, before setting the targets to be
proposed for adoption by the Supervisory Board, has carried
out scenario analyses of the possible financial outcomes
of meeting target levels, as well as maximum performance
levels, and how they may affect the level and structure
of the total remuneration of the members of the Board
of Management.
in €
Base salary
Short-term incentive
Share awards 1
Post-contract benefits 2
Other emoluments 3
Total remuneration
Ton Büchner
Chief Executive Officer
Maëlys Castella
Chief Financial Officer
859,000
915,800
1,303,600
356,700
8,200
3,443,300
585,000
405,400
236,300
87,800
8,200
1,322,700
1 Costs relating to share awards (performance-related share plan and share-matching plan) are non-cash and relate to the expenses following IFRS 2.
2 Post-contract benefits refers to payments intended for building up retirement.
3 Other emoluments refers to social security cost.
132
Governance and compliance | AkzoNobel Report 2015 assessed critically in light of the assumptions made at the
beginning of the year. The test also included an assessment
of the progress made with the strategic objectives under
prevailing market conditions.
For 2015, the targets for ROI, OPI and OCF have been
determined by the Supervisory Board. Qualitative STI targets
were set and assessed by the Supervisory Board in the
context of the medium-term objectives of the company.
AkzoNobel does not disclose all qualitative targets, as
they are considered commercially sensitive information.
However, the targets for 2015 included goals set in
relation to delivering on the company’s communicated
performance improvement.
ROI is calculated by determining the ratio of operating
income over 12 months invested capital using reported
numbers. OPI was calculated as the number reported for
IFRS purposes, in constant currencies. The definitions and
calculations were identical to those applied in 2014. OCF
was calculated as EBITDA minus the change in operating
working capital and capital expenditures, all in constant
currencies. In 2015, the performance against the targets set
for ROI, OPI, OCF and qualitative targets was as follows:
2015 performance on STI metrics
Long-term incentives
The objectives of our long-term incentive plan are to
encourage long-term sustainable economic and shareholder
value creation – both absolute and relative to competitors
– and to align Board of Management interests with those
of shareholders, as well as ensuring retention of the
members of the Board of Management. Performance-related
shares are considered to provide a strong alignment with
shareholders’ interests.
Performance-related share plan
In line with the remuneration policy, vesting of 35 percent
of the shares conditionally granted is linked to AkzoNobel’s
ROI performance. For the shares conditionally granted in
2013 under the performance-related share plan (in respect
of which the performance period ended on December 31,
2015), the Supervisory Board has set the ROI to be achieved
by the end of 2015 as follows:
ROI performance range series 2013-2015
Vesting (as % of 35%
of conditional grant)
Threshold
50%
Target
100%
Maximum
150%
Target
12.5%
14.0%
16.5%
Metric
ROI
OPI
OCF
Qualitative targets
Payout as % of target
126
127
87
100
AkzoNobel’s ROI performance at the end the performance
period was reviewed by the Supervisory Board and
adjusted for currency effects and exceptional items. This
resulted in a vesting of 129 percent for this part of the
long-term incentive.
For the 2013 conditional grant, 30 percent was linked to
AkzoNobel’s relative sustainability performance by taking the
company’s average position in the RobecoSAM ranking. The
following vesting scheme has been applied in respect of the
conditional grants made in 2013:
Average position in RobecoSAM ranking during
performance period
Rank
1
2
3
4 – 6
7 – 10
11 – 15
Below 15
Vesting (as % of 30% of
conditional grant)
150
125
100
75
50
25
0
AkzoNobel was placed first in 2013, 2014 and 2015 in the
relevant RobecoSAM ranking. As a result, AkzoNobel’s
sustainability performance during the period 2013 to 2015
resulted in a vesting of 150 percent for this part of the long-
term incentive.
For the 2013 conditional grant, the remaining 35 percent was
linked to AkzoNobel’s relative total shareholder return (TSR)
performance compared with the companies in a defined peer
group. Independent external experts conducted an analysis
to calculate the number of shares that will vest according to
the TSR ranking. In order to adjust for changes in exchange
rates, all local currencies were converted into euros. The
relative TSR performance was compared with a peer group as
determined by the Supervisory Board.
The peer group currently consists of the following companies:
• Arkema
• DuPont
• Kansai Paint
• Kemira OYJ
• Nippon Paint
• PPG Industries
• RPM Industrial
• Sherwin-Williams
• Solvay
• Valspar Corporation
133
AkzoNobel Report 2015 | Governance and compliance Shareholding requirements and share-matching
The table below summarizes the shares acquired by the
relevant members of the Board of Management in 2015 that
would, subject to the conditions of the share-matching plan,
qualify for matching by the company. See also Note 21 of the
Consolidated financial statements.
Qualifying shares
Board members
Ton Büchner
Maëlys Castella
Qualifying shares acquired
in 2015
2,252
305
Shares obtained by members of the Board of Management
under the performance-related share plan are taken into
account for share ownership purposes (but not for matching
purposes) as soon as they have become unconditional. This
includes vested shares that are to be retained during the
blocking period of two years after vesting.
This peer group is reviewed on a regular basis to ensure
that the companies in the group remain appropriate peers.
Occasionally, changes need to be made, particularly if
one of the companies in the peer group is taken over. The
Supervisory Board will see to it that, to the extent reasonably
possible, a replacement has no impact on the company’s
relative TSR ranking.
The following vesting scheme has been applied in respect of
the conditional grants made in 2013:
TSR vesting scheme for the conditional grants
The number of performance-related shares conditionally
granted under the 2015 plan amounted to 22,500 for the
CEO and 15,300 for the CFO.
In accordance with provision II.2.13d of the Code, the
schedule at the end of this Remuneration report sets out
(i) the number of at-target shares conditionally granted; (ii)
the number of shares which have vested; (iii) the number
of shares held by members of the Board of Management
at the end of the lock-up period; (iv) the face value at the
conditional share grant, at vesting and at the end of the
lock-up period respectively.
Rank
1
2
3
4
5
6
7
8 – 11
Vesting (as % of 35% of
conditional grant)
150
135
120
100
75
50
25
0
AkzoNobel’s TSR performance during the period 2013 to
2015 resulted in an eighth position within the ranking of the
peer group companies. This ranking did not result in any
vesting of shares for the TSR part of the share plan.
Based on the company’s combined ROI, sustainability and
TSR performance, the final vesting percentage of the 2013
conditional grant – after including the dividend yield during
the performance period (determined to be 7.96 percent)
– equaled 97.48 percent. Upon its ex-post review of the
relationship between the chosen performance criteria and
the strategic objectives applied, and of the relationship
between remuneration and performance, the Supervisory
Board – given the importance of the link between the
variable remuneration and the company’s strategic ambitions
– decided not to make any correction in respect of the
definitive award.
134
In accordance with the company’s Articles of Association,
the Code and the rules of the performance-related share
plan, the number of shares to be conditionally granted to
members of the Board of Management is determined by
the Supervisory Board, within the limits of the remuneration
policy and the maximum number of shares as adopted
and approved, respectively, by the AGM. The Supervisory
Board has decided that where, in the event of a takeover,
the payout under the performance share plan is between
100 percent and 150 percent, it will, at its discretion – taking
into account the performance of the company prior to
the takeover bid – decide whether the projected outcome
is fair and may decide to adjust the vesting upwards or
downwards within the bandwidth mentioned. This does not
affect the discretion the Supervisory Board has to correct the
variable remuneration of the Board of Management upwards
or downwards in exceptional circumstances. It is noted that
a takeover would not influence the RobecoSAM sustainability
ranking of the company, nor the ROI performance. Therefore,
the Supervisory Board will, under such circumstances,
primarily take into account the company’s TSR performance.
Claw back and value adjustment
In 2015, there was no cause for a claw back or value
adjustment by the Supervisory Board.
Governance and compliance | AkzoNobel Report 2015 Post-contract compensation
The members of the Board of Management receive
contributions towards post-contract benefits, which are
defined as a percentage of income as determined by the
Supervisory Board. Currently, they are based on age. For
the CEO, the contributions are paid over the base salary
in the current year and the short-term incentive related to
that year. The contributions will therefore vary depending on
the performance during the year and the age of the Board
member. For the CFO, these contributions are paid on base
salary only.
Further details will be provided in the Notice of Meeting for
the 2016 AGM.
The metrics applied for the LTI (ROI, TSR and sustainability)
will continue to be applied in 2016. The targets and ranges
have been set at a challenging but realistic level, based
on the company’s strategic goals formulated during the
year. The vesting schemes for the TSR and sustainability
performance remain unchanged. The target and ranges for
the ROI metric will not be disclosed as they are considered
commercially sensitive information.
Board contracts
Agreements for members of the Board of Management
are concluded for a period not exceeding four years,
in accordance with the Code. After the initial term,
reappointments may take place for consecutive periods of up
to four years each. The notice period by the Board member
is subject to a term of three months. Notice by the company
shall be subject to a six-month term. Members of the Board
of Management normally retire in the year that they reach the
legal retirement age. The contractual arrangements allow the
Supervisory Board to request the CEO to resign between
the age of 60 and the legal retirement age for effective
succession planning within the Board. In such an exceptional
situation, the CEO will be entitled to the “fixed” remuneration
component until the date of retirement.
Remuneration policy planned by the Supervisory
Board for the next financial year and subsequent
years
In 2015, the Supervisory Board conducted a review of the
remuneration policy, to assess whether it was still aligned
with the external market and the objectives of the company.
The metrics applied for the short-term incentive in 2015 (ROI,
OPI, OCF) will continue to be applied in 2016. However,
the Supervisory Board will propose to the AGM to add one
additional metric to be applied in 2016.
135
AkzoNobel Report 2015 | Governance and compliance Valuation 1 shares Board of Management
Unconditional shares, vested
Board member
Conditional share grant
Number of vested shares
Series
Ton Büchner
Series 2012 - 2014
Series 2013 - 2015
Number
31,900
24,200
Value at grant
in €
1,191,784
1,203,829
Number
26,228
23,590
Value at vesting
in €
1,512,055
1,455,041
End of lock-up period
(five years after
grant)
Value in €
Number
–
–
NA
NA
Conditional shares, not vested
Board member
Ton Büchner
Series 2014 - 2016
Series
Series 2015 - 2017
Matching shares 2012 (vesting 2016)
Matching shares 2013 (vesting 2016)
Matching shares 2014 (vesting 2017)
Matching shares 2015 (vesting 2018)
Maëlys Castella
Series 2015 - 2017
Matching shares 2015 (vesting 2018)
Number
22,300
22,500
11,582
1,429
2,450
2,252
15,300
305
Conditional share
grant at target
Value at grant in €
Vesting at min
performance
Number
Vesting at max
performance
Number
1,256,382
1,297,125
500,016
71,086
133,782
166,062
882,045
22,491
–
–
–
–
–
–
–
–
33,450
33,750
11,582
1,429
2,450
2,252
22,950
305
1 Values for LTI series based on the share price on January 1 of the relevant financial year and for the Matching shares based on the date of purchase (face value).
136
Governance and compliance | AkzoNobel Report 2015 AkzoNobel on the capital markets
Proposed dividend of €1.55 per
share (up 7 percent on 2014)
Settlement of €622 million bond
which matured on March 27, 2015
A strong case for investment
We have a portfolio of businesses with leadership positions
in many markets and strong global brands in both consumer
and industrial markets. There is long-term growth potential
from end-user segments and we have a balanced exposure
across geographical regions. We have a track record
of improving returns and cash flow, as well as a history of
successfully commercializing innovation. We are a clear
leader in sustainability and are committed to making cities
more human.
Close dialog with the
capital markets
We attach great value to maintaining an open dialog with
the financial community in order to promote transparency.
Management gave presentations at a number of industry
conferences during the year, as well as holding meetings
with investors and analysts. In October, a capital markets
day was held to give an update on the strategy, which
featured presentations from the CEO and CFO, our three
Business Area Executive Committee members, the Executive
Committee member responsible for Human Resources and
the Head of Integrated Supply Chain.
Listings
Share price performance 2015
AkzoNobel’s common shares are listed on Euronext
Amsterdam. The company is included in the AEX Index, which
consists of the top 25 listed companies in the Netherlands,
ranked on the basis of their turnover in the stock market
and free float. The AkzoNobel weight in the AEX index was
3.89 percent at year-end 2015. During 2015, 174 million
AkzoNobel shares were traded on Euronext Amsterdam
(2014: 171 million). AkzoNobel has a sponsored level 1 ADR
program and ADRs can be traded on the international OTCQX
platform in the US.
See the table below for stock codes and ticker symbols:
Euronext ticker symbol
AKZA
ISIN common share
OTC ticker symbol
ISIN ADR
Sedol code
Key share data
Year-end (share price in €)
Year-high (share price in €)*
Year-low (share price in €)*
Year-average (share price in €)
Average daily trade (in € millions)
Average daily trade
(in millions of shares)
Number of shares outstanding at
year-end (in millions)
Market capitalization at year-end (in
€ billions)
Net income per share (in €)
Dividend per share (in €)
Dividend yield (in %)
* Based on close value.
NL0000009132
AKZOY
US0101993055
5458314
2013
2014
2015
55.71
56.08
42.65
49.32
39.8
0.8
57.65
60.77
47.63
54.87
36.9
0.7
61.68
74.81
55.65
64.91
44.1
0.7
242.6
246.0
249.0
13.5
14.1
15.4
3.00
1.45
2.9
2.23
1.45
2.6
3.95
1.55
2.4
Our share price increased 7 percent in 2015, outperforming
both the DJ Stoxx Chemicals and AEX indices, and
21 percent over the term from February 2013 (when the
new strategy was launched) to December 2015. For more
details about our share price performance, please refer to
the following graphs:
Share price performance 2015
AkzoNobel share price in €
AkzoNobel
AEX index
DJ Stoxx Chemicals index
80
70
60
50
4
1
c
e
D
1
3
5
1
n
a
J
5
1
b
e
F
5
1
r
a
M
5
1
r
p
A
5
1
y
a
M
5
1
n
u
J
5
1
l
u
J
5
1
g
u
A
5
1
t
p
e
S
5
1
t
c
O
5
1
v
o
N
Share price performance February 2013 –
December 2015
AkzoNobel share price in €
AkzoNobel
AEX index
DJ Stoxx Chemicals index
70
60
50
40
3
1
b
e
F
3
1
n
u
J
3
1
t
p
e
S
3
1
c
e
D
4
1
r
a
M
4
1
n
u
J
4
1
t
p
e
S
4
1
c
e
D
5
1
r
a
M
5
1
n
u
J
5
1
t
p
e
S
DJ Stoxx
AEX
Akzo
DJ Stoxx
AEX
Akzo
5
1
c
e
D
1
3
5
1
c
e
D
1
3
137
AkzoNobel Report 2015 | Governance and compliance
A North America
B UK/Ireland
C The Netherlands
D Rest of Europe
E Rest of world
F Undisclosed
48
18
8
16
4
6
A
Distribution of shares 2014
A North America
B UK/Ireland
C The Netherlands
D Rest of Europe
E Rest of world
F Undisclosed
53
14
8
15
3
7
E
F
D
C
B
E
F
D
C
B
A
A
Dividend policy
Analyst recommendations
Distribution of shares 2015
AkzoNobel’s dividend policy is to pay a stable to rising
dividend each year. Cash dividend is default, stock dividend
is optional.
At year-end 2015, AkzoNobel was covered by 25 equity
brokers and the following analyst recommendations were
applicable (see diagram):
Total proposed dividend of €1.55
per share
The Board of Management proposes a total dividend of
€1.55 per common share. AkzoNobel’s shares will be trading
ex-dividend as of April 22, 2016. In compliance with the
listing requirements of Euronext Amsterdam, the record date
will be April 25, 2016. The dividend as proposed to the 2016
Annual General Meeting of shareholders will be payable as
of May 19, 2016. The dividend paid over the last five years is
shown in the graph below.
Analyst recommendations in %
A Buy
B Hold
C Sell
48
32
20
C
B
Dividend paid in € per share
Interim dividend
Final dividend
1.08
1.12
1.12
1.12
0.32
2011
0.33
2012
0.33
2013
0.33
2014
1.20
0.35
2015
138
Broad base of international
shareholders
AkzoNobel, which has a 100 percent free float, has a
broad base of international shareholders. Based on an
independent shareholder identification survey carried out in
November 2015, the chart below shows the geographical
spread. Around 8 percent of the company’s share capital
is held by private investors, many of whom are resident in
the Netherlands.
Around 9 percent of the company’s share capital is held by
sustainable and responsible investors.*
* As calculated by Nasdaq, according to their methodology which is to include the sum of:
• Core sustainable and responsible investor firms where 100 percent of equity assets are
managed with an ESG approach
• Sustainable and responsible investor themed funds managed by broad sustainable and
responsible investors
Governance and compliance | AkzoNobel Report 2015
MSCI Inc., a leading provider of global benchmark indexes,
has over 500 equity and fixed income environmental, social,
and governance (ESG) indexes.
The ESI indices universe is composed of companies
included in the Russell Global Index that display the best
performance in the field of Corporate Social Responsibility.
Forum ETHIBEL’s selections are largely based on research,
carried out by the European rating agency Vigeo, which is
responsible for data collecting and processing, performance
analysis and industry benchmarking.
We were also once again included in the Carbon Disclosure
Project, which represents more than 822 institutional
investors, with over $95 trillion in assets under management,
and were awarded a position on the Benelux Climate
Disclosure Leadership Index (CDLI) 2015.
AkzoNobel in key
sustainability indices
Following 2015 reviews, AkzoNobel is a constituent in the
following indices: Dow Jones Sustainability World Index
(DJSI World), FTSE4Good Index Series, Euronext Vigeo
– World 120 index, STOXX® Global ESG Leaders indices,
MSCI Global Sustainability Index Series, Ethibel Sustainability
Index (ESI) Excellence Europe and the Ethibel Sustainability
Index (ESI) Excellence Global.
Widely regarded as the most respected independent
sustainability ranking system, the DJSI World Index
benchmarks the sustainability performance of leading
companies based on environmental, social and economic
performance, including forward-looking indicators.
AkzoNobel was ranked number one (out of more than 350
companies) in the Materials industry group of the Dow
Jones Sustainability World Index (DJSI World) for the fourth
consecutive year.
Created by the global index company FTSE Group,
FTSE4Good is an equity index series designed to facilitate
investment in companies that meet globally recognized
corporate responsibility standards. Companies in the
FTSE4Good Index Series have met stringent environmental,
social and governance criteria, and are positioned to
capitalize on the benefits of responsible business practice.
The Euronext Vigeo – World 120 index distinguishes
companies achieving the most advanced environmental,
social and governance performances and is
reviewed annually.
The STOXX® Global ESG Leaders indices have set new
standards in terms of transparency and comprehensiveness
in the ESG indexing space.
Credit rating and bonds
AkzoNobel is committed to maintaining a strong investment
grade rating. Regular review meetings are held between
rating agencies and AkzoNobel senior management.
See table for present rating and outlook
Rating agency
Long-term rating
Outlook
Moody’s 1
Standard & Poor’s 2
Baa1
BBB+
1 Rating affirmed on November 25, 2015.
2 Rating affirmed on October 13, 2015.
Stable
Stable
Bonds
On March 27, 2015, a €622 million bond was repaid from
existing resources.
Debt maturity* in € millions (nominal amounts)
€ Bonds
£ Bonds
339
800
750
500
2016
2017
2018
2019
2020
2021
2022
2023
2024
* At the end of Q4 2015.
For further information please visit
www.akzonobel.com/investors
139
AkzoNobel Report 2015 | Governance and compliance With you every step of the wayThere’s a certain grace and beauty about a shiny wooden floor, which is why we go to great lengths to develop products that take care of them. We supply a wide variety of paint, lacquers and stains for wood, all designed to offer essential qualities such as durability, reliability and flexibility. Financial information
Note 21 Remuneration of the Supervisory Board
and the Board of Management
Note 22 Financial risk management
Company financial statements
Note A General information
174
177
181
Note B Financial non-current assets and provisions
183
for subsidiaries
Note C Trade and other receivables
Note D Shareholders’ equity
Note E Net debt
Note F Other current liabilities
Note G Financial instruments
Note H Contingent liabilities
Note I
Auditor’s fees
Other information
Independent auditor’s report
Profit allocation and distributions
Financial summary
183
183
184
185
185
185
185
186
189
190
Financial statements
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Segment information
Notes to the Consolidated financial statements
Note 1 Summary of significant accounting policies
Note 2 Scope of consolidation
Note 3 Operating income
Note 4 Employee benefits
Note 5 Financing income and expenses
Note 6
Income tax
Note 7
Intangible assets
Note 8 Property, plant and equipment
142
142
143
144
145
146
147
152
153
154
155
155
158
160
Note 9
Investments in associates and joint ventures 161
Note 10 Other financial non-current assets
Note 11 Inventories
Note 12 Trade and other receivables
Note 13 Group equity
Note 14 Post-retirement benefit provisions
Note 15 Other provisions
Note 16 Net debt
Note 17 Trade and other payables
Note 18 Cash flow
Note 19 Contingent liabilities and commitments
Note 20 Related party transactions
161
162
162
163
164
170
170
172
172
173
174
AkzoNobel Report 2015 | Financial information
141
141
Financial information
Consolidated statement of income
Consolidated statement of
comprehensive income
In € millions
Note
2014
2015
In € millions
14,296
(8,676)
(2,912)
(1,273)
(363)
(85)
42
(18)
(180)
21
Continuing operations
Revenue
Cost of sales
Gross profit
Selling expenses
General and administrative expenses
Research and development expenses
Incidentals
Operating income
Financing income
Financing expenses related to pensions
Other financing expenses
Results from associates and
joint ventures
Profit before tax
Income tax
Profit from continuing operations
Discontinued operations
Profit for the period from
discontinued operations
Profit for the period
Attributable to
Shareholders of the company
Non-controlling interests
Profit for the period
Earnings per share, in €
Continuing operations
Basic
Diluted
Discontinued operations
Basic
Diluted
Total operations
Basic
Diluted
3
3
3
3
3
5
5
5
9
6
2
13
13
13
13
13
13
142
14,859
(8,784)
Profit for the period
Other comprehensive income
Items that will not be reclassified to statement of income:
5,620
6,075
Post-retirement benefits
Income tax
Net effect
Items that may be reclassified subsequently to statement of
income:
Exchange differences arising on translation of foreign operations
Cash flow hedge reserve
Income tax
Net effect
Other comprehensive income for the period
Comprehensive income for the period
Comprehensive income attributable to
Shareholders of the company
Non-controlling interests
Comprehensive income for the period
(3,021)
(1,245)
(347)
111
28
(13)
(129)
17
(4,502)
1,573
1,476
(416)
1,060
6
1,066
979
87
1,066
3.93
3.90
0.02
0.02
3.95
3.92
(4,633)
987
852
(252)
600
18
618
546
72
618
2.16
2.15
0.07
0.07
2.23
2.22
2014
618
2015
1,066
(589)
34
(555)
433
–
(16)
417
(138)
480
365
115
480
(191)
(2)
(193)
137
(30)
9
116
(77)
989
887
102
989
Financial information | AkzoNobel Report 2015
Consolidated balance sheet
at year-end, before allocation of profit
In € millions
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Investments in associates and joint ventures
Other financial non-current assets
Total non-current assets
Current assets
Inventories
Current tax assets
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total current assets
Total assets
Equity and liabilities
Equity
Shareholders’ equity
Non-controlling interests
Group equity
Non-current liabilities
Post-retirement benefit provisions
Other provisions
Deferred tax liabilities
Long-term borrowings
Total non-current liabilities
Current liabilities
Short-term borrowings
Current tax liabilities
Trade and other payables
Current portion of provisions
Liabilities held for sale
Total current liabilities
Total equity and liabilities
Note
2014
2015
7
8
6
9
10
11
6
12
16
2
13
13
14
15
6
16
16
6
17
15
2
4,142
3,835
1,152
183
813
1,545
88
2,743
1,732
66
5,790
477
1,488
655
412
2,527
811
227
3,407
494
11
10,125
6,174
16,299
6,267
5,082
4,156
4,003
1,057
165
903
1,504
69
2,741
1,365
–
6,484
496
1,285
580
360
2,161
430
243
3,473
451
–
10,284
5,679
15,963
6,980
4,386
4,950
16,299
4,597
15,963
143
AkzoNobel Report 2015 | Financial information Consolidated statement of cash flows
In € millions
Profit for the period
Income from discontinued operations
Adjustments to reconcile earnings to cash generated from operating activities
Amortization/depreciation
Impairment losses
Financing income and expenses
Results from associates and joint ventures
Pre-tax result on acquisitions/divestments
Income tax
Changes in working capital
Changes in provisions
Interest paid
Income tax paid
Other changes
Net cash from operating activities
Capital expenditures
Interest received
Dividends from associates and joint ventures
Acquisition of consolidated companies
Proceeds from divestments
Other changes
Net cash from investing activities
Proceeds from borrowings
Borrowings repaid
Issue of shares for stock option plan
Dividends
Buy-out of non-controlling interests
Net cash from financing activities
Net cash used for continuing operations
Cash flows from discontinued operations
Net change in cash and cash equivalents of continued and discontinued
operations
Cash and cash equivalents at January 1
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents
144
618
(18)
618
2
156
(21)
(8)
252
28
(406)
(206)
(258)
54
(588)
34
11
(13)
51
(24)
980
(1,347)
12
(280)
–
Note
2
7, 8
7, 8
5
9
2
6
18
18
6
8
9
2
2
16
16
13
2
16
2014
2015
1,066
(6)
626
22
114
(17)
(70)
416
46
(658)
(151)
(261)
9
(651)
22
11
(9)
160
(41)
811
1,136
(529)
(508)
829
(1,518)
–
(281)
(2)
(635)
(353)
(88)
(441)
2,020
70
1,649
(972)
(344)
(6)
(350)
1,649
18
1,317
Financial information | AkzoNobel Report 2015 Consolidated statement of changes in equity
Attributable to shareholders of the company
Subscribed
share capital
Additional
paid-in
capital
Cash flow
hedge
reserve
Cumulative
translation
reserve
Other
(statutory)
reserves and
undistributed
profit
Shareholders’
equity
Non-controlling
interests
485
319
In € millions
Balance at January 1, 2014
Profit for the period
Reclassification into the statement of income
Other comprehensive income
Tax on other comprehensive income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
–
–
–
–
–
5
–
2
Balance at December 31, 2014
492
Profit for the period
Reclassification into the statement of income
Other comprehensive income
Tax on other comprehensive income
Comprehensive income
Dividend paid
Equity-settled transactions 1
Issue of common shares
Acquisitions and divestments
–
–
–
–
–
4
–
2
–
–
–
–
–
–
137
–
7
463
–
–
–
–
–
137
–
(2)
–
(19)
–
15
(15)
–
–
–
–
–
(19)
–
26
(56)
7
(23)
–
–
–
–
(417)
5,226
5,594
–
–
390
(16)
374
–
–
–
546
–
(589)
34
(9)
(354)
34
–
546
15
(214)
18
365
(212)
34
9
(43)
4,897
5,790
–
(5)
127
2
124
–
–
–
–
979
–
(191)
(2)
786
(363)
32
–
(3)
979
21
(120)
7
887
(222)
32
–
(3)
427
72
–
43
–
115
(68)
–
3
477
87
–
15
–
102
(86)
–
2
1
Group equity
6,021
618
15
(171)
18
480
(280)
34
12
6,267
1,066
21
(105)
7
989
(308)
32
2
(2)
Balance at December 31, 2015
498
598
(42)
81
5,349
6,484
496
6,980
1 Includes a tax charge of €1 million (2014: nil)
145
AkzoNobel Report 2015 | Financial information Segment information
Our Decorative Paints business is a leading color authority,
supplying a wide variety of quality products for every situation
and surface, including paints, lacquers and varnishes. We
also offer a range of mixing machines and color concepts
for the building and renovation industry, as well as specialty
coatings for metal, wood and other critical building materials.
Our Performance Coatings business is a global leader in
technology and innovation. We have an extensive portfolio
which includes high performance paints and coatings for
ships, yachts, cars, trucks and buses, industrial installations,
structural steel, architectural components, beverage cans,
furniture, aircraft, mobile devices and flooring.
Our Specialty Chemicals business also holds leadership posi-
tions in many markets. We supply industries worldwide with
high quality ingredients and process aids for the manufacture
of life’s essentials.
Information per Business Area
Incidentals
Operating income
ROS%
Revenue from third parties
Group revenue
2014
3,858
5,569
4,864
5
2015
3,954
5,938
4,965
2
2014
3,909
5,589
4,883
(85)
2015
4,007
5,955
4,988
(91)
14,296
14,859
14,296
14,859
Amortization and
depreciation
2014
(157)
(142)
(307)
(12)
(618)
2015
(150)
(146)
(320)
(10)
(626)
2014
2015
–
–
–
(85)
(85)
–
–
31
80
111
Invested capital
Total assets
Total liabilities
Capital expenditures
2014
2,791
2,424
3,402
1,246
–
2015
2,643
2,510
3,352
1,324
–
2014
4,610
4,243
4,641
2,739
66
2015
4,588
4,359
4,570
2,446
–
2014
1,833
1,680
1,283
5,225
11
2015
1,741
1,624
1,252
4,366
–
2014
143
143
297
5
–
9,863
9,829
16,299
15,963
10,032
8,983
588
2015
158
147
331
15
–
651
2014
6.3
9.8
10.4
–
6.9
2015
8.6
13.3
12.2
–
10.6
2014
248
545
508
(314)
987
2014
8.8
22.0
14.8
–
–
2015
345
792
609
(173)
1,573
ROI%
2015
11.7
29.4
17.2
–
–
10.0
15.0
Revenue by region of destination
Intangible assets
and property,
plant and equipment
Invested capital
Capital expenditures
2014
762
5.710
2.193
1.485
3.469
677
2015
693
5.687
2.494
1.483
3.796
706
14.296
14.859
2014
1.691
2.155
1.096
539
2.397
99
7.977
2015
1.681
2.256
1.208
401
2.515
98
8.159
2014
2.088
2.974
1.825
715
2.086
175
9.863
2015
2.070
3.035
1.865
580
2.099
180
9.829
2014
72
277
68
45
109
17
588
2015
102
258
100
34
146
11
651
In € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Total
In € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Assets held for sale
Total
Regional information
In € millions
The Netherlands
Other European countries
US and Canada
Latin America
Asia
Other regions
Total
146
Financial information | AkzoNobel Report 2015 Notes to the
Consolidated financial
statements
1
Note 1: Summary of significant accounting policies
General information
Consolidation
Akzo Nobel N.V. is a company headquartered in the
Netherlands. The address of our registered office is
Christian Neefestraat 2, Amsterdam. We have filed a list
of subsidiaries, associated companies and joint ventures,
drawn up in conformity with sections 379 and 414 of
Book 2 of the Netherlands Civil Code, with the Trade
Registry of Amsterdam.
We have prepared the Consolidated financial statements
of Akzo Nobel N.V. in accordance with International
Financial Reporting Standards (IFRS) as adopted by the
European Union. They also comply with the financial
reporting requirements included in Section 9 of Book 2 of
the Netherlands Civil Code, as far as applicable.
The Management report within the meaning of Section
391 of Book 2 of the Netherlands Civil Code consists of
the following parts of the annual report:
• AkzoNobel in 2015 at a glance
• How AkzoNobel created value in 2015
• CEO statement
• Strategic performance
• Leadership: Statement of the Board of Management
• Governance and compliance: Corporate
governance statement
• Governance and compliance: Remuneration report
• Financial information: Note 3 Operating income
• Financial information: Note 22 Financial
risk management
The section Strategic performance provides information
on the developments during 2015 and the results.
This section also provides information on cash flow
and net debt, capital expenditures, innovation activities
and employees.
On February 9, 2016, the Board of Management autho-
rized the financial statements for issue. The financial state-
ments as presented in this report are subject to adoption
by the Annual General Meeting of shareholders.
The Consolidated financial statements include the
accounts of Akzo Nobel N.V. and its subsidiaries.
Subsidiaries are companies over which Akzo Nobel N.V.
has control, because it is exposed, or has rights, to
variable returns from its involvement with the subsidiary
and has the ability to affect returns through its power over
the subsidiary. Non-controlling interests in equity and in
results are presented separately.
Change in accounting policies
Accounting pronouncements, which became effective
for 2015, had no material impact on our Consolidated finan-
cial statements.
Discontinued operations (Note 2)
A discontinued operation is a component of our busi-
ness that represents a separate major line of business or
geographical area of operations that has been disposed
of or is held for sale, or is a subsidiary acquired exclusively
with a view to resale. Assets and liabilities are classified as
held for sale if it is highly probable that the carrying value
will be recovered through a sale transaction within one
year rather than through continuing use. When reclassify-
ing assets and liabilities as held for sale, we recognize the
assets and liabilities at the lower of their carrying value or
fair value less selling costs. Assets held for sale are not
depreciated but tested for impairment.
Use of estimates
The preparation of the financial statements in compliance
with IFRS requires management to make judgments,
estimates and assumptions that affect amounts reported in
the financial statements. The estimates and assumptions
are based on experience and various other factors that
are believed to be reasonable under the circumstances
147
AkzoNobel Report 2015 | Financial information Foreign currencies
Exchange rates of key currencies
Transactions in foreign currencies are translated into
the functional currency using the foreign exchange
rate at transaction date. Monetary assets and liabilities
denominated in foreign currencies are translated into
the functional currency using the exchange rates at the
balance sheet date. Resulting foreign currency differences
are included in the statement of income. Non-monetary
assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate
at acquisition date.
The principal exchange rates against the euro used in
preparing the balance sheet and the statement of
income are:
US dollar
Pound sterling
Swedish krona
Chinese yuan
Balance sheet Statement of income
2014
1.216
0.780
9.399
7.561
2015
1.092
0.736
9.175
7.177
2014
1.329
0.806
9.099
8.199
2015
1.111
0.726
9.355
7.002
The assets and liabilities of entities with other functional
currencies are translated into euros, the functional
currency of the parent entity, using the exchange rates
at the balance sheet date. The income and expenses
of entities with other functional currencies are translated
into the functional currency, using the exchange rates at
transaction date.
Foreign exchange differences resulting from translation into
the functional currency of investments in subsidiaries and
of intercompany loans of a permanent nature with other
functional currencies are recorded as a separate compo-
nent (cumulative translation reserves) within Other compre-
hensive income. These cumulative translation adjustments
are reclassified (either fully or partly) to the statement of
income upon disposal (either fully or partly) or liquidation
of the foreign subsidiary to which the investment or the
intercompany loan with a permanent nature relates to.
Foreign currency differences arising on the re-translation of
a financial liability designated as an effective hedge of
a net investment in a foreign operation are recognized in
the cumulative translation reserves (in Other comprehen-
sive income).
Revenue recognition
Revenue is defined as the revenue from the sale and
delivery of goods and services and royalty income, net of
rebates, discounts and similar allowances, and net of sales
tax. Revenue is recognized when the significant risks and
rewards have been transferred to a third party, recovery of
the consideration is probable, the associated costs and
possible return of goods can be estimated reliably and
there is no continuing management involvement with the
goods. For revenue from sales of goods these condi-
tions are generally met at the time the product is shipped
and delivered to the customer, depending on the delivery
conditions. Service revenue is generally recognized as
services are rendered.
and are used to judge the carrying values of assets and
liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed
on an ongoing basis. The most critical accounting policies
involving a higher degree of judgment and complexity in
applying principles of valuation and for which changes in
the assumptions and estimates could result in significantly
different results than those recorded in the financial
statements are the following:
• Scope of consolidation (Note 2)
• Income tax and deferred tax assets (Note 6)
• Impairment of intangible assets and property, plant and
equipment (Note 7, 8)
• Post-retirement benefits (Note 14)
• Provisions (Note 15)
Statement of cash flows
We have used the indirect method to prepare the state-
ment of cash flows. Cash flows in foreign currencies
have been translated at transaction rates. Acquisitions or
divestments of subsidiaries are presented net of cash and
cash equivalents acquired or disposed of, respectively.
Cash flows from derivatives are recognized in the state-
ment of cash flows in the same category as those of the
hedged items.
Operating segments
We determine and present operating segments (Business
Areas) on the information that is provided to the Executive
Committee, our chief operating decision-maker during
2015, to make decisions about resources to be allocated
to the Business Area and assess its performance. Busi-
ness Area results reported to the Executive Committee
include items directly attributable to a Business Area as
well as those items that can be allocated on a reasonable
basis. Unallocated items comprise mainly corporate assets
and corporate costs and are reported in Business Area
“Corporate and other”.
148
Financial information | AkzoNobel Report 2015 Post-retirement benefits
(Note 4, 14)
Contributions to defined contribution plans are recognized
in the statement of income as incurred.
Most of our defined benefit pension plans are funded with
plan assets that have been segregated in a trust or foun-
dation. In certain countries we also provide post-retirement
benefits other than pensions to our employees and these
plans are generally not funded. Valuations of both funded
and unfunded plans are carried out by independent
actuaries based on the projected unit credit method.
Post-retirement costs primarily represent the increase in
the actuarial present value of the obligation for projected
benefits based on employee service during the year and
the interest on this obligation with respect to employee
service in previous years, net of the expected return on
plan assets, if any. When the calculation results in a benefit
to AkzoNobel, the recognized asset is limited to the
present value of economic benefits available in the form
of any future refunds from the plan or reductions in future
contributions to the plan. An economic benefit is available
if it is realizable during the life of the plan, or on the settle-
ment of the plan liabilities. The effect of these so-called
asset ceiling restrictions and any changes therein, is
recognized in Other comprehensive income.
Actuarial gains and losses, which arise in calculating our
obligation with reference to a plan, are recognized in
Other comprehensive income. When the benefits of a plan
improve, the portion of the increased benefits related to
past service by employees is recognized as an expense in
the statement of income immediately. We recognize gains
and losses on the curtailment or settlement of a defined
benefit plan when the curtailment or settlement occurs.
Interest on the defined benefit obligations net of the return
on plan assets is included in financing expenses related
to pensions. Other charges and benefits recognized are
reported in Operating income, in as far as they are not
recorded in Other comprehensive income.
Other employee benefits
(Note 4, 15)
Provisions for other long-term employee benefits are
measured at present value, using actuarial assumptions
and methods. Any actuarial gains and losses are recog-
nized in the statement of income in the period in which
they arise.
Share-based compensation
(Note 4)
We have a performance-related share plan, under which
shares are conditionally granted to certain employees. The
fair value is measured at grant date and amortized over
the three-year period during which the employees normally
become unconditionally entitled to the performance-
related shares with a corresponding increase in share-
holders’ equity. Amortization is accelerated in the event of
earlier vesting. The fair value of the performance-related
shares for which vesting is based on the company’s
performance or the ranking for sustainability, is the value
of the Akzo Nobel N.V. common share on the date of the
grant. The fair value for the TSR-linked vesting condition is
measured using actuarial valuation methods. The amount
recognized as an expense is adjusted to reflect the actual
number of performance-related shares that vest, except
when forfeiture or extra vesting is due to TSR perfor-
mance, because this is a market performance condition.
Income tax (Note 6)
Income tax expense comprises both current and deferred
tax, including effects of changes in tax rates. In determin-
ing the amount of current and deferred tax we also take
into account the impact of uncertain tax positions
and whether additional taxes and interest may be due.
Income tax is recognized in the statement of income,
unless it relates to items recognized in Other comprehen-
sive income.
Current tax includes the expected tax payable and receiv-
able on the taxable income for the year, using tax rates
enacted or substantially enacted at reporting date, as well
as any adjustments to tax payable and receivable with
respect to previous years.
Deferred tax is recognized using the balance sheet
method. We do not recognize deferred tax for the initial
recognition of goodwill, the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit,
and differences related to investments in subsidiaries
to the extent that they will probably not reverse in the
foreseeable future. Deferred tax assets are recognized for
unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that
future taxable profits will be available against which
they can be utilized.
Measurement of deferred tax assets and liabilities is
based upon the enacted or substantially enacted tax rates
expected to apply to taxable income in the years in which
temporary differences are expected to be reversed. Non-
refundable dividend tax is taken into account in the deter-
mination of deferred tax liabilities to the extent of earnings
expected to be distributed by subsidiaries in the foresee-
able future. Deferred tax positions are not discounted.
Government grants
Government grants related to costs are deducted from
the relevant cost to be compensated in the same period.
Government grants to compensate for the cost of an asset
are deducted from the cost of the related asset. Emission
rights granted by the government are recorded at cost. A
provision is recorded if the actual emission is higher than
the emission rights granted.
Intangible assets (Note 7)
Intangible assets are valued at cost less accumulated
amortization and impairment charges. Intangible assets
with an indefinite useful life, such as goodwill and certain
149
AkzoNobel Report 2015 | Financial information brands, are not amortized, but tested for impairment
annually. Goodwill in a business combination represents
the excess of the consideration paid over the net fair
value of the acquired identifiable assets, liabilities and
contingent liabilities. If the cost of an acquisition is less
than the fair value of the net assets of the subsidiary
acquired, the difference is recognized directly in the
statement of income. The effects of all transactions with
non-controlling interests are recorded in equity if there is
no change in control.
Intangible assets with a finite useful life, such as licenses,
know-how, brands, customer relationships, intellectual
property rights and capitalized development and software
costs, are capitalized at historical cost and amortized
on a straight-line basis over the estimated useful life of
the assets, which generally ranges from five to 40 years.
Amortization methods, useful lives and residual values are
reassessed annually.
Property, plant and equipment
(Note 8)
Property, plant and equipment are valued at cost less
accumulated depreciation and impairment charges. Costs
include expenditures that are directly attributable to the
acquisition of the asset, including financing expenses of
capital investment projects under construction.
Depreciation is calculated using the straight-line method,
based on the estimated useful life of the asset compo-
nents. In the majority of cases the useful life of plant
equipment and machinery is ten years, and for buildings
ranges from 20 to 30 years. Land is not depreciated.
In the majority of cases residual value is assumed to be
insignificant. Depreciation methods, useful lives and
residual values are reassessed annually.
Costs of major maintenance activities are capitalized and
depreciated over the estimated useful life. Maintenance
costs which cannot be separately defined as a component
of property, plant and equipment are expensed in the
period in which they occur.
We recognize conditional asset retirement obligations in
the periods in which sufficient information becomes avail-
able to reasonably estimate the cash outflow.
Impairments (Note 7, 8)
We assess the carrying value of intangible assets and
property, plant and equipment whenever events or
changes in circumstances indicate that the carrying value
of an asset may not be recoverable. In addition, for good-
will and other intangible assets with an indefinite useful life,
the carrying value is reviewed annually in the fourth quarter.
If the carrying value of an asset or its cash-generating unit
exceeds its estimated recoverable amount, an impair-
ment loss is recognized in the statement of income. The
assessment for impairment is performed at the lowest level
of assets generating largely independent cash inflows. For
goodwill and other intangible assets with an indefinite life,
we have determined this to be at business unit level (one
level below segment).
Except for goodwill, we reverse impairment losses in
the statement of income if and to the extent we have
identified a change in estimates used to determine the
recoverable amount.
Leases (Note 8, 19)
Lease contracts in which we have substantially all the risks
and rewards of ownership are classified as finance leases.
Upon initial recognition, the leased asset is measured at
the lower of its fair value and the present value of minimum
lease payments. Subsequent to initial recognition, the
asset is accounted for in accordance with the accounting
policy applicable to the asset. The interest expenses
are recognized as other financing expenses over the
lease term.
Payments made under operating leases are recognized in
the statement of income on a straight-line basis over the
term of the lease.
Associates and joint ventures
(Note 9)
Associates and joint ventures are accounted for using the
equity method and are initially recognized at cost. The
Consolidated financial statements include our share of the
income and expenses of the associates and joint ventures,
whereby the result is determined using our accounting
principles. When the share of losses exceeds the interest
in the investee, the carrying amount is reduced to nil and
recognition of further losses is discontinued, unless we
have incurred legal or constructive obligations on behalf
of the investee. Loans to associates and joint ventures are
carried at amortized cost less impairment losses.
Inventories (Note 11)
Inventories are measured at the lower of cost and net
realizable value. Costs of inventories comprise all costs of
purchase, costs of conversion and other costs incurred
in bringing the inventories to the present location and
condition. The costs of inventories are determined using
weighted average cost.
Provisions (Note 15)
We recognize provisions when a present legal or construc-
tive obligation as a result of a past event exists, it is probable
that an outflow of economic benefits is required to settle the
obligation and the amount can be reliably estimated. Provi-
sions are measured at net present value. The increase of
provisions as a result of the passage of time is recognized in
the statement of income under Other financing expenses.
Provisions for restructuring are recognized when a detailed
and formal restructuring plan has been approved, and
the restructuring has either commenced or has been
announced publicly. We do not provide for future operating
costs. A provision for warranties is recognized when the
underlying products or services are sold, generally based
on historical warranty data.
150
Financial information | AkzoNobel Report 2015 Financial instruments
Regular purchases and sales of financial assets and
liabilities are recognized on trade date. The initial measure-
ment of all financial instruments is at fair value. Except for
derivatives, the initial measurement of financial instruments
is adjusted for directly attributable transaction costs.
Derivative financial instruments (Note 22)
Derivative financial instruments are recognized at fair value
on the balance sheet. Fair values are derived from
market prices and quotes from dealers and brokers, or
are estimated using observable market inputs. When
determining fair values, credit risk for our contract party,
as well as for AkzoNobel, is taken into account.
Changes in the fair value are recognized in the statement
of income, unless cash flow hedge accounting or net
investment hedge accounting is applied. In those cases,
the effective part of the fair value changes is deferred in
Other comprehensive income and released to the related
specific lines in the statement of income or balance sheet
at the same time as the hedged item.
Other financial non-current assets (Note 10) and
trade and other receivables (Note 12)
Loans and receivables are measured at amortized cost,
using the effective interest method, less any impairment
losses. An allowance for impairment is established if the
collection of a receivable becomes doubtful.
Cash and cash equivalents (Note 16)
Cash and cash equivalents are measured at fair value and
include all cash balances and short-term investments that
are directly convertible into cash. Changes in fair values
are included in Financing income.
Long-term and short-term borrowings (Note 16,
22) and trade and other payables (Note 17)
Long-term and short-term borrowings, as well as trade
and other payables, are measured at amortized cost, using
the effective interest rate method. The interest expense on
borrowings is included in Other financing expenses. The
fair value of borrowings, used for disclosure purposes, is
determined on the basis of listed market price, if avail-
able. If a listed market price is not available, the fair value
is calculated based on the present value of principal
and interest cash flows, discounted at the interest at the
reporting date, taking into account AkzoNobel’s credit risk.
New IFRS accounting standards
IFRS standards and interpretations thereof not yet in force
which may apply to our Consolidated financial statements
for 2016 and beyond have been assessed for their poten-
tial impact. The most important upcoming changes are:
Other new IFRS accounting standards
Standard
Published
Implementation date in the standard
IFRS 9, “Financial Instruments” 2009-2014
Implementation date of January 1, 2018, with
earlier adoption permitted
Endorsed by the
European Union
Not yet endorsed
IFRS 15, “Revenue from
Contracts with Customers”
May 28, 2014
January 1, 2018, with earlier adoption permitted Not yet endorsed
IFRS 16, “Leases”
January 13, 2016
January 1, 2019, with earlier adoption permitted,
if IFRS 15 is also applied at the date of adoption
Not yet endorsed
Anticipated impact
IFRS 9 introduces new requirements for classifying and measuring financial assets and
liabilities. This standard encompasses an overall change of accounting principles for
financial instruments and replaces IAS 39 – the current standard on financial instruments.
The standard contains new requirements for impairment of financial assets and for
hedge accounting. In 2015, we started the assessment of the impact of IFRS 9 on our
Consolidated financial statements; we expect to complete this process in 2016.
IFRS 15 replaces existing revenue recognition guidance in IFRS. It introduces a five-step
model to determine when to recognize revenue and at what amount, based on transfer of
control over goods or services to the customer. New qualitative and quantitative disclosures
will also be required. In 2015, we started the assessment of the impact of IFRS 15 on our
Consolidated financial statements, which sofar indicated that the effects are limited: We
expect to complete this process in 2016.
IFRS 16 replaces existing guidance on lessee accounting for leases. It requires lessees to
bring most leases on balance sheet in a single lease accounting model, recognizing a right-
of-use asset and a lease liability. In 2016, we will start with our impact assessment.
151
AkzoNobel Report 2015 | Financial information 2
Note 2: Scope of consolidation
Divestments
In 2015, Specialty Chemicals completed the divestment of
its Paper Chemicals business, which was accounted for as
held for sale in 2014 at year-end. The divestment resulted
in a net profit of €31 million, recognized as incidental item.
Acquisitions
In March 2015, we obtained the remaining 50 percent
stake in Delesto B.V., which was treated as a consolidated
company thereafter.
No acquisition in 2015, individually nor in total,
was deemed material in respect of IFRS 3 disclosure
requirements.
Discontinued operations
The results and net cash out, both in 2014 and 2015,
mainly relate to settlements for previously
divested business.
Material subsidiaries
The consolidated financial statements comprise the
assets, liabilities, income and expenses of approximately
370 legal entities. We consider legal entities material when
they represent, for at least two subsequent years, more
than 5 percent of either revenue or operating income
(before incidentals). Material subsidiaries included in the
table are 100 percent owned and meet these criteria.
Assets and liabilities held for sale
In € millions
Property, plant and equipment
Intangible assets
Other assets
Total assets
Total non-current liabilities
Total current liabilities
Total liabilities
2014
23
21
22
66
3
8
11
2015
–
–
–
–
–
–
–
Discontinued operations
In € millions
Results related to discontinued operations in previous years
Tax related to discontinued operations in previous years
Profit for the period
Cash flows from discontinued operations
In € millions
Net cash from operating activities
Net cash from discontinued operations
Material subsidiaries
2014
2015
13
5
18
(3)
9
6
2014
(88)
(88)
2015
(6)
(6)
Legal entity
Akzo Nobel Coatings Inc.
Principal place of business/country of corporation
United States
Akzo Nobel Pulp and Performance Chemicals AB
Sweden
Akzo Nobel Industrial Chemicals B.V.
Akzo Nobel Surface Chemistry LLC
Akzo Nobel Ltda
The Netherlands
United States
Brazil
152
Financial information | AkzoNobel Report 2015
3
Note 3: Operating income
Operating income increased 59 percent to €1,573 million,
reflecting the positive effects of process optimization,
lower costs, favorable currency developments and the
impact of incidental items.
• In Decorative Paints, operating income increased
39 percent as a result of the new operating model
and lower costs
• In Performance Coatings, operating income increased
45 percent due to performance improvement
initiatives, including management delayering
and currencies
• In Specialty Chemicals, operating income increased
20 percent, with significant savings from continuous
improvement programs and incidental items
• Operating income in other activities was, apart from
incidental items, adversely impacted by insurance
costs and higher pension costs due to changes in
discount rates and de-risking of pension liabilities.
Corporate costs were higher due to planned
functional transformation projects and favorable items
in 2014 related to the sale of assets
Raw material prices were lower, although in certain regions
foreign currency effects adversely impacted raw material
costs in local currencies.
For the full-year operating income was positively impacted
by €111 million incidental items. In Specialty Chemicals
the book profit, net of related costs, of €31 million with
respect to the divestment of the Paper Chemicals busi-
ness was reported as incidental items. Operating income
in other activities was impacted by incidental items,
including a recovery related to the 2014 fraud case
(€42 million) and several adjustments to provisions, mainly
for post-retirement benefits and legacy items.
In 2014 operating income was impacted by adverse
incidental items (€85 million) related to the external
fraud suffered by one of our susidiaries in the US,
provisions for legacy items and project costs related to
a divestment.
Costs by nature
In € millions
Cost of sales
Selling expenses
General and administrative expenses
Research and development expenses
Incidentals
Total
Employee
benefits Amortization Depreciation
(926)
(986)
(682)
(230)
–
(7)
(90)
(37)
(7)
–
(347)
(70)
(43)
(17)
–
Purchases
and other
costs
(7,396)
(1,766)
(511)
(109)
(85)
2014
Employee
Total
benefits Amortization Depreciation
(8,676)
(1,004)
(2,912)
(1,022)
(1,273)
(363)
(85)
(564)
(230)
92
(7)
(97)
(28)
(7)
–
(361)
(74)
(35)
(17)
–
Purchases
and other
costs
(7,412)
(1,828)
(618)
(93)
19
2015
Total
(8,784)
(3,021)
(1,245)
(347)
111
(2,824)
(141)
(477)
(9,867)
(13,309)
(2,728)
(139)
(487)
(9,932)
(13,286)
153
AkzoNobel Report 2015 | Financial information
4
Note 4: Employee benefits
Salaries, wages and other employee benefits in
operating income
Share-based compensation
In € millions
Salaries and wages
Post-retirement cost
Other social charges
Total
2014
(2,226)
(221)
(377)
2015
(2,188)
(128)
(412)
(2,824)
(2,728)
Share-based compensation relates to the performance-
related share plan, as well as the share-matching plan.
Charges recognized in the 2015 statement of income for
share-based compensation amounted to €33 million and
are included in salaries and wages (2014: €34 million).
Performance-related share plan
Under the performance-related share plan, a number
of conditional shares are granted to the members of
the Board of Management, members of the Executive
Committee and executives each year. The number of
participants of the performance-related share plan at
year-end 2015 was 593 (2014: 635).
The 2013 conditional grant of shares is linked for
30 percent to the ranking of the company in the
RobecoSAM benchmark (SAM), 35 percent to the return
on investment (ROI) performance of the company and
the remaining 35 percent to the relative TSR performance
of the company compared with the peer group.
The shares of the series 2012-2014 have vested and were
delivered to the participants in 2015.
The conditional shares of the 2013-2015 series vested
as follows:
Average number of employees
Average number during the year
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Total
2014
15,500
21,000
10,000
1,700
48,200
2015
15,100
19,700
9,300
2,000
46,100
The average number of employees working outside
the Netherlands was 41,200 (2014: 43,100).
Employees
At year-end
Decorative Paints
Performance Coatings
Specialty Chemicals
Corporate and other
Total
2014
15.200
20.500
9.800
1.700
47.200
2015
14.900
19.300
9.100
2.300
45.600
At year-end 2015, the workforce reduced by
3 percent to 45,600 employees (year-end 2014: 47,200
employees), mainly due to ongoing restructuring
and divestments.
• Our TSR performance over the period 2013-2015
resulted in an eighth position within the ranking of the
peer group companies. This did not result in vesting of
conditional shares
• Our ROI performance at the end of 2015 resulted in
a vesting of 129 percent for this part of the long-term
incentive
• The average position in the RobecoSAM benchmark
resulted in a first position within the ranking. This
resulted in a vesting of 150 percent for this part of the
long-term incentive
As a result, the conditional shares of the 2013-2015 series
vested for 90.29 percent (series 2012-2014: 75 percent),
including dividend shares of 7.96 percent, the final
vesting percentage amounted to 97.48 percent
(series 2012-2014: 82.22 percent).
The fair value of the performance-related share plan at
grant date is amortized as a charge against income over
the three-year vesting period. The fair value for the shares
conditionally granted in 2015 without a holding restriction
was €54.11 and €45.47 with a holding restriction (2014:
€57.37 without and €46.91 with a holding restriction).
The share price of a common AkzoNobel share at year-
end amounted to €61.68 (2014: €57.65). For further
details on our performance-related share plan, refer to the
Remuneration report.
Performance-related shares
Series
2012 – 2014
2013 – 2015
2014 – 2016
2015 – 2017
Total
Balance per
January 1,
2015
823,825
733,366
619,452
Granted in
2015
Vested in
2015
Forfeited in
2015
Dividend in
2015 1
Balance at
December
31, 2015
Vested on
January 1,
2016
11,215
15,006
–
613,653
–
(823,825)
–
(91,376)
(39,863)
(27,398)
–
–
–
9,724
662,929
662,929
12,364
12,839
606,959
599,094
–
–
–
–
–
2,176,643
639,874
(823,825)
(158,637)
34,927
1,868,982
662,929
154
1 Equivalent in shares related to accumulated dividend, which is included in the balances on balance sheet date.
Financial information | AkzoNobel Report 2015 5
Note 5: Financing income and expenses
6
Note 6: Income tax
Financing income and expenses
In € millions
Financing income
Financing expenses
Net interest on net debt
Other interest movements
Financing expenses related to pensions
Interest on provisions
Other items
Net other financing charges
Net financing expenses
2014
42
(157)
(115)
(18)
(32)
9
(41)
(156)
2015
28
(125)
(97)
(13)
(17)
13
(17)
(114)
Net financing expenses for the year decreased by
€42 million, from €156 million to €114 million. Significant
variances are:
• Net interest on net debt decreased by €18 million
to €97 million (2014: €115 million), mainly due to
lower financing expenses as a result of a high interest
bond repayment partly off-set by a lower return on
investments held in an escrow account
• Net other financing charges decreased by €24 million
to €17 million (2014: €41 million) mainly as a result from
less significant decreases of discount rates in 2015
when compared to 2014
The average interest rate used for capitalized interest was
3.9 percent (2014: 5.1 percent).
The average financing expenses on total debt were
4.0 percent (2014: 5.0 percent)
Pre-tax income from continuing operations amounted to
a profit of €1,476 million (2014: €852 million). The net tax
charges related to continuing operations are included in
the statement of income as follows:
Classification of current and deferred tax result
In € millions
2014
2015
Current tax expense for
The year
Adjustments for prior years
Total current tax expense
Deferred tax expense for
Origination and reversal of temporary
differences and tax losses
(De)recognition of deferred tax assets
Changes in tax rates
Total deferred tax expense
Total
(244)
(8)
(252)
(7)
8
(1)
–
(252)
(332)
27
(305)
(82)
(20)
(9)
(111)
(416)
The total deferred tax charge, including discontinued
operations was €109 million (2014: € nil). The total
tax charge, including discontinued operations, was
€407 million (2014: €247 million).
Fair value of performance-related shares
The fair value of the performance-related shares (€54.11)
was for 35 percent based on a market condition
(TSR: €39.61) and for 65 percent based on non-market
based performance conditions (€61.92).
The TSR part of the award is valued applying a Monte
Carlo simulation model and the other part is valued based
on the share price at grant date discounted for the present
value of expected dividends over the vesting period.
Furthermore, for members of the Executive Committee,
an additional holding restriction applies after the vesting
period, up to a total of five years. Regarding this restriction
an additional discount is taken into account. This leads to
a lower fair value for their awards (€45.47).
The parameters applied for the fair value calculations are:
share price at date of grant (opening of January 2, 2015):
€57.50, expected volatility: 24.41 percent, expected
dividend yield: 2.63 percent; and risk-free interest rate:
0.21 percent.
For the peer group (TSR) please refer to the
Remuneration report.
Share-matching plan
The members of the Board of Management and the
members of the Executive Committee are eligible to
participate in the share-matching plan. Under certain
conditions, members who invest part of their short-term
incentives in AkzoNobel shares may have such shares
matched by the company. The investment in AkzoNobel
shares in 2015 resulted in a total of 4,529 potential
matching shares (2014: 5,205).
The fair value of the potential matching shares at the date
of the share investment is amortized as a charge against
income over the three-year vesting period. The fair value
was €67.81 per potential matching share in 2015
(2014: €49.96).
155
AkzoNobel Report 2015 | Financial information Income tax recognized in equity
Unrecognized deferred tax assets
In € millions
Tax losses and tax credits
Deductible temporary differences
Total
2014
139
249
388
2015
165
267
432
In € millions
Currency exchange differences on
intercompany loans of a permanent
nature
Cash flow hedges
Share-based compensation
Post-retirement benefits
Total
Current tax
Deferred tax
Total
2014
(16)
2015
2
–
–
34
18
(16)
34
18
7
(1)
(2)
6
–
6
6
Expiration year of loss carryforwards
In € millions
Total loss carryforwards
Loss carryforwards not recognized in
deferred tax assets
2016
53
(36)
2017
146
(71)
2018
61
(46)
2019
63
(38)
2020
63
(48)
Later
Unlimited
644
(16)
2,964
(44)
Total
3,994
(299)
Total recognized
17
75
15
25
15
628
2,920
3,695
Effective tax rate reconciliation
The effective income tax rate based on the Consolidated
statement of income is 28.2 percent.
Effective tax rate
In %
Corporate tax rate in the Netherlands
Effect of tax rates in other countries
Weighted average statutory income
tax rate
Non-taxable (income)/expenses
(De)recognition of deferred tax assets
Non-refundable withholding taxes
Other
Effective tax rate
2014
25.0
0.4
25.4
0.3
(0.9)
3.6
1.2
29.6
2015
25.0
1.9
26.9
0.4
1.4
0.7
(1.2)
28.2
The impact of non-refundable withholding tax on the
tax rate is dependent on our relative share in the profit
of subsidiaries in countries that levy withholding tax on
dividends and on the timing of the remittance of such
dividends. Based on the Dutch tax system there is a limited
credit for such taxes. The high impact in 2014 was caused
by relatively high expected dividends.
Deferred tax assets and liabilities
From the total amount of recognized net deferred tax
assets, €496 million (2014: €967 million) is related to
entities that have suffered a loss in either 2015 or 2014
and where utilization is dependent on future taxable profit
in excess of the profit arising from the reversal of existing
taxable temporary differences.
The usage of the tax loss carryforwards recognized in the
balance sheet will affect the cash tax rate in coming years.
156
Financial information | AkzoNobel Report 2015
Movement in deferred tax in 2014
In € millions
Intangible assets
Property, plant and equipment
Post-retirement benefit provisions
Other provisions
Other items and tax credits
Tax loss carryforwards
Deferred tax assets not recognized
Tax assets/liabilities
Set-off of tax
Net deferred taxes
Net balance
January 1, 2014
Changes in
exchange rates
Recognized in
income
Recognized in
equity
(493)
(52)
182
273
267
681
(176)
682
–
682
(29)
(1)
11
21
(2)
53
(17)
36
–
36
180
15
(64)
(132)
41
51
(91)
–
–
–
–
–
138
–
–
–
(104)
34
–
34
Net balance
December 31,
2014
Assets
Liabilities
(352)
(39)
267
162
305
785
(388)
740
–
740
86
82
348
175
479
785
(388)
1,567
(415)
1,152
438
121
81
13
174
–
–
827
(415)
412
Other
(10)
(1)
–
–
(1)
–
–
(12)
–
(12)
Movement in deferred tax in 2015
In € millions
Intangible assets
Property, plant and equipment
Post-retirement benefit provisions
Other provisions
Other items and tax credits
Tax loss carryforwards
Deferred tax assets not recognized
Tax assets/liabilities
Set-off of tax
Net deferred taxes
Net balance
January 1, 2015
Changes in
exchange rates
Recognized in
income
Recognized in
equity
Net balance
December 31,
2015
Other
Assets
Liabilities
(352)
(39)
267
162
305
785
(388)
740
–
740
7
1
13
10
1
44
(14)
62
–
62
(9)
–
(91)
(36)
13
38
(24)
(109)
–
(109)
–
–
5
–
13
(6)
(6)
6
–
6
–
(1)
–
(1)
–
–
–
(2)
–
(2)
(354)
(39)
194
135
332
861
(432)
697
–
697
61
78
310
159
396
861
(432)
1,433
(376)
1,057
415
117
116
24
64
–
–
736
(376)
360
157
AkzoNobel Report 2015 | Financial information 7
Note 7: Intangible assets
Intangible assets
In € millions
Balance at January 1, 2014
Cost of acquisition
Cost of internally developed intangibles
Accumulated amortization/impairment
Carrying value
Movements in 2014
Acquisitions through business combinations
Investments – including internally developed intangibles
Transfer from/(to) assets held for sale
Amortization
Impairments
Changes in exchange rates
Total movements
Balance at December 31, 2014
Cost of acquisition
Cost of internally developed intangibles
Accumulated amortization/impairment
Carrying value at year-end 2014
Movements in 2015
Acquisitions through business combinations
Investments – including internally developed intangibles
Divestment
Amortization
Impairments
Changes in exchange rates
Total movements
Balance at December 31, 2015
Cost of acquisition
Cost of internally developed intangibles
Accumulated amortization/impairment
Carrying value at year-end 2015
158
Goodwill
Brands
Customer
lists
Other
intangibles
1,264
2,113
–
(85)
1,179
–
(118)
1,995
5
–
(16)
–
–
78
67
–
–
–
(11)
–
137
126
854
–
(425)
429
3
–
71
(69)
–
29
34
1,340
2,267
1,027
–
(94)
1,246
–
(146)
2,121
3
–
(2)
–
–
77
78
–
–
–
(12)
–
3
(9)
–
(564)
463
–
–
(1)
(70)
–
29
(42)
1,423
2,260
1,071
–
(99)
1,324
–
(148)
2,112
–
(650)
421
319
237
(253)
303
2
24
35
(61)
(2)
11
9
401
255
(344)
312
–
37
(8)
(57)
(1)
16
(13)
409
246
(356)
299
Total
4,550
237
(881)
3,906
10
24
90
(141)
(2)
255
236
5,035
255
(1,148)
4,142
3
37
(11)
(139)
(1)
125
14
5,163
246
(1,253)
4,156
Financial information | AkzoNobel Report 2015 Goodwill and other intangibles per segment
In € millions
Decorative Paints
Performance Coatings
Specialty Chemicals
Total
Goodwill
Brands with indefinite
useful lives
Other intangibles with
finite useful lives
Total intangibles
2014
37
701
508
2015
36
731
557
2014
1,908
–
–
2015
1,907
–
–
1,246
1,324
1,908
1,907
2014
305
292
391
988
2015
265
278
382
925
2014
2,250
993
899
4,142
2015
2,208
1,009
939
4,156
Average revenue growth rates per forecast period
In % per year
Decorative Paints
Performance Coatings
Specialty Chemicals
2016-2020
2021-2025
5.1%
3.0%
1.3%
3.4%
2.5%
2.0%
Dulux is the major brand with an indefinite useful life,
due to its global presence, high recognition and strategic
nature. Other intangibles include licenses, know-how,
intellectual property rights, emission rights and develop-
ment cost. Both at year-end 2015 and 2014, there
were no purchase commitments for individual intangible
assets. No intangible assets were registered as security for
bank loans.
For virtually all business units, a terminal value was
calculated using a long-term average market growth rate
that did not exceed 2 percent. The estimated pre-tax cash
flows are discounted to their present value using a pre-tax
weighted average cost of capital. The discount rates are
determined for each business unit and range from
7.7 percent to 11.9 percent, with a weighted average of
8.6 percent.
A sensitivity test for growth assumptions – a 50 percent
reduction of the growth rate – as well as the pre-tax
weighted average cost of capital – a one percentage point
increase – confirms sufficient headroom in all businesses.
As a result, no impairment charge was recognized in
relation to the annual impairment test this year.
Impairment
Goodwill and other intangibles with indefinite useful lives
are tested for impairment per business unit (one level
below segment level) in the fourth quarter or whenever an
impairment trigger exists. The impairment test is based
on cash flow projections of the five-year plan. The key
assumptions used in the projections are:
• Revenue growth: based on actual experience, analysis
of market growth and the expected market share
development
• Margin development: based on actual experience and
management’s long-term projections
Revenue growth and margin development projections are
extrapolated beyond this five-year explicit forecast period
for another five years, for which generally reduced growth
rates are applied.
159
AkzoNobel Report 2015 | Financial information Capital expenditures
• In Decorative Paints, we invested in growth markets and
in creating efficiency in Europe through optimization of
our production footprint
• In Performance Coatings, we invested in both RD&I
facilities and production facilities in mature and growth
markets, to increase capacity and to improve efficiency
• In Specialty Chemicals, several asset integrity and
efficiency improvement projects as well as growth
projects for specific segments were executed
Impairments
In 2015 some small impairments were recorded, spread
over all businesses.
Financial lease
The carrying value of the property, plant and equipment
financed by hire purchase and leasing and not legally
owned by the company was €39 million (2014: €40 million)
of which €38 million is related to buildings and land and
€1 million to other equipment.
8
Note 8: Property, plant and equipment
Property, plant and equipment
In € millions
Balance at January 1, 2014
Cost of acquisition
Accumulated depreciation/impairment
Carrying value
Movements in 2014
Transfer from assets held for sale
Divestments
Capital expenditures
Transfer between categories
Depreciation
Impairments
Changes in exchange rates
Total movements
Balance at December 31, 2014
Cost of acquisition
Accumulated depreciation/impairment
Carrying value at year-end 2014
Movements in 2015
Acquisitions
Divestments
Capital expenditures
Transfer between categories
Depreciation
Impairments
Changes in exchange rates
Total movements
Balance at December 31, 2015
Cost of acquisition
Accumulated depreciation/impairment
Carrying value at year-end 2015
160
Buildings
and land
Plant equip-
ment and
machinery
Other
equipment
Construction
in progress
and prepay-
ments on
projects
Assets not
used
Total
2,214
(1,149)
1,065
5,963
(4,285)
1,678
16
(11)
44
54
(81)
7
32
61
10
(7)
144
178
(322)
3
44
50
2,319
(1,193)
1,126
6,261
(4,533)
1,728
–
(8)
21
81
(75)
(11)
12
20
11
(11)
134
279
(336)
(2)
16
91
2,403
(1,257)
1,146
6,670
(4,851)
1,819
797
(600)
197
3
(4)
40
38
(74)
(2)
29
30
922
(695)
227
1
(6)
31
60
(76)
(1)
6
15
999
(757)
242
646
(4)
642
–
–
358
(272)
–
(7)
24
103
813
(68)
745
1
(4)
465
(420)
–
(7)
9
44
863
(74)
789
60
(53)
7
9,680
(6,091)
3,589
–
–
2
2
–
(1)
(1)
2
70
(61)
9
–
(1)
–
–
–
–
(1)
(2)
66
(59)
7
29
(22)
588
–
(477)
–
128
246
10,385
(6,550)
3,835
13
(30)
651
–
(487)
(21)
42
168
11,001
(6,998)
4,003
Financial information | AkzoNobel Report 2015 9
Note 9: Investments in associates and joint ventures
10
Note 10: Other financial non-current assets
At year-end 2015, the carrying value of investments in
associates amounted to €107 million (2014: €100 million)
and in joint ventures €58 million (2014: €83 million).
In 2015, the results from associates and joint ventures
amounted to a profit of €17 million (2014: €21 million).
The most significant associates and joint ventures of
AkzoNobel are: Metlac Holdings Brl (49 percent), Metlac
Spa (44 percent), Eka Chile SA (50 percent), Delamine B.V.
(50 percent), Fort Amanda Specialties LLC (50 percent)
and I.C. Insurance Holdings Ltd (49 percent).
Other financial non-current assets
In € millions
Loans and receivables
Other than financial instruments
Total
2014
232
581
813
2015
189
714
903
No significant contingent liabilities exist related to
associates and joint ventures.
None of the associates and joint ventures are considered
individually material to the group.
In 2015, we acquired the remaining 50 percent stake in
Delesto B.V. and obtained control. As a result Delesto B.V.
changed from a joint venture into a consolidated company.
Combined financial information of our share in associates and joint ventures
In € millions
2014
2015
2014
2015
Associates
Joint ventures
Condensed statement of income
Revenue
Profit before tax
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Condensed balance sheet
Non-current assets
Current assets
Total assets
Shareholders’ equity
Non-current liabilities
Current liabilities
Total liabilities and equity
93
19
13
1
14
57
84
141
100
14
27
141
103
18
11
1
12
60
85
145
107
4
34
145
220
9
8
4
12
44
76
120
83
11
26
120
126
12
6
2
8
42
46
88
58
11
19
88
The loans and receivables include the subordinated loan
of €90 million (2014: €89 million) granted to the Pension
Fund APF in the Netherlands and the non-current part
of an escrow account of the AkzoNobel (CPS) Pension
Scheme in the UK amounting to €59 million (2014: €86
million), invested in corporate bonds. Under certain condi-
tions, the minimum annual funding of this pension fund
from the escrow account is €34 million (£25 million). The
current portion of the escrow account is reported as Other
receivables within Trade and other receivables.
Other financial non-current assets include an amount of
€528 million related to pension plans in an asset position
(2014: €409 million). See Note 14.
161
AkzoNobel Report 2015 | Financial information 11
Note 11: Inventories
12
Note 12: Trade and other receivables
Inventories
In € millions
Raw materials and supplies
Work in progress
Finished products and goods for resale
2014
476
84
985
2015
450
87
967
Total
1,545
1,504
Of the total carrying value of inventories at year-end
2015, €51 million is measured at net realizable value
(2014: €49 million). In 2015, €27 million was recognized in
the statement of income for the write-down of inventories
(2014: €28 million), while €15 million of write-downs were
reversed (2014: €17 million). There are no inventories
subject to retention of title clauses.
Trade and other receivables
Allowance for impairment of trade receivables
In € millions
Balance at January 1
Additions charged to income
Release of unused amounts
Utilization
Currency exchange differences
Balance at year-end
2014
91
35
(16)
(19)
4
95
2015
95
43
(17)
(18)
(1)
102
The addition to and release of the allowance for impair-
ment have been included in the statement of income
under Selling expenses.
The maximum exposure to credit risk at the reporting
date is the carrying value of each class of receivables
mentioned above. We do not hold any collateral for
trade receivables. We do not have a significant customer
concentration.
In € millions
Trade receivables
Prepaid expenses
Tax receivables other than income tax
Receivables from associates and
joint ventures
FX and commodity contracts
Other receivables
Total
2014
2,246
2015
2,267
63
164
35
17
218
62
155
29
24
204
2,743
2,741
Trade receivables are presented net of an allowance for
impairment of €102 million (2014: €95 million). In 2015,
€43 million of impairment losses were recognized in the
statement of income (2014: €35 million).
Ageing of trade receivables
In € millions
Performing accounts receivable
2014
2,004
2015
2,026
Past due accounts receivables
and not impaired
< 3 months
> 3 months
Impaired accounts receivables
Allowance for impairment
Total trade receivables
205
20
112
(95)
200
25
118
(102)
2,246
2,267
With respect to the trade and other receivables that are
neither impaired nor past due, there are no indications
as of reporting date that the debtors will not meet their
payment obligations.
162
Financial information | AkzoNobel Report 2015 13 Note 13: Group equity
Composition of share capital at year-end 2015
Non-controlling interests
Authorized
share capital
Subscribed
share capital
19,200
19,200
Group equity
Partner
%
€ million
%
€ million
2014
Equity stake
2015
Equity stake
400,000,000
–
Akzo Nobel Swire Paints (Shanghai) Ltd,
Shanghai, China
Swire Duro (Holdings) Ltd, China
30.00
184
30.00
191
In €
Priority shares
(48 with nominal value of €400)
Cumulative preferred shares
(200 million with nominal value of €2)
Common shares
(600 million with nominal value of €2)
1,200,000,000
497,952,856
Akzo Nobel India Limited, Kolkata, India
Privately held, India
PT ICI Paints Indonesia, Jakarta, Indonesia
PT DWI Satrya Utama, Indonesia
Total
1,600,019,200
497,972,056
Outstanding common shares
Number of shares
2014
2015
Akzo Nobel Paints (Malaysia) Sdn. Bhd.,
Kuala Lumpur, Malaysia
Akzo Nobel Swire Paints (Guangzhou)
Limited, Guangzhou, China
International Paint (Korea) Ltd, Busan,
South Korea
Privately held, Malaysia
Swire Duro (Holdings) Limited,
Industrial Development Co. Ltd of
Guangzhou, China
Noroo Holdings, South Korea
Outstanding at January 1
242,625,535
246,043,094
Kayaku Akzo Corporation, Tokyo, Japan
Nippon Kayaku Co., Ltd., Japan
788,616
825,102
Akzo Nobel Kemipol A.S., Izmir, Turkey
Privately held, Turkey
27.04
45.00
40.05
46.00
40.00
25.00
49.00
11.74
25.00
24.19
50.00
27.04
45.00
40.05
46.00
40.00
25.00
49.00
11.74
25.00
24.19
50.00
50
30
30
53
19
8
18
5
5
10
13
52
477
55
29
27
38
24
8
18
5
4
13
14
70
496
Marshall Boya Ve Vernik Sanayii A.S.,
Gebze, Turkey
Marshal Employees' Foundation,
Privately held, Turkey
Akzo Nobel Boya Sanayi Ve Ticaret A.S.,
Izmir, Turkey
Akzo Nobel Pakistan Limited, Karachi,
Pakistan
Akzo Nobel Oman SAOC, Muscat, Oman
Privately held, Turkey
Privately held, Pakistan
Omar Zawawi Establishment LLC,
Oman
Others
Total
Subscribed share capital
For further details on subscribed share capital, see
Note D in the Company financial statements.
as from the translation of intercompany loans with
a permanent nature and liabilities and derivatives that
hedge the net investments in a foreign subsidiary.
Other components of shareholders’ equity
Changes in fair value of derivatives comprise the effective
portion of the cumulative net change in the fair value
of cash flow hedging instruments related to hedged
transactions that have not yet occurred.
Equity-settled transactions consist of the performance-
related share plan and share-matching plan, whereby
shares are granted to the Board of Management,
Executive Committee and other executives. For details of
the share-based compensation, see Note 4.
Cumulative translation reserves comprise all foreign
exchange differences arising from the translation of
the financial statements of foreign operations, as well
Non-controlling interests
None of the non-controlling interests are considered
individually material to the group.
163
Issued in connection to stock
options exercised and performance
shares granted
Stock dividend
2,628,943
2,108,232
Balance at year-end
246,043,094
248,976,428
Weighted average number of shares
Number of shares
Issued common shares at
January 1
Issued common shares during
the year
Shares for basic earnings per
share for the year
Effect of dilutive shares
2014
2015
242,625,535
246,043,094
2,033,094
1,777,510
244,658,629
247,820,604
For performance-related shares
1,410,341
1,826,898
For share-matching plan
20,801
24,136
Shares for diluted earnings
per share
246,089,771
249,671,638
AkzoNobel Report 2015 | Financial information 14
Note 14: Post-retirement benefit provisions
Post-retirement benefit provisions relate to defined benefit
pension and other post-retirement benefits, including
healthcare or welfare plans. We have a number of defined
benefit pension plans. The largest pension plans are
the ICI Pension Fund (ICIPF) and the AkzoNobel (CPS)
Pension Scheme (CPS) in the UK which together account
for 83 percent of defined benefit obligations (DBO) and
91 percent of plan assets. Other pension plans include
the largely unfunded plans in Germany, the plans in the
US and certain other smaller plans in the UK. The benefits
of these pension plans are based primarily on years of
service and employees’ compensation. The funding
policy for the plans is consistent with local requirements
in the countries of establishment. We also provide certain
healthcare and life insurance benefits to retired employees,
mainly in the US and the Netherlands.
Valuations of the obligations under the plans are carried
out regularly by independent qualified actuaries. We
accrue for the expected costs of providing such post-
retirement benefits during the service years of the employ-
ees. Governance of the benefit plans is the responsibility of
the ExCo Pensions Committee. This committee provides
oversight of the costs and risks of the plans including over-
sight of the impact of the plans on the company in terms
of cash flow, pension expenses and the balance sheet, by
the development and maintenance of policies on benefit
design, funding, asset allocation and assumption setting.
Pension plans
Almost all of the defined benefit plans have been closed
to new members since the early to mid-2000s, although
in many plans long-serving employees continue to accrue
benefits. For plans in the US, benefit accrual is frozen
and employees participate in defined contribution plans
for future service. In countries where plans are closed,
new employees are eligible to join a defined contribution
arrangement. In countries in high growth markets, pension
schemes currently are not material. Unless mandated by
law, it is our policy that any new plans are established as
defined contribution plans.
164
The most significant risks that we run in relation to defined
benefit plans are that investment returns fall short of
expectations, low discount rates, that inflation exceeds
expectations, and that retirees live longer than expected.
The assets and liabilities of each of the funded plans are
held outside of the company in a trust or a foundation,
which is governed by a board of fiduciaries or trustees,
depending on the legal arrangements in the country
concerned. The primary objective with regard to the
investment of pension plan assets is to ensure that each
individual plan has sufficient funds available to satisfy
future benefit obligations in accordance with local legal
and legislative requirements. For this purpose, we work
closely with plan trustees or fiduciaries to develop strategic
asset allocation strategies. Asset liability modeling (ALM)
studies are carried out periodically to analyze and under-
stand the trade-off between expected investment returns,
volatility of outcomes and the impact on cash contribu-
tions. We aim to strike a cautious balance between these
factors in order to agree affordable contribution schedules
with plan fiduciaries. Plan assets principally consist of
long-term interest-earning investments, insurance policies
and (investment funds with holdings primarily in) quoted
equity securities. Our largest plans use derivatives (such
as index futures, currency forward contracts and swaps)
to reduce volatility of underlying variables, for efficient
portfolio management and to improve the liability match-
ing characteristics of the assets. Limits have been set
on the use of derivatives which are periodically subject
to review for compliance with the pension fund’s invest-
ment strategy. ICIPF invested in annuity contracts that
aim to hedge all key risks related to a certain part of the
pensioner population. CPS has an insurance contract with
SwissRe to hedge longevity risk in respect of a portion of
its pensioners.
In line with our proactive pension risk management
strategy, we seek to reduce risk in our pension plans over
time. We continue to evaluate different potential de-risking
strategies and opportunities on an ongoing basis. Some
future de-risking transactions may have both cash flow
and balance sheet impacts which may be substantial, as
have some of the de-risking actions already taken. The
cost of fully removing risk would exceed estimated funding
deficits. In 2015, the Trustee of ICIPF entered into three
more annuity buy-in agreements. Two of the agreements
are with Legal & General plc and the other is with Pruden-
tial Retirement Income Limited and they cover, in aggre-
gate, £1.5 billion (€2.0 billion) of pensioner liabilities (local
plan value). The buy-ins involved the purchase of bulk
annuity policies under which the insurers will pay to ICIPF
amounts equivalent to the benefits payable to a subset
of current pensioners. The pension liabilities remain with
ICIPF and the matching annuity policies are held within
ICIPF. The accounting impact of the transaction is a lower
valuation of the plan assets giving a reduction in Other
comprehensive income of £230 million (€321 million). The
Trustee of a smaller UK pension plan, the ICI Specialty
Chemicals Pension Fund (ISCPF) transacted two buy-ins
in August and November 2015 with Prudential Retirement
Income Limited covering £235 million (€317 million) of
pensions liabillities (local plan value) giving a reduction in
Other comprehensive income of £47 million (€63 million).
By purchasing these bulk annuities, the Trustees have
both taken significant steps in actively de-risking liabilities
and reducing the risk that AkzoNobel will be required to
contribute additional cash in the future.
The remaining pension plans primarily represent defined
contribution plans. This includes, among others, the
Pension Fund APF in the Netherlands and the 401k Plan
in the US. The ITP2 plan in Sweden is financed through
insurance with the Alecta insurance company and is
classified as a multi-employer defined benefit plan. As
AkzoNobel does not have access to sufficient information
from Alecta to enable a defined benefit accounting treat-
ment, it is accounted for as a defined contribution plan.
Contributions in 2015 were €8 million (2014: €10 million).
Alecta’s target funding ratio in 2015 was 140 percent.
The most recently quoted ratio at September 2015 stood
at 148 percent. There is also a small number of multi-
employer plans in the US and Germany in which
AkzoNobel participates with annual contributions in each
case totaling less than €1 million. These are also
accounted for as defined contribution plans. The
expenses of all plans accounted for as defined
contribution plans in AkzoNobel totaled €132 million in
2015 (2014: €145 million).
Financial information | AkzoNobel Report 2015 Other post-retirement benefit plans
AkzoNobel provides certain healthcare and life insurance
benefits to retired employees, mainly in the US and the
Netherlands. The risks to which the US healthcare plans
expose AkzoNobel include the risk of future increases in
the cost of healthcare which would increase the cost of
maintaining the plans. The benefit payments to retirees
under the Dutch plan are frozen. Both plans expose
AkzoNobel to the risk of a further decline in discount rates,
which increases the plan obligations, and longevity risk as
the plans generally pay lifetime benefits.
In the second half of 2015, we modified the US welfare
plans to align with local market practice. This resulted in
plan amendments and curtailments, leading to an adjust-
ment of the provision of €92 million.
Reconciliation balance sheet
In € millions
2014
DBO
Plan
assets
Total
DBO
Plan
assets
2015
Total
Balance at the beginning of the period
(15,188)
14,248
(940)
(17,165)
15,989
(1,176)
Statement of income
Current service cost
Past service cost
Settlements
Net interest (charge)/income on net defined benefit (liability)/asset
Cost recognized in statement of income
Remeasurements
Actuarial gain/(loss) due to liability experience
Actuarial gain/(loss) due to liability financial assumption changes
Actuarial gain/(loss) due to liability demographic assumption changes
Actuarial loss due to buy-in
Return on plan assets greater/(less) than discount rate
(57)
(2)
–
(643)
(702)
68
(1,469)
132
–
–
–
–
–
625
625
–
–
–
(841)
(57)
(2)
–
(18)
(77)
68
(1,469)
132
(841)
1,528
1,528
(65)
92
2
(597)
(568)
404
394
(126)
–
–
Remeasurement effects recognized in other comprehensive income
(1,269)
687
(582)
672
Cash flow
Employer contributions
Employee contributions
Benefits and administration costs paid from plan assets
Net cash flow
Other
Acquisitions/divestments/transfers
Changes in exchange rates
Total other
–
(4)
948
944
10
(960)
(950)
425
4
(948)
(519)
(10)
958
948
425
–
–
425
–
(2)
(2)
–
(3)
1,061
1,058
9
(966)
(957)
–
–
(1)
584
583
–
–
–
(384)
(473)
(857)
480
3
(1,061)
(578)
(8)
951
943
(65)
92
1
(13)
15
404
394
(126)
(384)
(473)
(185)
480
–
–
480
1
(15)
(14)
Balance at the end of the period
(17,165)
15,989
(1,176)
(16,960)
16,080
(880)
Asset restriction
Medicare receivable
Net balance sheet provision
In the balance sheet under
Other financial non-current assets
Post-retirement benefit provisions
Current portion of provisions
Liabilities held for sale
Net balance sheet provision
(2)
(3)
(1,181)
409
(1,488)
(102)
–
(1,181)
(3)
–
(883)
528
(1,285)
(126)
–
(883)
165
AkzoNobel Report 2015 | Financial information
DBO at funded and unfunded pension plans
In € millions
2014
2015
Wholly or partly funded plans
16,481
16,380
Unfunded plans
Total
350
16,831
324
16,704
In addition to the expenses borne by the funds them-
selves, some expenses are borne directly by AkzoNobel.
Administrative expenses are incurred, especially for the UK
pension funds, of €24 million (2014: €17 million), which
are included in Operating income. In addition, we directly
incurred asset management expenses of €5 million (2014:
€7 million), which have been included in Other comprehen-
sive income.
Interest costs on DBO for both pensions and other post-
retirement benefits together with the interest income on
plan assets comprise the net financing expenses related to
pensions of €13 million (2014: €18 million), see Note 5.
Cash flows
In 2016, we expect to contribute €436 million to our
defined benefit pension plans. This includes €104 million
of regular pension contributions and €332 million for
top-ups, of which £25 million (€34 million) will be paid out
of the CPS escrow account (see explanation in Key plan
details). We expect to pay a further €20 million for other
post-retirement benefit plans. No allowance is made for
any special one-off contributions that may arise in relation
to new de-risking opportunities.
The figures in the table below are the estimated future
benefit payments to be paid from the plans to beneficiaries
over the next ten years.
Future benefit payments
Plan assets
In € millions
Equities
Debt – fixed interest government bonds
Debt – index-linked government bonds
Debt – corporate and other bonds
Insurance contracts
Cash and cash equivalents
Other
Total
2014
2015
Total Percentage of total
Total Percentage of total
In € millions
1,566
1,222
3,701
1,645
4,405
1,516
1,934
10
8
23
10
28
9
12
1,166
950
4,028
1,069
6,250
238
2,379
7
6
25
7
39
1
15
2016
2017
2018
2019
2020
2021-2025
15,989
100
16,080
100
Other post-
retirement
benefits
Pensions
1,047
1,031
1,042
1,047
1,059
5,388
21
20
20
19
18
84
The equities and government bond debt assets in
the table above have quoted prices in active markets,
although most are held through funds comprised of such
instruments which are not actively traded themselves.
The other categories of plan assets include certain assets
that are not quoted in active markets. Such unquoted
securities, totaling €997 million (2014: €654 million), have
increased due to changed investment allocations by the
trustees. Unquoted plan assets include investments in real
estate, totaling €362 million (2014: €314 million) and other
investments in infrastructure, catastrophe bonds,
insurance policies and high-yield credit strategies. Plan
assets did not directly include any of AkzoNobel’s own
transferable financial instruments, nor any property
occupied by or assets used by the company.
Pension balances recorded under Other financial non-
current assets totaled €528 million (2014: €409 million).
These assets could be recognized under IFRIC 14
because economic benefits are available in the form of
future refunds from the plan or reductions in future
contributions to the plan, either during the life of the plan
or on the (final) settlement of the plan liabilities.
166
Financial information | AkzoNobel Report 2015 Key figures and assumptions by plan
In € millions
Percentage of total DBO
Defined Benefit Obligation
Fair value of plan assets
Plan funded status
Restriction on asset recognition
Medicare receivable
Amounts recognized on the balance sheet
Percentage of total current service cost
Current service cost
Employer contributions
Discount rate
Rate of compensation increase
Inflation
Pension increases
Healthcare cost trend rate for next year
Rate to which cost trend rate is assumed to decline
Year that rate reaches the ultimate trend
Life expectancy (in years)
Currently aged 60
Males
Females
Currently aged 45, from age 60
Males
Females
ICIPF
UK
62%
(10,633)
10,870
237
–
–
237
16%
9
230
3.4%
3.9%
2.9%
2.8%
–
–
–
26.7
29.0
27.8
30.3
CPS
UK
Other pension
plans
Other post-
retirement
benefits
21%
15%
2%
2014
Total
(17,165)
15,989
(1,176)
(2)
(3)
(2,650)
1,513
(1,137)
(2)
–
(334)
–
(334)
–
(3)
(1,139)
(337)
(1,181)
55%
31
79
2.8%
2.7%
2.0%
2.1%
–
–
–
25.2
28.3
26.8
29.8
7%
4
23
3.3%
–
–
–
5.3%
3.9%
57
425
3.4%
3.8%
2.8%
2.5%
5.3%
3.9%
2019-2032
2019-2032
24.8
26.7
26.1
27.6
26.5
28.7
27.7
30.0
(3,548)
3,606
58
–
–
58
22%
13
93
3.6%
4.0%
3.0%
2.1%
–
–
–
26.8
28.4
28.0
29.7
ICIPF
UK
62%
(10,544)
10,821
277
–
–
277
16%
10
253
3.6%
3.9%
2.9%
2.8%
–
–
–
27.0
29.5
28.3
31.0
CPS
UK
Other pension
plans
Other post-
retirement
benefits
21%
15%
2%
(3,568)
3,764
196
–
–
(2,592)
1,495
(1,097)
(3)
–
(256)
–
(256)
–
–
196
(1,100)
(256)
21%
14
102
3.7%
4.0%
3.0%
2.1%
–
–
–
26.9
29.4
28.3
30.9
56%
36
97
3.1%
2.7%
1.9%
2.0%
–
–
–
25.6
28.6
27.1
30.3
7%
5
28
3.6%
–
–
–
5.2%
3.8%
2024
26.2
28.2
27.5
29.5
2015
Total
(16,960)
16,080
(880)
(3)
–
(883)
65
480
3.5%
3.8%
2.8%
2.5%
5.2%
3.8%
2024
26.8
29.3
28.1
30.8
167
AkzoNobel Report 2015 | Financial information Sensitivity of DBO to change in assumptions
In € millions
Discount rate: 0.5% decrease
Price inflation: 0.5% increase 1
Life expectancy: one year increase from age 60
Healthcare cost trend rate: 0.5% increase
Maturity information
ICIPF
UK
692
427
492
–
CPS
UK
291
160
127
–
Weighted average duration of DBO (years)
12.6
15.3
14.6
1 The sensitivity to price inflation assumption includes corresponding changes to all inflation-related compensation
increases, pensions in payment and pensions in deferment.
Other
pension plans
Other post-
retirement
benefits
196
113
111
–
13
–
10
4
9.4
Total
1,192
700
740
4
13.4
The sensitivities in the table only apply to the DBO and
not to the net amounts recognized in the balance sheet.
Movements in the fair value of plan assets (which include
the de-risking instruments) would, to a significant extent,
be expected to offset movements in the DBO resulting
from changes in the given assumptions. The annuity buy-in
contracts cover 66 percent of pensioner liabilities at ICIPF
and the longevity hedge contract covers 40 percent of
pensioner liabilities at CPS.
The effect on DBO shown allows for an alternative value
for each assumption while the other actuarial assumptions
remain unchanged. While this table illustrates the overall
impact on DBO of the changes shown, the significance
of the impact and the range of reasonably possible alter-
native assumptions may differ between the different plans
that comprise the total DBO; in particular the plans differ
in benefit design, currency and average term, meaning
that different assumptions have different levels of signifi-
cance for each plan. The sensitivity analysis is intended
to illustrate the inherent uncertainty in the valuation of the
DBO under market conditions at the measurement date.
Its results cannot be extrapolated due to non-linear effects
that changes in the key actuarial assumptions may have
on the total DBO. Furthermore, the analysis does not
indicate a probability of such changes occurring and it
does not necessarily represent our view of expected future
changes in DBO. Any management actions that may be
taken to mitigate the inherent risks in the post-retirement
defined benefit plans are not reflected in this analysis, as
they would normally be reflected in plan asset changes
rather than DBO changes.
168
Financial information | AkzoNobel Report 2015 Key plan details for the two largest pension plans
Type of plan
Benefits
ICI Pension Fund, UK
AkzoNobel (CPS) Pension Scheme, UK
Defined benefit, based upon years of service and final salary
Defined benefit, based upon years of service and final salary
Retirement pension for employee
Dependents’ pensions on death of employee/pensioner
Options for ill health early retirement
Retirement pension for employee
Dependents’ pensions on death of employee/pensioner
Options for ill health early retirement
Pension increases (main benefit section)
Annually linked to UK RPI with a maximum of 5 percent
Annually linked to UK CPI with a maximum of 5 percent
Plan structure
Governance
Regulatory framework
Funding basis
Plans are set up under a trust and are tax approved
Plans are set up under a trust and are tax approved
Trustee directors:
Five members nominated
One independent (Law Debenture)
Five appointed with the agreement of Law Debenture
Trustee directors:
Four members nominated
Four companies nominated
One independent (Law Debenture)
The plans are tax approved and assets are held in trust for the benefit of participants. The trustees have a legal duty to manage the trust in
the best interests of participants. Investment strategy is controlled by the trustees in consultation with the company
A plan specific basis must be agreed with each trustee board in accordance with UK regulations. The basis is not the same as the IFRS
calculation as it uses more prudent assumptions about life expectancy and the discount rates reflect prudent estimates of the expected
return on assets actually held, thus the trustees’ investment strategies will impact the discounted value of liabilities
Frequency of funding reviews
Latest valuation
Every three years
March 31, 2014
Every three years
March 31, 2012
Funding deficit1 at latest valuation
£850 million (€1,154 million)
£220 million (€299 million) allowing for the escrow account
Recovery plan
£150 million (€204 million) per annum in 2016 and 2017 and £125
million (€170 million) per annum in 2018 to 2021, paid in January
each year
£42 million (€57 million) per annum to 2018, plus a minimum of £25
million (€34 million) per annum to 2017 from the escrow account paid
in March each year
Next funding review
March 31, 2017 with recovery plan to be agreed by June 30, 2018
March 31, 2015 with recovery plan to be agreed by June 30, 2016
Estimated funding deficit1 at March 31, 2015
Estimated solvency deficit1 at March 31, 2015
£0.75 billion (€1.0 billion)
£1.8 billion (€2.4 billion)
Funding position to be agreed with Trustees by June 30, 2016
Asset allocation at March 31, 2015
Matching:
Return seeking:
85%
15%
Buy-in annuity contracts cover 66% of pensioner liabilities
58%
42%
Longevity hedge contract covers 40% of pensioner liabilities
Escrow account
Not applicable
Membership at March 31, 2015
Active
Deferred
Pensioner
Total
1 Based on local valuation regulations.
347
9,327
46,196
55,870
Pre-funded account established in 2007 to fund existing deficit. It
pays a minimum of £25 million (€34 million) per annum to CPS until
it is exhausted (no later than 2017). Value at year-end 2015 is £68
million (€93 million)
569
9,162
19,382
29,113
169
AkzoNobel Report 2015 | Financial information 15
Note 15: Other provisions
16
Note 16: Net debt
Movements in other provisions
In € millions
Balance at January 1, 2015
Additions made during the year
Utilization
Amounts reversed during the year
Unwind of discount
Changes in exchange rates
Balance at year-end 2015
Non-current portion of provisions
Current portion of provisions
Balance at year-end 2015
Restructuring
of activities Environmental costs
Sundry
259
88
(171)
(40)
2
4
142
24
118
142
326
13
(34)
(18)
6
12
305
266
39
305
462
127
(129)
(23)
7
14
458
290
168
458
Total
1,047
228
(334)
(81)
15
30
905
580
325
905
Provisions for restructuring of activities
Provisions for restructuring of activities comprise of
accruals for certain employee benefits and for costs
which are directly associated with plans to exit or cease
specific activities and closing down of facilities. For all
restructuring provisions a detailed formal plan exists and
the imple men tation of the plan has started or the plan has
been announced before the balance sheet date. Most
restructuring plans are expected to be completed within
one year from the balance sheet date.
Provisions for environmental costs
For details on environmental exposures, see Note 19.
Sundry provisions
Sundry provisions relate to a great variety of risks and
commitments, including provisions for claims, antitrust
cases and other long-term employee benefits, such as
long-service leave and jubilee payments.
The majority of the cash outflows related to sundry
provisions are expected to be within one to five years. In
calculating the sundry provisions, a pre-tax discount rate
of on average 2.8 percent has been used.
Current portion of provisions
Current portion of post-retirement benefit provisions
(€126 million) and other provisions (€325 million) adds up
to €451 million (2014: €494 million), as reflected in the
balance sheet.
Net debt at year-end 2015 of €1,226 million was below
2014 (€1,606 million).
Analysis of net debt by category
In € millions
Bonds issued
Other borrowings
Long-term borrowings
Current portion of
long-term borrowings
Debt to credit institutions
Other
Short-term borrowings
Total borrowings
Cash and cash equivalents
Net debt
2014
2,351
176
2,527
662
83
66
811
3,338
(1,732)
1,606
2015
2,034
127
2,161
378
48
4
430
2,591
(1,365)
1,226
AkzoNobel’s net debt is mainly denominated in euro.
The part of long-term borrowings that is due within one
year is presented under short-term borrowings. For details
on the exposure to interest rate and foreign currency risk,
see Note 22.
Bonds issued
In € millions
8% 2009/16 (£250 million)
4% 2011/18 (€800 million)
2 5/8% 2012/22 (€750 million)
1 3/4% 2014/24 (€500 million)
2014
320
794
741
496
2015
–
796
742
496
Total
2,351
2,034
The average effective interest rate of the bonds
outstanding at year-end 2015 was 2.9 percent
(year-end 2014: 3.6 percent).
170
Financial information | AkzoNobel Report 2015 Aggregated maturities of long-term borrowings
Cash and cash equivalents
In € millions
Bonds issued
Other borrowings
Total
2017 – 2019
After 2020
In € millions
796
67
863
1,238
60
1,298
Long-term borrowings
We have a €1.8 billion multi-currency revolving credit
facility, which was amended and extended in 2015 by two
additional years to 2020. This facility does not contain
financial covenants or acceleration provisions that are
based on adverse changes in ratings or on material
adverse change. At year-end 2015 and 2014, this facility
had not been drawn. At year-end 2015 and 2014, none of
the borrowings was secured by collateral.
Financial lease liabilities are included in Other borrowings
and aggregated €46 million (2014: €49 million). An amount
of €5 million (2014: €6 million) will mature within one year,
€18 million will mature in the period 2017 through 2020
and €23 million after 2020.
Short-term borrowings
In March 2015, a bond of €621 million matured. In April
2016, a bond totaling £250 million will mature; at year-end
2015 this bond was classified as a short-term borrowing.
We have US dollar and euro commercial paper programs
in place, which can be used to the extent that the
equivalent portion of the €1.8 billion multi-currency
revolving credit facility is not used. We had no commercial
paper outstanding at year-end 2015 and 2014.
Cash on hand and in banks
Short-term investments
Included under cash and cash
equivalents in the balance sheet
Debt to credit institutions
Total per cash flow statement
Net debt
In € millions
Net debt at January 1, 2014
Net cash from operating activities
Net cash from investing activities
Proceeds from borrowings
Borrowings repaid
Transfers from long-term to short-term
Issue of shares for stock option plan
Dividends
Changes in exchange rates
Other changes
Net debt at year-end 2014
Net cash from operating activities
Net cash from investing activities
Proceeds from borrowings
Borrowings repaid
Transfers from long-term to short-term
Dividends
Buy-out of non-controlling interests
Changes in exchange rates
Other changes
Net debt at year-end 2015
2014
848
884
2015
771
594
1,732
1,365
(83)
1,649
(48)
1,317
Cash and cash equivalents
Short-term investments almost entirely consist of cash
loans, time deposits, marketable private borrowings and
marketable securities immediately convertible into cash.
For more information on credit risk management,
see Note 22.
At December 31, 2015, an amount of €68 million in cash
and cash equivalents was restricted (2014: €95 million).
Restricted cash is defined as cash that cannot be
accessed centrally due to regulatory or contractual
restrictions.
Long-term
Short-term
2,666
961
–
–
512
–
(663)
–
–
23
(11)
2,527
–
–
–
–
(386)
–
–
6
14
2,161
–
–
474
(1,347)
663
(12)
–
–
72
811
–
–
829
(1,518)
386
–
–
(2)
(76)
430
Cash
(2,098)
(811)
529
(986)
1,347
–
–
280
(70)
77
(1,732)
(1,136)
508
(829)
1,518
–
281
2
(18)
41
Net debt
1,529
(811)
529
–
–
–
(12)
280
(47)
138
1,606
(1,136)
508
–
–
–
281
2
(14)
(21)
(1,365)
1,226
171
AkzoNobel Report 2015 | Financial information 17
Note 17: Trade and other payables
18
Note 18: Cash flow
Trade and other payables
In € millions
Suppliers
Amounts payable to employees
FX and commodity contracts
Taxes and social security contributions
Customer-related payables
Dividends
Payable to associates and
joint ventures
Other liabilities
Total
2014
2,149
367
45
231
224
14
13
364
3,407
2015
2,137
400
65
252
250
34
3
332
3,473
Operating activities in 2015 resulted in cash inflows of
€1,136 million (2014: €811 million). Profit from continu-
ing operations was higher in 2015 as a result of process
optimization, lower costs, reduced restructuring expenses,
favorable currencies and incidental items. Net cash from
operating activities benefited from increased profit from
continuing operations.
Changes in working capital per cash flow statement
In € millions
Trade and other receivables
Inventories
Trade and other payables
Total
2014
(113)
(59)
200
28
Changes in provisions per cash flow statement
In € millions
Post-retirement provisions
Restructuring provisions
Environmental and sundry provisions
Total
2014
(348)
16
(74)
(406)
2015
(29)
56
19
46
2015
(474)
(132)
(52)
(658)
In 2014, €92 million of the change in sundry provisions
concerned discontinued operations.
172
Financial information | AkzoNobel Report 2015 19
Note 19: Contingent liabilities and commitments
Environmental matters
We are confronted with substantial costs arising out of
environmental laws and regulations, which include obliga-
tions to eliminate or limit the effects on the environment of
the disposal or release of certain wastes or substances at
various sites. Proceedings involving environmental matters,
such as the alleged discharge of chemicals or waste
materials into the air, water, or soil, are pending against
us in various countries. In some cases, this concerns
sites divested in prior years or derelict sites belonging to
companies acquired in the past.
the Hydrogen Peroxide infringement in the 1990s. This
claim is disputed. In 2015, the European Court of
Justice ruled that the Dortmund court has jurisdiction over
the dispute.
An appeal by the company is pending with the European
Court of Justice against the ruling of the General Court on
the decision by the European Commission to impose fines
on certain subsidiaries of the company for violations of EU
competition laws regarding Heat Stabilizers in the 1980s
and 1990s.
not materially affect our consolidated financial position but
could be material to our results of operations or cash flows
in any one accounting period.
Commitments
Purchase commitments for property, plant and
equipment aggregated €31 million (2014: €44 million).
Lease payments during 2015 amounted to €193 million
(2014: €112 million).
Maturity operational lease contracts
In € millions
Payments due within one year
Payments between one and five years
Payments due after more than five years
Total
2014
103
205
103
411
2015
152
335
150
637
Guarantees related to associates and joint ventures at
year-end 2015 totaled €5 million (2014: €9 million).
It is our policy to accrue and charge against earnings envi-
ronmental clean-up costs when it is probable that a liability
has materialized and an amount is reliably estimable.
These accruals are reviewed periodically and adjusted, if
necessary, as assessments and clean-ups proceed and
additional information becomes available. Environmental
liabilities can change substantially due to the emergence
of additional information on the nature or extent of the
contamination, the geological circumstances, the necessity
of employing particular methods of remediation, actions by
governmental agencies or private parties, or other factors.
Cash expenditures often lag behind the period in which an
accrual is recorded by a number of years.
The provisions for environmental costs amounted to
€305 million at year-end 2015 (2014: €326 million).
The provision has been discounted using an average
pre-tax discount rate of 3.3 percent (2014: 3.3 percent).
While it is not feasible to predict the outcome of all
pending environmental exposures, it is reasonably possible
that there will be a need for future provisions for environ-
mental costs which, in management’s opinion, based on
information currently available, would not have a material
effect on the company’s financial position but could be
material to the company’s results of operations in any one
accounting period.
Claims and litigations
AkzoNobel is – together with others – involved in civil
proceedings initiated by Cartel Damages Claims HP SA/
NV before the Dortmund Court in Germany in relation to
AkzoNobel has provided various indemnities and guar-
antees in respect of past divestments to the relevant
purchasers and their permitted assigns (if applicable),
which in general are capped in time and/or amount (in
proportion to the value received). The provided guarantees
and indemnities have varying maturity periods. Akzo Nobel
has received various claims under such indemnities and
guarantees. In some instances, AkzoNobel has been
named as a direct defendant despite the divestments.
A number of other claims are pending, all of which are
contested. We are also involved in disputes with tax
authorities in several jurisdictions.
Provisions are recognized when an outflow of economic
benefits for settlement is probable and the amount can
be reliably estimated. It should be understood that, in light
of possible future developments, such as: (a) potential
additional lawsuits; (b) possible future settlements; and (c)
rulings or judgments in pending lawsuits, certain cases
may result in additional liabilities and related costs. At this
point in time, we cannot estimate any additional amount
of loss or range of loss in excess of the recorded amounts
with sufficient certainty to allow such amount or range of
amounts to be meaningful. Moreover, if and to the extent
that the contingent liabilities materialize, they are typi-
cally paid over a number of years and the timing of such
payments cannot be predicted with confidence. While
the outcome of said cases, claims and disputes cannot
be predicted with certainty, we believe, based upon legal
advice and information received, that the final outcome will
173
AkzoNobel Report 2015 | Financial information 20
Note 20: Related party transactions
21
Note 21: Remuneration of the Supervisory Board
and the Board of Management
We purchased and sold goods and services to various
related parties in which we hold a 50 percent or less equity
interest (associates and joint ventures). Such transactions
were conducted at arm’s length with terms comparable
with transactions with third parties.
During 2015, we considered the members of the Executive
Committee and the Supervisory Board to be the key
management personnel as defined in IAS 24 “Related
parties”. For details on their remuneration, as well as on
shares and options held by members of the Supervisory
Board or Board of Management, see Note 21. In the
ordinary course of business, we have transactions with
various organizations with which certain of the members
of the Supervisory Board or Executive Committee are
associated, but no related party transactions were effected
in 2015. Likewise, there have not been any transactions
with members of the Supervisory Board or Executive
Committee, any other senior management personnel or
any family member of such persons. Also no loans have
been extended to members of the Supervisory Board
or Executive Committee, any other senior management
personnel or any family member of such persons. For
related party transactions with pension funds, see Notes
10 and 14. For receivables from and payables to related
parties, see Notes 12 and 17.
Total compensation to key management personnel
amounted to €13.3 million (2014: €10.8 million). An
amount of €7.6 million relates to short-term employee
benefits (2014: €7.1 million); €1.1 million to post-
contract benefits and other post-contract compensation
(2014: €1.0 million); and €4.6 million to share-based
compensation (2014: €2.7 million). The members of
the Executive Committee that are not a member of the
Board of Management are included in key management
personnel.
tion. Members living outside the Netherlands receive an
attendance fee dependent on the country of residence.
Members who are resident in the Netherlands do not
receive an attendance fee except for meetings held
outside the Netherlands.
In accordance with the Articles of Association and good
corporate governance practice, the remuneration of
Supervisory Board members is not dependent on the
results of the company.
Supervisory Board
Members of the Supervisory Board receive a fixed remu-
neration: €130,000 for the Chairman, €78,000 for the
Deputy Chairman and €65,000 for the other members.
Members of committees receive an extra compensa-
We do not grant share-based compensation to our Super-
visory Board members, neither do we provide loans. Travel
expenses and facilities for members of the Supervisory
Board are borne by the company and reviewed by the
Audit Committee. The shares in the company owned by
Supervisory Board members serve as a long-term invest-
ment in the company.
Supervisory Board
In €
Antony Burgmans, Chairman
Sari Baldauf
Peggy Bruzelius
Uwe-Ernst Bufe 1
Byron Grote
Louis Hughes
Dick Sluimers 2
Ben Verwaayen
Total
1 Until April 22, 2015.
2 As of May 1, 2015.
Total remu-
neration Remuneration Attendance fee
Committee
allowance fees
Employer’s
charges
Total remu-
neration
2014
124,200
91,700
116,500
87,000
66,700
112,200
–
89,700
688,000
130,000
65,000
65,000
26,000
65,000
65,000
43,300
65,000
524,300
2,500
12,500
15,000
5,000
15,000
30,000
2,500
15,000
97,500
20,000
20,000
20,000
–
23,300
21,700
13,300
15,000
133,300
–
–
10,300
–
–
3,600
–
3,600
17,500
2015
152,500
97,500
110,300
31,000
103,300
120,300
59,100
98,600
772,600
174
Financial information | AkzoNobel Report 2015 Shares held by the members of the Supervisory
Board
Board of Management
Number of shares at year-end
Antony Burgmans
Sari Baldauf
Peggy Bruzelius
Byron Grote 1
Louis Hughes
Ben Verwaayen
Dick Sluimers
1 In the form of ADRs.
2014
500
–
500
392
548
–
–
2015
551
–
500
1,333
548
–
–
The individual contracts of the members of the Board of
Management are determined by the Supervisory Board
within the framework of the remuneration policy adopted
by the Annual General Meeting of shareholders. We do not
provide loans to members of the Board of Management.
For more detailed information on the decisions of the
Supervisory Board with respect to the individual contracts
of the members of the Board of Management, see the
Remuneration report.
Short-term incentive
The short-term incentives for 2015 are linked to ROI
(20 percent), OPI (20 percent), OCF (30 percent) and the
individual and qualitative targets of the members of the
Board of Management (30 percent). For more information,
see the Remuneration report.
Board remuneration 2014
In €
Ton Büchner
Maëlys Castella 1
Keith Nichols 2
Total
1 As from September 15, 2014.
2 Until June 30, 2014.
Salary
834,000
176,800
308,000
783,000
106,100
308,000
1,318,800
1,197,100
Short-term
incentives
Other short-term
benefits
Post-contract
compensation
Share-based
compensation
Total
remuneration
8,500
5,400
315,500
329,400
325,000
28,800
147,900
501,700
1,233,100
3,183,600
–
(766,000)
467,100
317,100
313,400
3,814,100
Board remuneration 2015
In €
Ton Büchner
Maëlys Castella
Total
Salary
859,000
585,000
915,800
405,400
1,444,000
1,321,200
1 This concerns the short-term incentive amounts over 2015, to be paid in 2016.
Short-term
incentives 1
Other short-term
benefits
Post-contract
compensation
Share-based
compensation
Total
remuneration
8,200
8,200
16,400
356,700
87,800
444,500
1,303,600
236,300
1,539,900
3,443,300
1,322,700
4,766,000
Other short-term benefits
Other short-term benefits include employer’s charges and
other compensations. Employer’s charges refer to social
contributions and healthcare contributions.
Post-contract compensation
This refers to compensation intended for building up
retirement benefits instead of pension contributions. The
compensation is based on age and is calculated over the
2015 remuneration. For the CEO, the contributions are
paid over the base salary in the current year and the short-
term incentive related to that year. For the CFO, these
contributions are paid on base salary only.
Share-based compensation
The costs for share-based compensation are non-cash
and relate to the performance-related share plan and
the share-matching plan following IFRS 2. The fair value
of the performance-related share plan at grant date is
amortized as a charge against income over the three-year
vesting period. The fair value amounted to €45.47 per
performance-related share conditionally granted in 2015
for those members of the Board of Management facing a
two-year holding restriction (2014: €46.91), and €54.11 for
those members whose holding restriction will lapse after
the end of their term (2014: €57.37). The fair value for the
shares related to the share-matching plan amounted to
€67.81 (2014: €49.96).
Performance-related shares
With regard to the performance-related shares granted to
the members of the Board of Management in 2013, the
final vesting percentage of the series 2013-2015 equaled
90.29 percent (series 2012-2014: 75.00 percent), includ-
ing dividend shares 97.48 percent (series 2012-2014:
82.22 percent). The members of the Board of Manage-
ment will retain the shares for a minimum period of two
years after vesting or (if shorter) for the duration of their
tenure as member of the Board of Management.
175
AkzoNobel Report 2015 | Financial information Share-matching plan
The CEO is required to build up, over a five-year period
from the date of appointment, and then hold, at least three
times his gross base salary in AkzoNobel shares for the
duration of his tenure as member of the Board of Manage-
ment. For other Board of Management members, the
requirement is at least one time their gross base
salary. Under certain conditions, members who invest
part of their short-term incentives in AkzoNobel shares
may have such shares matched by the company. See the
Remuneration report.
Former members of the Board of
Management
In 2015, charges for former members of the Board of
Management amounted to €0.6 million (2014: €2.5 million)
mainly due to accrued taxation on excessive pay
(“Belas tingheffing excessieve beloningsbestanddelen”).
Number of performance-related shares
Ton Büchner
Balance at
January 1,
2015
26,228
25,568
22,892
Granted
in 2015
–
–
–
–
22,500
Series
2012 – 2014
2013 – 2015
2014 – 2016
2015 – 2017
Maëlys Castella
2015 – 2017
15,300
Vested
in 2015
(26,228)
–
–
–
–
Forfeited
in 2015
Dividend
in 2015
Balance at
December
31, 2015
Vested on
January 1,
2016
–
(2,536)
–
–
–
–
558
498
493
–
23,590
23,390
22,993
335
15,635
–
23,590
–
–
–
Number of potential matching shares
Ton Büchner
Maëlys Castella
Year of share
investment
2012
2013
2014
2015
2015
Potential
match
11,582
1,429
2,450
2,252
305
Shares held by the Board of Management
Number of shares at year-end
Ton Büchner
Maëlys Castella
2014
2015
21,901
44,683
–
610
Matched
in 2015
Forfeited
in 2015
Balance at
year-end 2015
–
–
–
–
–
–
–
–
–
–
11,582
1,429
2,450
2,252
305
176
Financial information | AkzoNobel Report 2015 22
Note 22: Financial risk management
Financial risk management
framework
Our activities expose us to a variety of financial risks:
market risk (including: currency risk, fair value interest rate
risk and price risk), credit risk and liquidity risk. These risks
are inherent to the way we operate as a multinational with
a large number of locally operating subsidiaries. Our overall
risk management program seeks to identify, assess, and
– if necessary – mitigate these financial risks in order to
minimize potential adverse effects on our financial perfor-
mance. Our risk mitigating activities include the use of
derivative financial instruments to hedge certain risk expo-
sures. The Board of Management is ultimately responsible
for risk management. We centrally identify, evaluate and
hedge financial risks, and monitor compliance with the
corporate policies approved by the Board of Manage-
ment, except for commodity risks, which are subject to
identification, evaluation and hedging in the businesses.
We have treasury hubs located in Brazil, China, Singapore
and the US that are primarily responsible for regional cash
management and short-term financing. We do not allow
for extensive treasury operations at subsidiary level directly
with external parties.
Liquidity risk management
The primary objective of liquidity management is to provide
for sufficient cash and cash equivalents at all times and
any place in the world to enable us to meet our payment
obligations. We aim for a well-spread maturity schedule of
our long-term borrowings and a strong liquidity position.
At year-end 2015, we had €1.4 billion available as cash
and cash equivalents (2014: €1.7 billion), see Note 16.
In addition, we have a €1.8 billion multi-currency revolv-
ing credit facility, which was amended and extended in
2015 by two additional years to 2020. This facility does
not contain financial covenants or acceleration provi-
sions that are based on adverse changes in ratings or on
material adverse change. At year-end 2015 and 2014, this
facility had not been drawn. We have US dollar and euro
commercial paper programs in place, which can be used
Maturity of liabilities and cash outflows
Credit risk management
Trade and other payables
3,362
In € millions
At December 31, 2014
Borrowings
Interest on borrowings
Finance lease liabilities
Fx contracts (hedges)
Outflow
Inflow
Other derivatives
Outflow
Inflow
Total
At December 31, 2015
Borrowings
Interest on borrowings
Finance lease liabilities
Fx contracts (hedges)
Outflow
Inflow
Other derivatives
Outflow
Inflow
Total
Less than
1 year
Between
1 and 5 years
Over 5
years
805
103
6
2,196
(2,188)
14
–
2,630
(2,641)
1,210
1,275
228
17
–
–
–
10
(4)
93
25
–
–
–
–
–
4,298
1,461
1,393
425
71
5
845
186
18
1,275
65
23
–
–
–
–
–
–
–
–
28
(2)
27
–
3,924
1,076
1,363
Trade and other payables
3,408
to the extent that the equivalent portion of the €1.8 billion
multi-currency revolving credit facility is not used. We
had no commercial paper outstanding at year-end 2015
and 2014. The table above shows our cash outflows per
maturity group. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Credit risk arises from financial assets such as cash and
cash equivalents, derivative financial instruments with a
positive fair value, deposits with financial institutions, and
trade receivables. We have a credit risk management
policy in place to limit credit losses due to non-perfor-
mance of financial counterparties and customers. We
monitor our exposure to credit risk on an ongoing basis at
various levels. We only deal with financial counterparties
that have a sufficiently high credit rating.
Generally, we do not require collateral in respect of
financial assets. Investments in cash and cash equivalents
and transactions involving derivative financial instruments
are entered into with counterparties that have sound
credit ratings and good reputation. Derivative transactions
are concluded mostly with parties with whom we have
contractual netting agreements and ISDA agreements in
place. We set limits per counterparty for the different types
of financial instruments we use. We closely monitor the
acceptable financial counterparty credit ratings and credit
limits and revise where required in line with the market
circumstances. We do not expect non-performance by
the counterparties for these financial instruments. Due to
our geographical spread and the diversity of our custom-
ers, we were not subject to any significant concentration
of credit risks at balance sheet date. The credit risk from
trade receivables is measured and analyzed at a local
operating entity level, mainly by means of ageing analysis,
see Note 12. Generally, the maximum exposure to credit
risk is represented by the carrying value of financial assets
in the balance sheet.
At year-end 2015, the credit risk on consolidated level was
€4.3 billion (2014: €4.7 billion) for cash, loans, trade and
other receivables. Our credit risk is well spread among
both global and local counterparties. Our largest coun-
terparty risk amounted to €249 million at year-end 2015
(2014: €194 million).
177
AkzoNobel Report 2015 | Financial information Foreign exchange risk
management
Trade and financing transactions
We operate in a large number of countries, where we have
clients and suppliers, many of whom are outside of the
local functional currency environment. This creates curren-
cy exposure which is partly netted out on consolidation.
The purpose of our foreign currency hedging activities is
to protect us from the risk that the functional currency net
cash flows resulting from trade or financing transactions
are adversely affected by changes in exchange rates. Our
policy is to hedge our transactional foreign exchange rate
exposures above predefined thresholds from recognized
assets and liabilities. Cash flow hedge accounting is
applied by exception. Derivative transactions with external
parties are bound by overnight limits per currency.
In general, forward exchange contracts that we enter into
have a maturity of less than one year. When necessary,
forward exchange contracts are rolled over at maturity.
Currency derivatives are not used for speculative purposes.
Hedged notional amounts at year-end
In € millions
US dollar
Pound sterling
Swedish krona
Chinese yuan
Other
Total
Buy
2014
289
212
350
67
355
Sell
2014
649
103
45
90
385
Buy
2015
211
554
304
19
562
Sell
2015
324
66
53
171
705
1,273
1,272
1,650
1,319
Investments in foreign subsidiaries, associates
and joint ventures
Net investment hedge accounting was applied on hedges
of pound sterling net investments in foreign operations
which were hedged by a £250 million bond. During 2015
this hedge relationship was de-designated; until de-desig-
nation the hedge was fully effective. During 2015 net
178
investment hedge accounting was applied to hedges of
Chinese yuan net investments in foreign operations. During
2015 this hedge was fully effective. No net investment
hedging is applied on pound sterling hedges and Chinese
yuan hedges at year-end 2015.
Price risk management
Commodity price risk management
We use commodities, gas and electricity in our production
processes and we are particularly sensitive to energy price
movements. Our Chlor-Alkali activity in the Netherlands
mitigates price risks related to electricity by concluding
electricity futures to gradually cover the expected use over
future periods. We apply cash flow hedge accounting to
these futures. The fair value of the contracts outstanding
at year-end 2015 amounted to a loss of €20 million, net of
tax, recorded in equity (year-end 2014: a loss of €8 million,
net of tax), which are expected to affect profit within the
next three years. All contracts qualified as effective for
hedge accounting. In order to hedge the oil price risk,
we have entered into oil/gas swap contracts. At the end
of 2015, the contracts outstanding have a fair value of
€2 million gain, net of tax on those contracts. The fair value
of the contracts at the year-end 2014 was a €3 million
gain, net of tax. We did not apply hedge accounting to the
changes of the fair values of these contracts.
To hedge the price risk of electricity that is used for the
Specialty Chemicals plants in Sweden and Finland, we
entered into future contracts on the power exchange
Nasdaq commodities, based on expected use of electricity
over the period 2016–2020. We apply cash flow hedge
accounting to these contracts in order to mitigate the
accounting mismatch that would otherwise occur. The
effective part of the fair value of these contracts amounted
to a €22 million loss net of tax, recorded in equity
(year-end 2014: a loss of €11 million, net of tax), which
are expected to affect profit within the next five years.
All hedges were effective in 2015 and 2014.
Interest rate risk management
We are partly financed with debt in order to obtain more
efficient leverage. Fixed rate debt results in fair value inter-
est rate risk. Floating rate debt results in cash flow interest
rate risk. Fixed rate debt maturing within one year is
treated as floating rate debt. The fixed/floating rate of our
outstanding bonds shifted from 79 percent fixed at year-
end 2014 to 86 percent fixed at year-end 2015. During
2015, we have not used any interest rate derivatives.
Capital risk management
Our objectives when managing capital are to safeguard
our ability to satisfy our capital providers and to maintain a
capital structure that optimizes our cost of capital. For this
we maintain a conservative financial strategy, with the objec-
tive to remain a strong investment grade company as rated
by the rating agencies Moody’s and Standard & Poor’s. The
capital structure can be altered, among others, by adjusting
the amount of dividends paid to shareholders, return capital
to capital providers, or issue new debt or shares. In March
2015, a bond of €621 million matured.
Consistent with other companies in the industry, we monitor
capital headroom on the basis of funds from operations in
relation to our net borrowings level (FFO/NB-ratio). The FFO/
NB-ratio for 2015 at year-end amounted to 0.58 (2014:
0.45). Funds from operations are based on net cash from
operating activities after tax, which is adjusted, among
others, for the elimination of changes in working capital,
additional payments for pensions and for the effects of the
underfunding of post-retirement benefit obligations. Net
borrowings is calculated as a total of long and short-term
borrowings less cash and cash equivalents, adding an after-
tax amount for the underfunding of post-retirement benefit
obligations and lease commitments.
Financial information | AkzoNobel Report 2015 Fair value of financial instruments
and IAS 39 categories
Loans, receivables and other liabilities are recognized
at amortized cost, using the effective interest method.
We estimated the fair value of our long-term borrowings
based on the quoted market prices for the same or similar
issues or on the current rates offered to us for debt with
similar maturities.
The carrying amounts of cash and cash equivalents,
trade receivables less allowance for impairment,
short-term borrowings and other current liabilities
approximate fair value due to the short maturity period
of those instruments.
The only financial instruments accounted for at fair value
through profit or loss are derivative financial instruments
and the short-term investments included in cash. The fair
value of foreign currency contracts, swap contracts, oil
contracts and gas and electricity futures was determined
by valuation techniques using market observable input
(such as foreign currency interest rates based on Reuters)
and by obtaining quotes from dealers and brokers.
The following valuation methods for financial instruments
carried at fair value through profit or loss are distinguished:
• Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities
• Level 2: inputs other than quoted prices included
within level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices)
• Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable)
Level 1 fair valuation methods were used for bonds issued
(€2.5 billion), of which €2.2 billion of the long-term borrow-
ings and €0.3 billion of the short-term borrowings. All other
fair values were determined using level 2 fair valuation
methods, except for €110 million level 3 (discounted cash
flow) fair valuation.
Fair value per financial instruments category
In € millions
2014 year-end
Other financial non-current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Long-term borrowings
Short-term borrowings
Trade and other payables
Total financial liabilities
2015 year-end
Other financial non-current assets
Trade and other receivables
Cash and cash equivalents
Total financial assets
Long-term borrowings
Short-term borrowings
Trade and other payables
Total financial liabilities
Carrying
amount
Out of scope
of IFRS 7
Carrying value per IAS 39
category
Loans and
receivables/
other liabilities
At fair value
through profit
or loss
Total
carrying value Fair value
797
2,743
1,732
5,272
2,527
811
3,407
6,745
903
2,741
1,365
5,009
2,161
430
3,473
6,064
529
227
–
756
–
–
1,215
1,215
666
217
–
883
–
–
1,271
1,271
268
2,499
–
2,767
2,527
811
2,149
5,487
237
2,500
–
2,737
2,161
430
2,137
4,728
–
16
1,732
1,748
–
–
45
45
–
24
1,365
1,389
–
–
65
65
268
2,515
1,732
4,515
2,527
811
2,194
5,532
237
2,524
1,365
4,126
2,161
430
2,202
4,793
289
2,515
1,732
4,536
2,775
819
2,191
5,785
255
2,524
1,365
4,144
2,336
436
2,202
4,974
We have evaluated the potential effect of netting
agreements including the potential effect of rights of
set-off. We did not offset any amounts regarding derivative
transactions, but we did offset bank balances for
immaterial amounts.
Master netting agreements
We enter into derivative transactions under International
Swaps and Derivatives Association (ISDA) master netting
agreements. In general, under such agreements the
amounts owed by each counterparty on a single day in
respect of transactions outstanding in the same currency
may be aggregated into a single net amount that is
payable by one party to the other. In certain circumstances
– e.g. when a credit event such as a default occurs –
all outstanding transactions under the agreement may be
terminated, the termination value is assessed and a net
amount is payable in settlement of the transactions.
179
AkzoNobel Report 2015 | Financial information Sensitivities on financial instruments at year-end 2015
Sensitivity object
Sensitivity
Hypothetical impact
Foreign currencies:
We perform foreign currency sensitivity analysis
by applying an adjustment to the spot rates
prevailing at year-end. This adjustment is based
on observed changes in the exchange rate in the
past and management expectation for possible
future movements. We then apply the expected
possible volatility to revalue all monetary assets
and liabilities (including derivative financial instru-
ments) in a currency other than the functional
currency of the subsidiary in its balance sheet at
year-end.
Commodity prices:
We perform our commodity price risk sensitiv-
ity analysis by applying an adjustment to the
forward rates prevailing at year-end. This
adjustment is based on observed changes
in commodity prices in the previous year and
management expectations for possible future
movements. We then apply the expected volatil-
ity to revalue all commodity-derivative financial
instruments in the applicable commodity in our
balance sheet at year-end. For the purpose of
this sensitivity analysis, the change of the price
of the commodity is not discounted to the net
present value at balance sheet date.
A 10 percent strengthening of the euro versus
US dollar
Profit: €2 million (2014: profit €7 million). Equity: €nil
(2014: €nil)
A 10 percent strengthening of the euro versus
the Pound sterling
Profit: €2 million (2014: profit €3 million). Equity: €nil
(2014: €nil)
A 10 percent strengthening of the euro versus
Swedish krona
Profit: €nil million (2014: profit €2 million). Equity: €nil
(2014: €nil)
Electricity price Specialty Chemicals
Netherlands:
A 10 percent change in the forward price of
electricity (€3 per MWh) as compared with the
market prices (up/down)
Electricity price Specialty Chemicals
Sweden and Finland:
A 10 percent change in the forward price on
the Nord Pool exchange electricity (€2 per
MWh) as compared with market prices (up/
down)
Oil price Specialty Chemicals
Netherlands and Denmark:
A 10 percent change in price of oil (€3 per
barrel) as compared with market prices (up/
down)
Equity: €11 million (2014: €16 million)
We apply cash flow hedge accounting to the fair
value changes of electricity futures
Equity: €6 million (2014: €7 million)
We apply cash flow hedge accounting to the fair
value changes of electricity futures
Profit/(loss): €1 million (2014: €3 million)
Over the full term of the (partially long-term)
contracts, net impact on profit will be €nil
Interest rates:
We perform interest rate sensitivity analysis by
applying an adjustment to the interest rate curve
prevailing at year-end. This adjustment is based
on observed changes in the interest rate in the
past and management expectation for possible
future movements. We then apply the expected
possible volatility to revalue all interest bearing
assets and liabilities.
A 100 basis points increase of EURIBOR
interest rates
Profit: €4 million (2014 profit: €nil million)
A 100 basis points increase of US LIBOR
interest rates
Profit: €1 million (2014 loss: €2 million)
A 100 basis points increase of GBP LIBOR
interest rates
Loss: €2 million (2014 profit: €1 million)
180
Financial information | AkzoNobel Report 2015
Company financial statements
A
Note A: General information
Statement of income
In € millions
Net income from subsidiaries, associates and joint ventures
Other net income
Total net income
Balance sheet as of December 31, before allocation of profit
2014
546
–
546
2014
2015
1,018
(39)
979
2015
In € millions
Assets
Non-current assets
Financial non-current assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Subscribed share capital
Additional paid-in capital
Cash flow hedge reserve
Other statutory reserves
Cumulative translation reserves
Actuarial gains & losses
Other reserves
Undistributed results
Shareholders’ equity
Non-current liabilities
Provision for subsidiaries
Long-term borrowings
Total non-current liabilities
Current liabilities
Short-term borrowings
Other current liabilities
Total current liabilities
Total equity and liabilities
Note
B
C
E
D
B
E
E
F
13,037
11,310
13,037
11,310
103
724
492
463
(19)
335
(43)
(2,050)
6,147
465
147
6,969
716
242
827
13,864
484
11,794
111
373
498
598
(42)
313
81
(2,243)
6,387
892
5,790
6,484
–
4,751
7,116
4,751
373
186
958
13,864
559
11,794
The financial statements of Akzo Nobel N.V. have been
prepared using the option of section 362 of Book 2 of
the Netherlands Civil Code, meaning that the account-
ing principles used are the same as for the Consolidated
financial statements. Foreign currency amounts have
been translated, assets and liabilities have been valued,
and net income has been determined in accordance with
the principles of valuation and determination of income
presented in Note 1 to the Consolidated financial state-
ments. Subsidiaries of Akzo Nobel N.V. are accounted for
using the equity method.
As the financial data of Akzo Nobel N.V. are included in
the Consolidated financial statements, the statement of
income of Akzo Nobel N.V. is condensed in conformity
with section 402 of Book 2 of the Netherlands Civil Code.
The remuneration paragraph is included in Note 21 of the
Consolidated financial statements.
181
AkzoNobel Report 2015 | Financial information Cumulative
translation
reserves
Actuarial gains
& losses
Other
reserves
Undistributed
results
Shareholders'
equity
(417)
374
–
–
374
–
–
–
–
(1,495)
–
(555)
–
(555)
–
–
–
–
(43)
(2,050)
124
–
–
–
124
–
–
–
–
–
–
–
(193)
–
(193)
–
–
–
–
–
81
(2,243)
5,802
644
–
–
–
–
–
34
–
311
6,147
–
–
–
–
–
–
32
–
(3)
211
6,387
–
–
546
546
(354)
–
–
(371)
465
–
–
–
979
979
(363)
–
–
–
(189)
892
5,594
374
(555)
546
365
(212)
34
9
–
5,790
124
(23)
(193)
979
887
(222)
32
–
(3)
–
6,484
–
–
–
–
–
–
–
60
335
–
–
–
–
–
–
–
–
–
(22)
313
–
–
–
–
–
–
–
–
(19)
–
(23)
–
–
(23)
–
–
–
–
–
Movement in shareholders' equity
In € millions
Balance at January 1, 2014
Changes in exchange rates in respect of subsidiaries,
associates and joint ventures
Post-retirement benefits
Net income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
Addition to other reserves
Statutory reserves
Subscribed
share capital
Additional
paid-in capital
Cash flow
hedge reserve
485
319
(19)
Other
Statutory
reserves
275
–
–
–
–
5
–
2
–
–
–
–
–
137
–
7
–
Balance at December 31, 2014
492
463
Changes in exchange rates in respect of subsidiaries,
associates and joint ventures
Changes in fair value of derivatives
Post-retirement benefits
Net income
Comprehensive income
Dividend paid
Equity-settled transactions
Issue of common shares
Acquisitions and divestments
Addition to other reserves
–
–
–
–
–
4
–
2
–
–
–
–
–
–
–
137
–
(2)
–
–
Balance at December 31, 2015
498
598
(42)
182
Financial information | AkzoNobel Report 2015 B
Note B: Financial non-current assets and provisions for subsidiaries
C
Note C: Trade and other receivables
Movements in financial non-current assets
In € millions
Balance at January 1, 2014
Acquisitions/capital contributions
Divestments/capital repayments
Net income from subsidiaries, associates and joint ventures
Post-retirement benefits
Equity-settled transactions
Loans granted
Repayment of loans
Changes in exchange rates
Dividends received
Other changes
Change to provisions for subsidiairies
Balance at December 31, 2014
Acquisitions/capital contributions
Divestments/capital repayments
Net income from subsidiaries, associates and joint ventures
Post-retirement benefits
Equity-settled transactions
Loans granted
Repayment of loans
Changes in exchange rates
Dividends received
Other changes
Change to provisions for subsidiairies
Balance at December 31, 2015
1 Loans to these companies have no fixed repayment schedule.
Subsidiaries
Share in capital
8,910
1,986
–
546
(553)
31
–
–
379
(2,402)
–
(343)
8,554
550
–
1,018
(195)
27
–
–
139
(1,541)
(26)
(147)
8,379
Other financial
non-current
assets
94
Loans 1
4,818
–
–
–
–
–
1,804
(2,297)
64
–
–
–
4,389
–
–
–
–
–
268
(1,840)
17
–
–
–
–
(1)
–
–
–
–
–
–
–
1
–
94
4
(2)
–
–
–
–
–
–
–
1
–
Total
13,822
1,986
(1)
546
(553)
31
1,804
(2,297)
443
(2,402)
1
(343)
13,037
554
(2)
1,018
(195)
27
268
(1,840)
156
(1,541)
(25)
(147)
2,834
97
11,310
Trade and other receivables
In € millions
Receivables from subsidiaries
Receivable from associates and
joint ventures
FX contracts
Other receivables
Total
2014
42
16
15
30
103
2015
57
13
21
20
111
D
Note D: Shareholders’ equity
Subscribed share capital
The holders of common shares are entitled to receive
dividends as declared from time to time and are entitled
to one vote per share at the Annual General Meeting of
shareholders. The holders of the priority shares are entitled
to a dividend of 6 percent per share or the statutory interest
in the Netherlands, whichever is lower, plus any accrued and
unpaid dividends. They are entitled to 200 votes per share
(in accordance with the 200 times higher nominal value
per share) at the Annual General Meeting of shareholders.
In addition, the holders of priority shares have the right
to draw up binding lists of nominees for appoint ment to
the Supervisory Board and the Board of Management;
amendments to the Articles of Association are subject to the
approval of the Meeting of Holders of Priority Shares.
Priority shares may only be transferred to a transferee
designated by a Meeting of Holders of Priority Shares
and against payment of the par value of the shares, plus
interest at the rate of 6 percent per annum or the statu-
tory interest in the Netherlands, whichever is lower, for
the period between the beginning of the year and the
date of transfer. There are no restrictions on voting rights
of holders of common or priority shares. The Articles of
Association set out procedures for exercising voting rights.
183
AkzoNobel Report 2015 | Financial information The Annual General Meeting of shareholders has in 2015
resolved to authorize the Board of Management for a
period of 18 months (i) to issue shares (or grant rights to
shares) in the capital of the company up to a maximum
of 10 percent, which in case of mergers or acquisitions
can be increased by up to a maximum of 10 percent,
of the total number of shares outstanding (and to restrict
or exclude the pre-emptive rights to those shares) and (ii)
to acquire shares in the capital of the company, provided
that the shares that will at any time be held will not
exceed 10 percent of the issued share capital. The issue
or repurchase of shares requires the approval of the
Supervisory Board.
We held no common shares at year-end 2015 or 2014.
Of the shareholders’ equity of €6.5 billion, an amount of
€5.7 billion (2014: €5.0 billion) was unrestricted and
available for distribution – subject to the relevant provisions
of our Articles of Association and Dutch law. We consider
negative reserves for actuarial gains and losses as
restricted.
Statutory reserves have been recognized following section
373 paragraph 4 of Book 2 of the Netherlands Civil Code.
At the Annual General Meeting of shareholders of April 26,
2001, an amendment to the Articles of Association was
approved whereby the par value of the priority shares was
decreased to €400 and of the common shares and the
cumulative preferred shares to €2. As the revised nominal
Unrestricted reserves at year-end
In € millions
Shareholders’ equity at year-end
Subscribed share capital
Subsidiaries’ restrictions to
transfer funds
Statutory reserve due to
capital reduction
Reserve for development costs
Cash flow hedge reserve
Unrestricted reserves
2014
5,790
(492)
(245)
(61)
(24)
–
2015
6,484
(498)
(224)
(61)
(23)
–
4,968
5,678
values are lower than the original par values, in accor-
dance with section 67a of Book 2 of the Netherlands Civil
Code, we recognize a statutory reserve of €61 million
for this reduction in subscribed share capital. Statutory
reserves also include €23 million for capitalized develop-
ment costs, as well as the reserves relating to earnings
retained by subsidiaries, associates, and joint ventures
after 1983.
Dividend
We will propose to the Annual General Meeting on April
20, 2016, a 2015 final dividend of €1.20 per share, which
would make a total 2015 dividend of €1.55 per share
(2014: €1.45). There will be a stock dividend option with
cash dividend as default.
During 2015, we paid the 2014 final dividend of €1.12 and
the 2015 interim dividend of €0.35 per share.
E
Note E: Net debt
Analysis of net debt by category
In € millions
Bonds issued
Debt to subsidiaries
Other borrowings
Long-term borrowings
Current portion of debenture loans
Current portion of
other long-term borrowings
Borrowings from associates and
joint ventures
Short-term loans
Short-term borrowings
Total borrowings
Cash and cash equivalents
Net debt
2014
1,610
5,299
60
6,969
623
30
41
22
716
7,685
(724)
6,961
2015
1,292
3,429
30
4,751
339
30
–
4
373
5,124
(373)
4,751
Long-term-borrowings
For the fair value of the debenture loans, see Note 22 of
the notes of the Consolidated financial statements.
Bonds issued
In € millions
8% 2009/16 (£250 million)
4% 2011/18 (€800 million)
1 3/4% 2014/24 (€500 million)
2014
320
794
496
2015
–
796
496
Total
1,610
1,292
We have a €1.8 billion multi-currency revolving credit
facility, which was amended and extended in 2015 by two
additional years to 2020. This facility does not contain
financial covenants or acceleration provisions that are
based on adverse changes in ratings or on material
adverse change. At year-end 2015 and 2014, this facility
had not been drawn. At year-end 2015 and 2014, none of
the borrowings was secured by collateral.
Short-term-borrowings
We have US dollar and euro commercial paper programs
in place, which can be used to the extent that the equiva-
lent portion of the €1.8 billion multi-currency revolving
credit facility is not used. We had no commercial paper
outstanding at the year-end 2015 and 2014.
Cash and cash equivalents
Cash and cash equivalents
In € millions
Cash on hand and in banks
Short-term investments
Total
2014
114
610
724
2015
53
320
373
184
Financial information | AkzoNobel Report 2015 F
Note F: Other current liabilities
Other current liabilities
In € millions
Payables to subsidiaries
FX contracts
Debt related to pensions
Other suppliers
Other liabilities
Total
2014
2015
21
19
6
81
115
242
23
10
6
43
104
186
2015, aggregating €0.8 billion (2014: €0.6 billion), are
included in the Consolidated balance sheet. Addition-
ally, at year-end 2015, guarantees were issued on behalf
of consolidated companies for an amount of €1.2 billion
(2014: €1.4 billion).
The debts and liabilities of the consolidated companies
underlying these guarantees are included in the
Con solidated balance sheet or in the amount of long-
term liabilities in respect of operational lease contracts
as disclosed in Note 19 of the Consolidated financial
statements. Guarantees relating to associates and joint
ventures amounted to €5 million (2014: €9 million).
I
Note I: Auditor’s fees
G
Note G: Financial instruments
Auditor's fees
At year-end 2015, Akzo Nobel N.V. had outstanding
foreign exchange contracts to buy currencies for a total of
€1.6 billion (year-end 2014: €1.3 billion), while contracts to
sell currencies totaled €1.3 billion (year-end 2014:
€1.3 billion). The contracts mainly related to US dollars,
Pound sterling and Swedish krona, and all have maturi-
ties within one year. These contracts offset the foreign
exchange contracts concluded by the subsidiaries, and
the fair value changes are recognized in the statement of
income to offset the fair value changes on the contracts
with the subsidiaries. For information on risk exposure and
risk management, see Note 22 of the notes to the consoli-
dated financial statements.
H
Note H: Contingent liabilities
Akzo Nobel N.V. is parent of the group’s fiscal unit in the
Netherlands, and is therefore liable for the liabilities of said
fiscal unit as a whole.
Akzo Nobel N.V. has declared in writing that it accepts
joint and several liability for contractual debts of certain
Dutch consolidated companies (section 403 of Book 2
of the Netherlands Civil Code). These debts, at year-end
In € millions
Audit
Audit-related
Tax
Other services
Total
Amsterdam, February 9, 2016
The Board of Management
Ton Büchner
Maëlys Castella
The Supervisory Board
Antony Burgmans
Sari Baldauf
Peggy Bruzelius
Byron Grote
Louis Hughes
Dick Sluimers
Ben Verwaayen
In the
Netherlands
Network outside
the Netherlands
3.1
0.3
–
–
3.4
7.1
0.2
0.1
–
7.4
2014
Total
10.2
0.5
0.1
–
10.8
In the
Netherlands
Network outside
the Netherlands
3.2
0.5
–
–
3.7
6.8
0.3
0.2
–
7.3
2015
Total
10.0
0.8
0.2
–
11.0
185
AkzoNobel Report 2015 | Financial information Other information
Independent auditor’s report
To: the Annual General Meeting of shareholders and the
Supervisory Board of Akzo Nobel N.V.
Report on the audit of the Financial statements
2015
Our opinion
In our opinion:
• The Consolidated financial statements give a true and
fair view of the balance sheet of Akzo Nobel N.V. as
at December 31, 2015, and of its result and its cash
flows for 2015 in accordance with International Financial
Reporting Standards as adopted by the European Union
(EU-IFRS) and with Part 9 of Book 2 of the Netherlands
Civil Code
• The company financial statements give a true and
fair view of the balance sheet of Akzo Nobel N.V. as
at December 31, 2015, and of its result for 2015 in
accordance with Part 9 of Book 2 of the Netherlands
Civil Code
What we have audited
We have audited the Financial statements 2015 of Akzo
Nobel N.V. (the company), based in Amsterdam. The
Financial statements include the Consolidated financial
statements and the Company financial statements.
Basis for our opinion
We conducted our audit in accordance with Dutch law,
including the Dutch Standards on Auditing. Our responsi-
bilities under those standards are further described in the
Our responsibilities for the audit of the Financial state-
ments section of our report.
We are independent of Akzo Nobel N.V. in accordance
with the Regulation regarding the independence of
auditors in case of assurance engagements (“Verordening
inzake de onafhankelijkheid van accountants bij assu-
rance-opdrachten” (ViO)) and other relevant indepen-
dence regulations in the Netherlands. Furthermore, we
have complied with the Regulation code of conduct and
professional practice auditors (“Verordening gedrags- en
beroepsregels accountants” (VGBA)).
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for
our opinion.
Audit approach summary
Unqualified audit opinion
Materiality
• Overall materiality of €60 million
• 4.1 percent of group profit before tax, 0.4 percent of
group revenue and 0.4 percent of group total assets
The Consolidated financial statements comprise:
1. The Consolidated balance sheet as at December
Scope of the group audit
• Coverage of 82 percent of Group profit before tax,
31, 2015
2. The following Consolidated statements for 2015: the
statement of income, the statements of comprehensive
income, changes in equity and cash flows; and
3. The notes comprising a summary of the significant
accounting policies and other explanatory information
The Company financial statements comprise:
1. The Company balance sheet as at December 31, 2015;
2. The Company statement of income for 2015; and
3. The notes comprising a summary of the significant
accounting policies and other explanatory information
70 percent of group revenue and 85 percent of group
total assets
Key audit matters
• Goodwill and other asset impairment testing
• Post-retirement benefit provisions
• Accounting for income tax positions
• Transformation programs
Materiality
Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these Financial
statements. The materiality affects the nature, timing and
extent of our audit procedures and the evaluation of the
effect of identified misstatements on our opinion.
Based on our professional judgment we determined the
materiality for the Financial statements as a whole at
€60 million (2014: €64 million). The materiality is deter-
mined with reference to group profit before tax
(4.1 percent). In addition, the appropriateness for the
materiality was assessed by comparing the amount to
group revenue (0.4 percent) and group total assets
(0.4 percent). We have also taken into account misstate-
ments and/or possible misstatements that in our opinion
are material for qualitative reasons for the users of the
Financial statements.
We agreed with the Supervisory Board that misstate-
ments in excess of €3 million, which are identified during
the audit, would be reported to them, as well as smaller
misstatements that in our view must be reported on quali-
tative grounds.
Scope of the group audit
Akzo Nobel N.V. is head of a group of entities. The finan-
cial information of this group is included in the Financial
statements of Akzo Nobel N.V.
Because we are ultimately responsible for the opinion, we
are also responsible for directing, supervising and perform-
ing the group audit. In this respect we have determined the
nature and extent of the audit procedures to be carried out
for group entities. Decisive were the size and / or the risk
profile of the group entities or operations. On this basis,
we selected group entities for which an audit or specified
audit procedures had to be carried out on the complete
set of financial information or specific items.
We scoped components of Akzo Nobel N.V. into the group
audit where they are of significant size, have significant
risks to the group or are considered significant for other
reasons. In case this determination does not provide
adequate coverage over the Financial statements, we used
186
Financial information | AkzoNobel Report 2015 our judgment to scope-in additional components. Operat-
ing companies and operating business units arereporting
components in our group audit. Applying these scoping
criteria led to 53 components in scope, in total covering
15 countries. Furthermore, we performed specified audit
procedures at corporate level and at business unit level on
significant risk areas such as post-retirement benefit provi-
sions, goodwill and other asset impairment testing and tax
positions. This resulted in coverage of 82 percent of Group
profit before tax, 70 percent of Group revenue and 85
percent of Group total assets. In addition, we performed
analytical procedures at the aggregated group level on
the remaining components in order to corroborate our
assessment that there are no significant risks of material
misstatement within these remaining components.
The group audit team provided detailed instructions to all
component auditors which covered the significant audit
areas, including the relevant risks of material misstatement,
and set out the information required to be reported back
to the group audit team. The group audit team visited
component locations in the US, UK, Sweden, Germany,
Brazil and China. Telephone calls were also held with the
auditors of these components and of all other components
that were not physically visited. During these visits and
calls, the findings and observations reported to the group
audit team were discussed in more detail. Furthermore,
we performed detailed file reviews and any further
work deemed necessary by the group audit team was
then performed.
By performing the procedures mentioned above at group
entities, together with additional procedures at group level,
we have been able to obtain sufficient and appropriate
audit evidence about the group’s financial information to
provide an opinion about the Financial statements.
Key audit matters
Key audit matters are those matters that, in our profes-
sional judgment, were of most significance in our audit
of the Financial Statements. We have communicated the
key audit matters to the Supervisory Board. The key
audit matters are not a comprehensive reflection of all
matters discussed.
These matters were addressed in the context of our audit
of the Financial Statements as a whole and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
Goodwill and other asset impairment testing
Description
The annual impairment test was significant to our audit
because the assessment process is complex and the test
imposes estimates. In performing the impairment testing
for goodwill and other assets, the company used various
assumptions in respect of future market and economic
conditions, market share, revenue and margin development.
Our response
For our audit we assessed and tested the assumptions,
methodologies, the weighted average cost of capital and
other data used by the company, for example by compar-
ing them to external data, such as expected inflation rates,
external market growth expectations and by analyzing
sensitivities in AkzoNobel’s valuation model. We included
in our team a valuation specialist to assist us with these
procedures. We specifically focused on the sensitivity in
the available headroom for the cash generating units, eval-
uating whether a reasonably possible change in assump-
tions could cause the carrying amount to exceed its recov-
erable amount. We also assessed the historical accuracy
of the Board of Management’s estimates. Based on our
procedures performed, we consider Board of Manage-
ment’s key assumptions to be within a reasonable range.
We assessed the adequacy of the company’s disclosures
included in Note 7 about those assumptions to which the
outcome of the impairment test is most sensitive.
Post-retirement benefit provisions
Description
The total amount of post-retirement benefit provisions
consists of total defined benefit obligations of €17 billion
offset by total plan assets amounting to €16 billion as per
December 31, 2015. The largest pension plans are the ICI
Pension Fund (ICIPF) and the AkzoNobel Pension Scheme
in the UK, which together account for 83 percent of the
defined benefit obligation and 91 percent of plan assets.
Our response
As part of our audit we have tested internal controls as
well as assessed and challenged the Board of Manage-
ment’s actuarial assumptions such as discount rates,
expected inflation rates, mortality tables, indexation
percentages, valuation of plan assets and future salary
increases. We benchmarked the discount rates utilized
by the company with external sources such as the AA
Corporate yield curve published by Merrill Lynch and peer
companies. In performing our audit we included in our
team local and international pension specialists including
actuarial and valuation specialists. Based on our proce-
dures performed, we consider Board of Management’s key
assumptions to be within a reasonable range. We specifi-
cally focused on the de-risking transactions executed
by the trustee of ICIPF and we verified the appropriate
accounting through other comprehensive income. We also
assessed the adequacy of the company’s disclosure in
Note 14 in respect of post-retirement benefit provisions.
Accounting for income tax positions
Description
Income tax positions were significant to our audit because
the assessment process is complex and imposes esti-
mates. AkzoNobel’s operations are subject to income
taxes in various jurisdictions and changes in the compa-
ny’s business model might have certain tax implications.
Our response
We have performed audit procedures on the completeness
and accuracy of the amounts recognized as current and
deferred tax, including the assessment of the tax impact
of changes in the company’s business model, corre-
spondence with tax authorities and the evaluation of tax
exposures. In addition, in respect of deferred tax assets,
we assessed and tested the Board of Management’s
analysis and assumptions supporting the probability that
deferred tax assets recognized in the balance sheet will
be recovered through taxable income in future years and
available tax planning strategies. We included in our team
local and international tax specialists to analyze the tax
positions and to challenge the assumptions used to deter-
mine tax positions. Based on our procedures performed,
we consider Board of Management’s key assumptions
187
AkzoNobel Report 2015 | Financial information as required by Part 9 of Book 2 of the Netherlands Civil
Code has been annexed
• We report that the report of the Board of Management,
to the extent we can assess, is consistent with the
financial statements
Engagement
We were re-appointed by the Annual General Meeting of
shareholders on April 29, 2014, as auditor of Akzo Nobel
N.V. for the years 2014 and 2015.
Amsterdam, February 9, 2016
KPMG Accountants N.V.
E.J.L. van Leeuwen RA
to be within a reasonable range. We also assessed the
adequacy of the company’s disclosure in Note 6 in respect
of tax and uncertain tax positions.
necessary to enable the preparation of the Financial state-
ments that are free from material misstatement, whether
due to errors or fraud.
Transformation programs
Description
The company continued to implement several global trans-
formation programs which impact the company’s business
processes, control activities and internal control organiza-
tion. In general transformation programs result in an inher-
ent increased risk of control deficiencies that could occur
if the programs are not implemented with proper oversight
and without focus on maintaining effective internal controls
throughout the transition processes.
Our response
In our audit we focused on the Finance and IT implications
of these transformation programs. Our audit procedures
included, amongst others, meetings with the transforma-
tion and project managers, internal control officers, internal
audit and the Board of Management on a regular basis
during the year to understand and monitor the effects of
changes to the company’s internal control environment,
across the organization. We tested monitoring activities
executed at different levels in the organization designed
to ensure continued effectiveness of the internal control
framework during the transformations. We also tested the
effectiveness of controls impacted by the transformations
and instructed our component auditors globally to perform
procedures designed to provide reasonable assurance
that a material misstatement did not exist in the financial
statements as a result of the transformations.
Responsibilities of the Board of Management
and the Supervisory Board for the Financial
statements
The Board of Management is responsible for the prepara-
tion and fair presentation of the Financial statements in
accordance with EU-IFRS and with Part 9 of Book 2 of
the Netherlands Civil Code and for the preparation of the
report of the Board of Management in accordance with
Part 9 of Book 2 of the Netherlands Civil Code. Further-
more, the Board of Management is responsible for such
internal control as the Board of Management determines is
As part of the preparation of the Financial statements,
the Board of Management is responsible for assessing
the company’s ability to continue as a going concern.
Based on the financial reporting framework mentioned,
the Board of Management should prepare the Financial
statements using the going concern basis of account-
ing unless the Board of Management either intends to
liquidate the company or to cease operations, or has no
realistic alternative but to do so. the Board of Management
should disclose events and circumstances that may cast
significant doubt on the company’s ability to continue as a
going concern in the Financial statements.
The Supervisory Board is responsible for overseeing the
Company’s financial reporting process.
Our responsibilities for the audit of
Financial statements
Our objective is to plan and perform the audit to obtain
sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not abso-
lute, level of assurance, which means we may not have
detected all errors and fraud. For a further description of
our responsibilities in respect of an audit of financial state-
ments we refer to the website of the professional body
for accountants in the Netherlands (NBA) www.nba.nl/
standardtexts-auditorsreport
Report on other legal and regulatory requirements
Report on the report of the Board of Management
and the other information
Pursuant to legal requirements of Part 9 of Book 2 of the
Netherlands Civil Code (concerning our obligation to
report about the report of the Board of Management and
other information):
• We have no deficiencies to report as a result of
our examination whether the report of the Board of
Management, to the extent we can assess, has been
prepared in accordance with Part 9 of Book 2 of the
Netherlands Civil Code, and whether the information
188
Financial information | AkzoNobel Report 2015 Profit allocation and distributions
Profit allocation and distributions
Article 43
43.6
The Board of Management shall be authorized to deter-
mine, with the approval of the Supervisory Board, what
share of profit remaining after application of the provisions
of the foregoing paragraphs shall be carried to reserves.
The remaining profit shall be placed at the disposal of
the Annual General Meeting of shareholders, with due
observance of the provisions of paragraph 7, it being
provided that no further dividends shall be paid on the
preferred shares.
43.7
From the remaining profit, the following distributions shall,
to the extent possible, be made as follows:
(a) To the holders of priority shares: 6 percent per share
or the statutory interest referred to in paragraph 1
of article 13, whichever is lower, plus any accrued and
unpaid dividends
(b) To the holders of common shares: a dividend of such
an amount per share as the remaining profit, less the
aforesaid dividends and less such amounts as the
Annual General Meeting of shareholders may decide to
carry to reserves, shall permit
43.8
Without prejudice to the provisions of paragraph 4 of this
article and of paragraph 4 of article 20, the holders of
common shares shall, to the exclusion of everyone else,
be entitled to distributions made from reserves accrued by
virtue of the provision of paragraph 7b of this article.
43.9
Without prejudice to the provisions of article 42 and
paragraph 8 of this article, the Annual General Meeting of
shareholders may decide on the utilization of reserves only
on the proposal of the Board of Management approved by
the Supervisory Board.
Article 44
44.7
Cash dividends by virtue of paragraph 4 of article 20,
article 42, or article 43 that have not been collected within
five years of the commencement of the second day
on which they became due and payable shall revert to
the company.
Proposal for profit allocation
With due observance of Dutch law and the Articles of
Association, it is proposed that net income of €593 million
is carried to the other reserves. Furthermore, with due
observance of article 43, paragraph 7, it is proposed that
dividend on priority shares of €1,152 and on common
shares of €386 million (to be increased by dividend on
shares issued in 2016 before the ex-dividend date) will be
distributed. Following the acceptance of this proposal, the
holders of common shares will receive a dividend of €1.55
per share, of which €0.35 was paid earlier as an interim
dividend. The final dividend of €1.20 per share (which
under the conditions to be published by the company and
at the shareholders’ election will be paid either in cash or
in stock) will be made available from May 19, 2016.
Special rights to holders of
priority shares
The priority shares are held by “Stichting Akzo Nobel”
(Foundation Akzo Nobel), whose board is composed of the
members of the Supervisory Board who are not members
of the Audit Committee. They each have one vote on the
board of the Foundation.
The Meeting of Holders of Priority Shares has the right
to draw up binding lists of nominees for appointment to
the Supervisory Board and the Board of Management.
Amendments to the Articles of Association are subject to
the approval of this meeting.
189
AkzoNobel Report 2015 | Financial information Financial summary
Consolidated statement of income
In € millions
Revenue
Operating income
Financing income and expenses
Income tax
Results from associates and joint ventures
Profit for the period from continuing operations
Minority interests attributable to minority shareholders
Discontinued operations
Net income, attributable to shareholders
Common shares, in millions at year-end
Dividend 4
Number of employees at year-end
Average number of employees
Employee benefits
Average revenue per employee (in €1,000)
Average operating income per employee (in €1,000)
Ratios
ROS
ROI
Net income in % of shareholders’ equity
Employee benefits in % of revenue
Interest coverage 5
Per share information
Net income
Adjusted earnings per share
Shareholders’ equity
Highest share price during the year
Lowest share price during the year
Year-end share price
2006
2007
10,023
10,217
2008 1
15,415
2009
13,028
887
(134)
(96)
87
744
(29)
438
1,153
287.0
344
42,700
61,900
2,158
162
14
8.8
16.3
30.5
21.5
6.6
778
(151)
(166)
(20)
441
(31)
9
419
262.3
472
42,600
42,600
2,215
240
18
7.6
14.6
122.9
21.7
5.2
(577)
(232)
(260)
25
(1,044)
(65)
23
(1,086)
231.7
417
60,000
61,300
3,022
251
(9)
– 3
– 3
– 3
19.6
– 3
4.02
33.82
(4.38)
14.44
49.41
38.30
46.18
42.06
65.56
44.41
54.79
32.21
57.11
22.85
29.44
855
(405)
(141)
21
330
(77)
32
285
232.3
325
54,700
56,300
2,955
231
15
6.6
7.3
3.7
22.7
2.1
1.23
2.06
33.47
46.52
26.01
46.40
2010 2
13,605
1,293
2011
14,604
1,157
(329)
(176)
25
813
(83)
58
788
233.5
320
55,600
55,100
2,980
247
23
9.5
11.3
8.8
21.9
6.8
3.23
3.71
38.48
47.70
37.18
46.49
(311)
(241)
24
629
(64)
(59)
506
234.7
304
52,020
51,100
2,765
286
23
7.9
10.0
5.6
18.9
4.7
2.04
3.10
39.25
53.74
29.25
37.36
2012
15,390
(1,198)
(205)
(203)
13
(1,593)
(63)
(436)
(2,092)
239.0
214
50,610
52,200
3,018
295
(23)
– 3
– 3
– 3
19.6
– 3
(8.82)
2.55
24.12
49.75
35.16
49.75
2013
2014
14,590
14,296
958
(200)
(111)
14
661
(68)
131
724
242.6
210
49,600
50,200
2,950
291
19
6.6
9.6
12.9
20.2
5.1
3.00
2.62
23.06
56.08
42.65
55.71
987
(156)
(252)
21
600
(72)
18
546
246.0
212
47,200
48,200
2,824
297
20
6.9
10.0
9.5
19.8
8.6
2.23
2.81
23.53
60.77
47.63
57.65
2015
14,859
1,573
(114)
(416)
17
1,060
(87)
6
979
249.0
222
45,600
46,100
2,728
322
34
10.6
15.0
15.1
18.4
16.2
3.95
4.02
26.04
74.81
55.65
61.68
1 Continuing operations from ICI are included as from 2008. The 2008 figures have not been restated for the National Starch divestment.
2 Restated to present Decorative Paints North America as a discontinued operation and for the revised IAS19.
3 Not meaningful as operating income and net income were losses.
4 Cash dividend paid to shareholders of AkzoNobel.
5 Until 2009: operating income divided by net financing expenses, as from 2010: operating income divided by net interest on net debt.
190
Financial information | AkzoNobel Report 2015 Consolidated balance sheet
In € millions
Intangible assets
Property, plant and equipment
Financial non-current assets
Total non-current assets
Inventories
Receivables
Cash and cash equivalents
Assets held for sale
Total current assets
Shareholders’ equity
Non-controlling interests
Total equity
Provisions
Long-term borrowings
Other non-current liabilities
Total non-current liabilities
Short-term borrowings
Current liabilities
Current portion of provisions
Liabilities held for sale
Total current liabilities
Average Invested capital 3
Capital expenditures
Depreciation
OWC
Net debt
Ratios
Equity/non-current assets
Inventories and receivables/current liabilities
Operating working capital as % of revenue 4
2006
682
3,346
1,706
5,734
2,042
2,919
1,871
219
7,051
4,144
119
4,263
2,132
2,551
181
4,864
410
2,652
571
25
3,658
8,034
371
349
2007
669
2,203
1,402
4,274
1,177
2,164
11,628
–
14,969
11,032
97
11,129
1,598
1,954
133
3,685
1,635
2,276
518
–
4,429
6,629
359
330
1,090
(8,039)
0.74
1.87
2.60
1.47
2008 1
7,172
3,357
1,848
2009
7,388
3,474
1,783
2010 2
6,568
3,191
2,105
2011
7,392
3,705
2,664
2012
4,454
3,739
2,628
12,377
12,645
11,864
13,761
10,821
1,781
2,977
1,595
4
6,357
7,463
450
7,913
2,072
2,341
715
5,128
1,338
3,510
845
–
5,693
1,441
2,666
2,128
–
6,235
7,775
470
8,245
1,919
3,641
674
6,234
384
3,220
797
–
4,401
1,482
2,740
3,133
–
7,355
8,397
525
8,922
1,958
2,727
556
5,241
904
3,575
577
–
5,056
1,924
3,035
1,635
–
6,594
9,031
529
9,560
2,392
3,035
541
5,968
494
3,782
551
–
4,827
1,545
2,789
1,752
921
7,007
5,764
464
6,228
2,677
3,388
434
6,499
662
3,632
455
352
5,101
2013
3,906
3,589
2,219
9,714
1,426
2,622
2,098
203
6,349
5,594
427
6,021
1,938
2,666
389
4,993
961
3,438
601
49
5,049
2014
4,142
3,835
2,148
2015
4,156
4,003
2,125
10,125
10,284
1,545
2,831
1,732
66
6,174
5,790
477
6,267
2,143
2,527
412
5,082
811
3,634
494
11
1,504
2,810
1,365
–
5,679
6,484
496
6,980
1,865
2,161
360
4,386
430
3,716
451
–
4,950
4,597
9,311
12,578
11,467
11,537
11,817
10,007
9,871
10,475
534
453
2,359
2,084
0.64
1.36
16.5
513
424
1,691
1,897
0.65
1.28
13.7
534
435
2,016
500
0.75
1.18
13.9
658
419
1,891
1,894
0.73
1.31
13.2
826
463
1,572
2,298
0.58
1.19
10.7
666
472
1,384
1,529
0.62
1.18
9.9
588
477
1,418
1,606
0.62
1.20
10.1
651
487
1,385
1,226
0.68
1.16
9.7
1 Continuing operations from ICI are included as from 2008. The 2008 figures have not been restated for the National Starch divestment.
2 Restated to present Decorative Paints North America as a discontinued operation and for the revised IAS19.
3 Restated to current definition as from 2010.
4 Operating working capital is measured against four times fourth quarter revenue.
191
AkzoNobel Report 2015 | Financial information Business Area statistics
In € millions
Decorative Paints
Revenue
Operating income
ROS 4
Average invested capital 3
ROI 4
Capital expenditures
Average number of employees
Average revenue per employee
Average operating income per employee
Performance Coatings
Revenue
Operating income
ROS
Average invested capital 3
ROI
Capital expenditures
Average number of employees
Average revenue per employee
Average operating income per employee
Specialty Chemicals
Revenue
Operating income
ROS
Average invested capital 3
ROI
Capital expenditures
Average number of employees
Average revenue per employee
Average operating income per employee
1 Excluding National Starch, divested in 2010.
2 Restated to present Decorative Paints North America as a discontinued operation.
3 From 2010 restated to current definition.
4 2012 excluding goodwill impairment.
192
2008
2009 1
2010
2011 2
2012
2013
2014
2015
5,006
(669)
3.5
6,515
2.7
120
4,573
133
2.9
6,169
2.2
112
4,968
275
5.5
4,908
5.6
154
4,201
235
5.6
5,032
4.7
155
4,297
(2,012)
2.2
4,701
2.0
206
4,174
398
9.5
2,896
13.7
171
3,909
248
6.3
2,824
8.8
143
4,007
345
8.6
2,959
11.7
158
24,600
22,900
21,800
17,100
17,200
16,800
15,500
15,100
203
(27)
4,575
444
9.7
2,010
22.1
89
200
6
4,112
433
10.5
1,868
23.2
61
228
13
4,786
487
10.2
2,063
23.6
87
246
14
5,170
458
8.9
2,267
20.2
116
250
(117)
5,702
542
9.5
2,499
21.7
123
248
24
5,571
525
9.4
2,463
21.3
143
252
16
5,589
545
9.8
2,480
22.0
143
265
23
5,955
792
13.3
2,692
29.4
147
21,000
20,200
20,600
21,300
21,700
21,300
21,000
19,700
218
21
5,687
130
2.3
3,797
3.4
305
204
21
4,359
422
9.7
3,435
12.3
319
232
24
4,943
604
12.2
3,464
17.4
273
243
22
5,335
622
11.7
3,406
18.3
365
263
25
5,543
500
9.0
3,678
13.6
484
262
25
4,949
297
6.0
3,609
8.2
346
266
26
4,883
508
10.4
3,442
14.8
297
12,900
11,400
11,100
11,300
11,800
10,600
10,000
441
11
382
37
445
54
472
55
470
42
467
28
488
51
302
40
4,988
609
12.2
3,540
17.2
331
9,300
536
65
Financial information | AkzoNobel Report 2015 Regional statistics
In € millions
2011
2012
2013
2014
2015
2011 1
2012
2013
2014
2015
2011
2012
2013
2014
2015
The Netherlands
Other European countries
Other Asian countries
Revenue by destination
694
745
765
762
693
Revenue by origin
1,646
1,601
1,600
1,662
1,563
Capital expenditures
Average invested capital
Number of employees 2
144
1,384
5,200
110
1,326
5,200
94
1,175
5,300
72
1,631
5,000
102
2,154
4,900
3,702
2,459
98
2,641
8,900
3,647
2,400
85
2,127
8,500
3,531
2,330
66
1,406
8,000
3,341
2,246
57
1,117
7,700
3,226
2,062
60
1,024
7,300
1,918
1,627
64
786
2,087
1,779
71
727
1,733
1,463
40
612
1,739
1,438
34
600
1,968
1,613
31
671
7,800
6,800
7,100
6,900
6,700
Germany
US and Canada 1
Other regions
Revenue by destination
1,284
1,258
1,176
Revenue by origin
1,228
1,219
1,143
Capital expenditures
Average invested capital
31
945
69
861
87
736
986
920
106
764
1,036
2,092
2,294
2,155
2,193
2,494
903
52
854
2,222
2,413
2,287
2,306
2,644
67
70
62
68
100
1,722
1,742
1,739
1,778
1,949
667
419
11
218
728
463
9
210
674
436
18
178
677
419
17
159
706
466
11
87
Number of employees 2
3,800
3,600
3,100
2,300
2,100
5,100
5,100
5,000
4,800
4,600
2,100
2,100
2,500
2,200
2,200
Sweden
Latin America
Revenue by destination
515
486
473
436
414
Revenue by origin
1,481
1,505
1,411
1,289
1,329
Capital expenditures
Average invested capital
54
551
70
539
38
471
40
428
55
542
1,515
1,282
66
704
1,623
1,343
138
784
1,553
1,282
83
713
1,485
1,252
45
707
1,483
1,210
34
679
Number of employees 2
3,300
3,200
3,000
2,900
2,700
4,500
4,600
4,500
4,400
4,100
UK
China
Revenue by destination
Revenue by origin
Capital expenditures
Average invested capital
Number of employees 2
841
879
27
1,512
3,900
901
967
68
1,433
3,800
887
948
74
1,314
3,700
947
950
74
1,008
3,600
1,011
1,109
91
833
3,500
1,376
1,361
96
1,089
7,400
1,621
1,699
135
1,295
7,700
1,643
1,690
104
1,330
7,400
1,730
1,814
75
1,380
7,400
1,828
1,960
115
1,683
7,500
1 As from 2011 excluding Decorative Paints North America, divested in 2013.
2 At year-end.
193
AkzoNobel Report 2015 | Financial information Helping you to look and feel goodWe think science is a thing of beauty. So it’s no surprise that we supply a wide range of essential ingredients for the personal care industry. Whether it’s hair care or skin care, you’ll find that we play a vital role in helping you to look your best. Sustainability statements
Consolidated Sustainability statements
Note 1: Managing our sustainability agenda
Note 2: Reporting principles
Note 3: Stakeholder engagement
Value chain management
Note 4: Sustainable business
Note 5: Resource efficiency
Note 6: Capable, engaged people
Note 7: Supplier management
Safety
Note 8: People safety
Note 9: Process safety
Note 10: Product stewardship
Note 11: HSE management processes
Employees and community
Note 12: Our people
Note 13: Restructuring
Note 14: Community
Environment
Note 15: Energy
Note 16: Greenhouse gases
Note 17: Local air quality
Note 18: Raw materials efficiency
Note 19: Water
Note 20: Soil and groundwater remediation
Independent assurance report
Sustainability performance summary
196
197
200
204
212
213
220
224
225
228
229
231
232
234
236
237
239
239
244
244
245
245
246
248
249
250
252
Additional sustainability information
In this report
Our purpose
10-17
Case studies
18, 20, 22, 72, 84, 96, 208, 216, 242
CEO statement
Strategic performance
Risk management
Business performance
Supervisory Board Chairman’s statement
Report of the Supervisory Board
Corporate governance statement
Compliance and integrity management
Remuneration report
AkzoNobel on the capital markets
8
25
52
61
104
106
114
124
130
137
On our website (www.akzonobel.com/sustainability)
you will find additional information on processes, detailed
data and contacts to support the following:
Note 1: Managing our sustainability agenda
Note 2:
Reporting principles
Note 3:
Stakeholder engagement
Notes 4-7: Value chain management
Notes 8-11: Safety
Notes 12-14: Employees and community
Notes 15-20: Environment
This Sustainability statements section of the Report 2015 is separate from, and
does not in any way form part of the company’s annual financial reporting as
defined in article 5:25c of the Dutch Financial Markets Supervision Act. This
section contains summarized key performance indicators (KPIs) relating to
sustainability performance. Further information on AkzoNobel’s sustainability
strategy, activities and results can be found on our corporate website:
www.akzonobel.com/sustainability
195
AkzoNobel Report 2015 | Sustainability statementsSustainability statements
Consolidated Sustainability
statements
Sustainability topics have been integrated into
all sections of the AkzoNobel Report 2015.
This summary focuses on sustainability processes
and activities that span our businesses.
A fuller overview of our sustainability strategy, activities and results can be found in the
Sustainability section of our corporate website: www.akzonobel.com/sustainability
Planet Possible
In order to secure our own business success – and that of
our customers – we have to create more value from fewer
resources. To help us achieve this, we have adopted an
agenda called Planet Possible, which is our commitment to
doing more with less.
We believe the planet can support nine billion people by
2050, but only if we take the right approach and understand
the changes that will be needed. So we’re looking to
engage with partners across the entire value chain as well
as specialist partners who believe in our agenda and have
the same commitment to finding opportunities where there
don’t appear to be any. Welcome to Planet Possible.
Note
2012
2013
2014
2015
Ambition
2015
Ambition
2020
4
4
4
5
5
5
100
17
22
0
33
13
98
18
24
2
31
13
96
19
24
-4
34
13
113
19
24
3
38
11
–
–
30
–
20
–
–
25–30
Our strategic sustainability objectives are explained in detail
throughout the Sustainability statements section of this
Report 2015.
Sustainable business: Details of our focus areas across the
value chain can be found in Note 4 of this section.
–
–
45
–
Resource efficiency: Details of our focus areas across
the value chain can be found in Note 5 and 7.
12
3.80
3.88
3.97
4.03
>4.00
>4.20
8
9
10
10
12
12
15-20
2.4
2.3
1.8
1.6
<2.0
<1.0
0
42
–
15
13
13
1
62
–
16
14
24
0
82
15
17
16
24
0
100
23
19
16
23
0
100
25
20
20
30
0
1001
100
25
22
40
(2017)
Capable, engaged people: Details of our focus areas
across the value chain can be found in Note 6.
Sustainability foundations: Our strong sustainability
foundations have been built up over many years. They
include people, process and product safety (Notes 8-11);
employee engagement and talent management (Note 12);
community involvement (Note 14); environmental
management (Notes 15-20); and integrity management
(Governance and compliance section).
Consolidated Sustainability statements
Sustainable business
Resource Efficiency Index (REI)
Eco-premium solutions with downstream benefits (% of
revenue)
Eco-premium solutions (% of revenue)
Resource efficiency
Carbon footprint cradle-to-grave per ton of product sales (%
reduction from 2012)
Renewable energy own operations (%)
Renewable raw materials (% of organic)
Capable, engaged people
Employee engagement
(ViewPoint score 1–5 scale)
Sustainability foundations
Total reportable injury rate employees/supervised contractors
(per million hours)
Significant loss of containment (Level D)
Priority substances with management plan (%)
REACH compliance third phase (%)
% of female executives
% of executives from high growth markets
Operational eco-efficiency footprint measure
(% reduction from 2009)
1 Phase 2 starting in 2016.
196
Sustainability statements | AkzoNobel Report 2015
1
Note 1: Managing our sustainability agenda
Strategic focus
Our sustainability agenda incorporates economic,
environmental and social aspects across the value chain.
The importance of sustainability to running our business
is firmly integrated into the AkzoNobel strategy. As well
as being a strategic focus area, it is one of the three
core principles (Safety, Integrity and Sustainability) that
provide the foundation for our company values and the
updated Code of Conduct. In addition, sustainability is
being embedded into our company-wide processes,
including Innovation, Commercial excellence and Talent
management. Sustainability helps us to enhance our
existing business, create new business opportunities and
minimize risks.
We developed the sustainability elements of our strategy
by reviewing our sustainability risks and opportunities
against the global trends that will impact our key
market segments by 2050. The trends were identified
as population growth and the new middle class and
urbanization – both of which provide opportunities for our
end-user segments – and long-term constraints of natural
resources and climate change, which drive us towards the
need for radical resource efficiency and circular thinking.
We express our sustainability agenda through a
concept known as Planet Possible, which highlights our
commitment to creating more value from fewer resources
across the value chain. Planet Possible encompasses all
By focusing on the full value chain, we will drive business, resource and engagement benefits
Raw materials
Own operations
Customer operations
End-user
End-of-life
Sustainable
business
Cost savings
Cost savings
Resource
efficiency
Reduced material
and energy use
Reduced material
and energy use
Improved revenue
and margin
Reduced material and
energy use in customer
processes, application
Energy/resource benefits in use
Improved revenue and margin
Reduced material and
energy use in product use
Capable,
engaged
people
Engaged
suppliers
Engaged
employees
Engaged
customers
Engaged customers
and users
Foundations: HSE, product stewardship, employee practices, community involvement, Code of Conduct
our programs to make our products and operations more
sustainable. As well as driving our own success, putting
sustainability at the heart of everything we do means that
our customers and employees – not to mention our planet
– will also benefit. For more details, see the Strategic
performance section of this Report 2015.
Our strategy has three sustainability focus areas designed
to deliver more value from fewer resources, with targets
for 2020. Our progress towards creating more value
from fewer resources is measured by a special Resource
Efficiency Index (REI), which monitors the gross margin
generated divided by the resource/energy use across
the value chain (measured as cradle-to-grave carbon
footprint). We focus on three aspects:
• Sustainable business: Creating business value
through products and solutions that provide both
functionality and other sustainability benefits, as well as
cost savings from operational efficiencies.
Target: 20 percent of revenue from eco-premium
solutions with a downstream benefit by 2020
• Resource efficiency: Accelerating material and energy
efficiency across the value chain.
Target: 25-30 percent reduction in cradle-to-grave
carbon footprint per ton of sales from 2012 to 2020
• Capable, engaged people: Engaging our people
and partnering with our suppliers and customers to
deliver significant changes. Objectives are emerging at
Business Area and functional level
Sustainability foundations
These strategic objectives are underpinned by strong
foundation programs for other economic, environmental
and social aspects that are material for our business.
Specifically, these are: people and process safety, product
safety/stewardship, employee talent management/
engagement, community involvement, environmental
management and integrity management. Community
involvement is included due to the link to employee
engagement. For these elements, we have key
performance indicators with 2015 targets, being extended
197
AkzoNobel Report 2015 | Sustainability statements to 2020. Other short-term and long-term ambitions are set
at functional and business level.
• Invent: Integrate sustainable value propositions
• Manage: Include sustainability in all aspects of the
The Notes in the Sustainability statements and other
elements of this Report 2015 illustrate our performance
against the strategy goals and foundation elements.
Sustainability framework
Our strategic sustainability focus areas are a natural next
step in our Sustainability framework, which maps out a
progression towards sustainability and identifies those
aspects that are material for our business. The framework
has three levels, which include environmental, economic
and social aspects:
value chain
• Improve: Continue to comply and ensure our license
to operate
The Improve level, with an emphasis on risks – working on
integrity, governance and compliance with our standards
and applicable laws and regulations – is now part of
the Compliance framework (see the Governance and
compliance section).
The current strategy focuses on creating opportunities for
value creation through resource efficiency, innovation and
talent development, alongside continued integration of
sustainability in all aspects of the value chain.
Sustainability framework
Level of development
Environmental
Economic
Social
Invent
Integrate sustainable value
propositions
Resource efficiency:
Carbon footprint
Circular economy
Sustainable business:
Customer needs
Eco-premium solutions
Capable, engaged people:
Employee engagement
Stakeholder engagement
Talent management
Manage
Include sustainability in all aspects
of the value chain
Future
trends
Market
research
Eco-premium
solutions; VOC
Required
Eco-efficiency
eco-analysis
analysis
Sustainable
supplier mgt
Operational
eco-efficiency
Market
propositions
R&D
Investment
decisions
Purchasing
Manufacturing
/supply chain
Sales and
marketing
Environmental management
Product stewardship
Integrity management
Business Partner
Code of Conduct
People/process safety
Employee practices
Community involvement
Improve
Continue to comply and ensure
our license to operate
Examples of material issues
Value chain aspects
198
The framework diagram indicates the main material issues
and programs, which are further detailed in the Notes of
these Sustainability statements and in other sections of
this Report 2015.
Management accountability
Company level
The Executive Committee has overall responsibility for
sustainability. They set company strategy and targets and
monitor the sustainability performance of each Business
Area, as well as the foundation elements, through the
Operational Control Cycle.
We have established a Sustainability Council, which
advises the Executive Committee on strategy
developments, monitors the integration of sustainability
into management processes and oversees the company’s
sustainability targets and overall performance. The
Council, which meets quarterly, is chaired by the CEO
and includes representative Managing Directors from
our Business Areas, as well as the Corporate Directors
of Strategy, Supply Chain/Research and Development,
Purchasing, Human Resources, Sustainability and HSE,
and Communications. The Council maintains an external
perspective, with input from value chain partners and
thought leaders during regular meetings, in addition to
company involvement in leading external organizations.
The Corporate Director of Sustainability and HSE reports
directly to the CEO and has an expertise team for HSE and
sustainability, including a group focusing on lifecycle and
sustainability assessments. In 2012, we formed a team
of senior Business Area representatives to work with the
expertise team and the business teams to ensure effective
roll-out of the new strategy.
Businesses and functions
Accountability for managing sustainability and delivering
against targets lies with the businesses and functions.
Sustainability statements | AkzoNobel Report 2015 The Managing Director of each business is responsible
for managing sustainability as an overall part of business.
All businesses have appointed a sustainability manager,
or focal point, to support the embedding of sustainability
throughout their operations. They bring together
an appropriate team to develop and implement the
sustainability agenda for the business. Focal points work
together at Business Area level to accelerate performance
improvements; they also exchange best practices
and identify opportunities for further development at
company level.
Each function in the value chain has identified focus areas
for sustainability. Functional management teams, such
as Procurement, Supply Chain and RD&I, are in place
to support the implementation of the functional strategy,
including the sustainability elements. These management
teams include corporate and business representatives.
Foundation elements – safety, product stewardship,
employee engagement/talent management and
environmental – are managed by the management
processes in the Human Resources and Health, Safety
and Environment functions. The Compliance framework
and the management structure for integrity and
compliance aspects are detailed in the Governance
and compliance section under Compliance and
integrity management.
Management processes
AkzoNobel uses a range of methods to manage
sustainability performance. The management of each
Business Area has identified sustainability priorities in
line with the company strategy and market drivers, and
developed a dashboard – with KPIs and targets – which is
used to monitor progress. Some improvement programs
and activities are managed at Business Area level to
improve effectiveness. For cross-business activities, each
function in the value chain has identified focus areas for
sustainability, with targets where appropriate.
Specific challenges are reported in the Strategic
performance and Business performance sections. Where
there are specific sustainability risks or issues of concern
to stakeholders, we develop a company position and an
improvement plan owned by a subject matter expert.
Goals and targets
AkzoNobel has three strategic sustainability KPIs and
company level targets for strategic and foundation
elements. The business dashboards reflect the main
sustainability drivers for that business and the contribution
to company targets.
Common processes
We include material sustainability issues in our company,
business and functional processes: strategy and planning;
risk management and internal control; compliance; the
Operational Control Cycle; as well as in our internal audit
and external assurance processes. These are reported
in other sections of this Report 2015 (see Strategic
performance and Governance and compliance).
Foundation elements: global standards
and programs
Global functions oversee the foundation elements of our
sustainability agenda: health and safety; environmental
protection; product stewardship; employee engagement/
talent development; and compliance; including social and
labor aspects. They set global standards and processes
and implement improvement programs in partnership with
the Business Areas. These standards are also the basis of
our supplier management processes.
Improvement plans and programs
Improvement programs for strategic objectives are
developed at business, Business Area or company level. In
2015, for example, the Executive Committee carried out a
complete review of the resource efficiency/carbon footprint
improvement plans in two dedicated meetings.
A new forecasting process, which includes the impact of
potential projects and changes in our portfolio product
mix, will be used to prioritize improvements.
To further embed sustainability in the way we do business,
we have developed a functional excellence improvement
tool, which reflects the strategic objectives, management
processes and good practice implementation. The
purpose is to accelerate sustainability performance against
strategy/targets by raising the capability of people and
processes, supporting good practice implementation,
providing challenges to the operating businesses and
focusing improvement actions where they count. Each
business carries out a self-assessment of the current
situation and sets ambition levels, based on company
requirements and business priorities, as well as focused
annual improvement plans. These assessments are
subject to a peer review/challenge by cross-business
colleagues to hone improvement options and identify the
need for common improvement programs. In the
future, the overall improvement plans will be reviewed
alongside current performance as part of the Operational
Control Cycle.
We carried out a pilot assessment in 2014 which identified
two priorities around our work with suppliers and the
capability of managers and employees. We have made
good progress with suppliers on initiating carbon footprint
improvements, as reported in Note 7. Progress on raising
the capability of managers across functions to drive
sustainability improvements has been somewhat slower,
but is starting to gain momentum. In 2015, we embedded
many structural changes in our businesses and decided
to retain the pilot version of the tool for a further year.
Each business has reviewed their 2014 assessment when
199
AkzoNobel Report 2015 | Sustainability statements 2
Note 2: Reporting principles
Material sustainability issues are integrated into corporate
compliance and audit processes, which are supplemented
by specialist functional audits. We also benchmark our
performance against our peers using external assessment
processes such as the RobecoSAM assessment for the
Dow Jones Sustainability Indices.
The sustainability aspects material to the company are
summarized in the company strategy and sustainability
framework. These are reviewed annually, with input from
internal and external stakeholders (see Materiality in
Note 2). Full details of the boundaries and management
processes for each aspect are included in the Global
Reporting Initiative (GRI) G4 additional information
document, which is available on our corporate website.
Reporting scope
This Report 2015 integrates our financial and sustainability
reporting and is addressed to readers interested in both
areas. In particular, we seek ways of linking sustainability
performance to business results in areas such as resource
efficiency, carbon emission reduction, eco-premium
solutions, safety, people development and engagement,
and operational eco-efficiency.
The information in this Report 2015 offers an update on
our implementation of the ten principles of the United
Nations Global Compact (UNGC). More sustainability
information is available on our corporate website, including
an index of the Global Reporting Initiative G4 indicators
and a summary of our UNGC communication
of progress.
developing the current improvement plan. Common issues
were again reviewed at Business Area and AkzoNobel
level. We have agreed to further refine the tool for 2016.
Priorities for 2016 will include:
• Continued work with suppliers
• Focus on the resource efficiency improvement areas
identified in each Business Area
• Further capability development activity, particularly in
marketing and sales
Incentives
We strive to empower all employees to contribute and
be accountable for our sustainability performance, using
training and other engagement processes, including
business and site level activity, as well as web-based
resources. This responsibility continues to be anchored
in the personal targets and remuneration packages of
managers and employees. Thirty percent of the conditional
grant of shares for Board of Management members and
all executives is based on AkzoNobel’s performance in the
RobecoSAM assessment over a three-year period (see
Remuneration report in the Governance and compliance
section). This link to sustainability performance has been in
place since 2009.
Monitor, benchmark and review
The business dashboards are reviewed at Business
Area and Executive Committee level at least every six
months as part of the Operational Control Cycle. Relevant
sustainability aspects are also discussed in other functional
Operational Review meetings.
200
Sustainability statements | AkzoNobel Report 2015
Reporting process
and assurance
The reporting period is 2015. Data has mainly been
obtained from our financial management reporting systems,
corporate HR information management systems, corporate
compliance information reporting systems and the
AkzoNobel corporate reporting systems for health, safety
and environment performance indicators, each of which
have associated approval and verification processes. These
processes continue to be updated and improved. Data
collection for the newer value chain reporting aspects is
carried out using standard templates and procedures. We
follow GHG Protocol standards for our value chain carbon
footprint metric and have applied the market-
based method for our Scope 2 emissions (GHG Protocol
Scope 2 Guidance). More details on Scope 2 emissions
according to the location-based method, as well as
details on all reporting processes, are available on our
corporate website.
We are confident in the overall reliability of the data
reported, but recognize that some of the information is
subject to an element of uncertainty, inherent to limitations
associated with measuring and calculating data. Senior
managers approved the content and the quantitative data
used in the Sustainability statements section relating to
their respective areas of responsibility. The integration of
sustainability in day-to-day business is part of our routine
internal audit process.
The Sustainability statements section has been reviewed
by independent, external auditors. The Assurance report,
including the scope of the audit, can be found in the
Independent assurance report at the end of this section.
For further information please go to
www.akzonobel.com/sustainability
Reporting policies
Reporting boundaries
This Report 2015 integrates sustainability aspects of our
processes and business operations in each section, in
particular the How AkzoNobel created value in 2015,
Strategic performance, Business performance and
Governance and compliance sections.
This Sustainability statements section summarizes the
global, cross-business elements of the sustainability
agenda and company performance. It includes quantitative
and qualitative information relating to the calendar year
2015 and comparative data for 2014, 2013 and 2012.
We report on consolidated data from entities where
AkzoNobel is the majority shareholder (more than 50
percent) and joint ventures where we have management
control, but exclude all data from entities where we have
minority ownership, or no management control.
Comparability
Since 2010, we report acquisitions from the date of
purchase, recognizing that reporting improvements may be
required at these facilities. Recent significant changes:
• 2015 data includes Paper Chemicals until it was
divested in May 2015
• 2014 data includes updated definitions on regulatory
actions and executive potential. See also Note 11 and
Note 12 respectively. It also includes the result of the
divestment of our Building Adhesives business
• 2013 data excludes Chemicals Pakistan as it was
divested at the end of 2012. We include data from
Decorative Paints North America until April 1, 2013,
when it was divested
• 2012 data includes the Boxing Oleochemicals
acquisition and our new facilities at Ningbo, China
Our value chain (cradle-to-grave) carbon footprint
is measured per metric ton of product sales leaving
AkzoNobel. In 2012, the definition of product was clarified
to reduce variability in the indicator. It now excludes sold
by-products and sold energy. Previous years’ data have
been restated on the same basis, so there was no impact
on the percentage change in carbon footprint. For our
own operations, environmental impact and improvements
are quoted relative to production quantity, i.e. the product
volumes leaving every manufacturing plant.
Since 2013, we include the climate impact of VOCs in our
overall carbon footprint targets. This increased our Scope 3
downstream CO2(e) by about three million tons. The 2012
data have been restated to provide a sound baseline for
our 2012 to 2020 targets. There continue to be minor
changes in models and raw material data. We calculate the
percentage improvement based on comparable 2012 data,
and include “as reported” data for each year in this Report
2015. The changes to GHG Protocol guidance in 2015 do
not impact comparability – we have applied the market-
based method since before 2012.
We identify issues that affect comparability in the text
or footnotes.
201
AkzoNobel Report 2015 | Sustainability statements
Materiality matrix
Economic
Environmental
Social
17 18
14 18
h
g
H
i
i
m
u
d
e
M
w
o
L
l
s
r
e
d
o
h
e
k
a
t
s
r
o
f
y
t
i
l
a
i
r
e
t
a
M
11 15
10 11
12 19
19 16
2 3 14
13 15
17 20
16
Low
Medium
High
Materiality for AkzoNobel
Materiality
We have used the principle of materiality for assessing the
topics to include in this Report 2015, which are current and
important for the company and key stakeholders. In order
to determine the materiality of topics, we made a long list
of all (more than 200) possible material topics, using the
following as our key sources:
• Shareholders
• Customers
• Employees
• AkzoNobel strategy
• AkzoNobel Report 2014
• Sustainability organizations such as the World Business
Council for Sustainable Development (WBCSD), Forum
for the Future and the International Integrated Reporting
Council
• Issues raised by investor associations such as the VBDO
• Reporting guidelines and frameworks such as GRI G4
and SASB
• Sustainability ratings agencies such as RobecoSAM and
Carbon Disclosure Project
• Peer reporting
• Media analysis
This long list was then reduced by reviewing the dominance
of the topics in the above-mentioned key sources and
ranking them. The highest ranked topics were then
clustered into 20 final topics, prioritized and plotted in
the matrix. The topics marked as high importance are
included in the Consolidated Sustainability statements.
The topics marked as high importance are also included in
the integrated materiality diagram and are covered by the
AkzoNobel strategic focus areas and core principles. See
also the Strategic performance section.
A full explanation of each topic featured in the matrix can
be found on the next page.
For further information please go to
www.akzonobel.com/sustainability
202
Sustainability statements | AkzoNobel Report 2015
Sustainability topics (alphabetical within importance categories)
Economic
Importance Qualitative information
Quantitative information
Reported
1 Circular economy principles
High
Renewable energy and raw material
programs, waste reuse, Circular economy
section
Bio-based raw materials, Renewable energy,
Circular economy section
2 Customer needs
High
Insight on end-user segment trends
Customer excellence programs
–
3 Economic performance and
High
strategy
Market segmentation
Description of economic performance
Economic performance and strategy
4 Eco-premium solutions and
value chain management
High
Lifecycle assessment value chain impacts
Customer partnership solutions
Eco-premium solutions with downstream benefits, Eco-premium solutions
VOC in product
5 Integrity
6 Product and margin
management
High
High
Insight on policies and procedures
Code of Conduct reporting, Code of Conduct investigation,
Compliance monitoring, Code of Conduct training
Operational excellence initiatives
–
7 Fair taxes
Medium
Responsible tax policy
Geographic tax reconciliation
8 Resource scarcity/
Medium
material availability risks
Risk description and mitigation actions
Renewable energy and raw material
programs
Bio-based raw materials, Renewable energy
Report 2015: Business performance,
Sustainability statements Notes 4 and 5,
Case study
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance,
Sustainability statements Notes 4 and 5
Report 2015: Compliance and integrity, website
Report 2015: Strategic performance,
Business performance
Report 2015: Consolidated financial statements Note 6,
website
Report 2015: Risk management, Business performance,
Sustainability statements Notes 4 and 5
Environmental
9 Energy, resource use,
High
carbon emissions throughout
the value chain
10 Product stewardship
High
Value chain descriptions
Insight on impacts throughout the value
chain
Resource Efficiency Index, Cradle-to-grave carbon footprint, Bio-based
raw materials, Energy use, Renewable energy, Greenhouse gas emissions
per ton of production
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance
Sustainability statements Notes 4, 5, 15, 16 and website
Priority substance management
Regulatory affairs
Priority substances with management plan, REACH compliance
11 Climate change
Medium
Climate change risk management, mitiga-
tion and adaption policies
Cradle-to-grave carbon footprint, Greenhouse gas emissions per ton of
production
12 Operational eco-efficiency
Medium
Operational eco-efficiency program and
management
Operational eco-efficiency footprint measure
Report 2015: Strategic performance,
Sustainability statements Note 10
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance,
Sustainability statements Notes 4 and 5
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance,
Sustainability statements Notes 15-20
13 Sustainability in the
Medium
Supplier sustainability framework program Third party assessements and audits, Supplier Support Visits, Business
Report 2015: Sustainability statements Note 7
supply chain
14 Biodiversity
Social
Low
Climate change, pollution control
–
Report 2015: Sustainability statements Notes 3, 5, 15-20
Partner Code of Conduct compliance, Environmental supply chain aspects
15 Employee engagement
High
Insight on policies and procedures
Employee engagement survey
16 People and process safety
High
Insight on policies and procedures
Reportable injury rate, Lost time injury rate, Behavior-based safety
program, Life-Saving Rules, Regulatory actions, Loss of containment
17 Talent management
High
Insight on policies and procedures
Cross-BU moves of leadership talents, Internal promotion into executive
level, Retention of leadership talent, ViewPoint score on learning and
growth, Female executives, Female executive potentials, High growth
market executives, High growth market executive potentials
18 Community involvement
Medium
Human Cities initiative, Community
Program, Business activities
Projects involved, Volunteers, Donations
19 Stakeholder engagement
Medium
Framework activities
Sustainability ratings, Agency rankings
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance,
Sustainability statements Note 12, Case study
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance,
Sustainability statements Notes 8 and 9
Report 2015: How AkzoNobel created value in 2015,
Strategic performance, Business performance,
Sustainability statements Note 12
Report 2015: Human Cities, Case studies, Strategic
performance, Sustainability statements Note 14, website
Report 2015: AkzoNobel on capital markets, Sustainability
statements Note 3, website
20 Sustainability in the
Medium
supply chain
Supplier sustainability framework programs,
Human rights commitment program
Third party audits, Supplier Support Visits, Business Partner Code of
Conduct compliance, Social supply chain aspects
Report 2015: Compliance and integrity,
Sustainability statements Note 7
203
AkzoNobel Report 2015 | Sustainability statements 3 Note 3: Stakeholder engagement
Our approach
Stakeholder engagement in 2015
The aim of our ongoing stakeholder engagement is
to learn from key financial, social and environmental
stakeholder groups and, in collaboration, to develop
innovative and sustainable solutions to address some of
the world’s most pressing challenges. Our Planet Possible
agenda is not only designed to help drive innovation and
enable us to become radically resource efficient, it’s also
intended to inspire employees, customers, suppliers
and other key stakeholders to work together with us in
achieving this.
Reaching out to all our stakeholders in ongoing
conversations is vital to achieving our goals and to further
developing our long-term vision and strategy in all areas
of sustainability. Our key stakeholders are employees,
suppliers, customers, investors, shareholder representative
groups, NGOs and international organizations,
governments, industry associations, sustainability rating
agencies and communities. Based on the company
strategy, emerging societal and business issues, and the
outcomes of our materiality analysis, we identify the key
topics and levels of engagement per stakeholder group,
which can vary from pro-active engagement to providing
information upon request.
This section includes several 2015 highlights. More details
can be found on our corporate website, in the
Strategic performance section, and other chapters of
this Report 2015:
• Customers: Business performance section
• Investors: Governance and compliance section
• Specific sustainability/research organizations and
NGOs: Note 3 of this section
• Employees: Notes 6 and 12 of this section
• Suppliers: Note 7 of this section
• Communities: Note 14 of this section
Our commitment and primary partners
We support a number of charters and external organizations to
demonstrate our commitment to sustainability issues. We have
been a signatory of the UN Global Compact since 2004.
We are a partner of the Caring for Climate platform and an
active member of the Global Compact Netherlands Network.
We are participating in a program led by the UNGC network
in partnership with Oxfam Novib, Oxfam America and Shift,
a non-profit center for business and human rights practice,
supported by a grant from the Dutch government. The aim
is to explore how to improve awareness and build capability
in the area of human rights in four key countries – Indonesia,
Mexico, South Africa and Turkey. Company managers have
taken part in workshops to explore the local issues and
potential areas for joint activity. The project builds on the
successful 2008 – 2010 Business and Human Rights Initiative,
in which several Dutch multinationals, including AkzoNobel,
collaborated to contribute to the development of the UN
Guiding Principles on Business and Human Rights. It will lead
to an updated publication and an online portal of resources to
support action.
In addition, we subscribe to the UN Universal Declaration
of Human Rights; the key conventions of the International
Labor Organization; the OECD Guidelines for Multinational
Enterprises; the Responsible Care® Global Charter and the
CEO Water Mandate.
In order to contribute to, and keep up to date with, important
developments in sustainability, we participate in meetings
and task forces as a member of organizations such as the
WBCSD, Forum for the Future, True Price and the Dutch
Sustainable Growth Coalition (DSGC). Since 2010, we have
been a member of Worldconnectors, a Dutch-based initiative
working to broaden the discussion on international issues
by incorporating perspectives from a cross-generational
network. In 2014, we were one of more than 60 signatories
of their Post-2015 Charter, committing to contribute to the
achievement of the United Nations Sustainable Development
Goals (2015-2030). We have reviewed these goals against our
company agenda and priorities. Our Human Cities agenda will
lead to a focus on Goal 11 Sustainable cities and communities,
and Goal 17 Partnerships for the goals, extending existing and
developing new programs or partnerships:
• Our Buildings and Infrastructure products and
partnership activities to support affordable housing,
cultural heritage, improved air quality and sustainable
cities policies; our Transportation end-user products to
support affordable, safe transport
• Our Human Cities initiative contribution to urban
resilience and regeneration in partnership with the
Clinton Global Initiative and the Rockefeller Foundation’s
100 Resilient Cities program
• AkzoNobel’s Human Cities Coalition, a multi-stakeholder
group in the Netherlands, contributing to the
development of the New Urban Agenda to be adopted
during 2016 in Quito, Ecuador
• The Sustainable Trade initiative on Pulp & Paper (STIPP),
a sector-wide trade initiative in Indonesia (link to Goal 15
Life on land)
• Partnerships for the development/supply of renewable
energy, including the WBCSD Energy Efficiency
in Buildings program (link to Goal 7 Affordable and
clean energy)
• The Advanced Research Center Chemical Building
Blocks Consortium (ARC CBBC), a major Dutch
consortium which has announced plans to establish a
national research center focused on tackling important
energy and chemistry issues associated with the
growing depletion of the finite supply of raw materials,
involving companies, government and universities –
which also links to Goal 12 Responsible consumption
and production and Goal 7 Affordable and clean energy
In addition to these focus areas, our current product portfolio
allows us to make some contribution to Goals 2, 6, 7, 12, 15.
Our operations/internal targets and international operations will
have a minor influence on Goals 3-16.
204
Sustainability statements | AkzoNobel Report 2015 United Nations Sustainable Development Goals
Initial assessment of AkzoNobel contribution
l Main l Intermediate l Minor
Operations
1 No poverty
2 Zero hunger
3 Good health and well-being
4 Quality education
5 Gender equality
6 Clean water and sanitation
7 Affordable and clean energy
8 Decent work/economic growth
9 Industry innovation and infrastructure
10 Reduced inequalities
11 Sustainable cities and communities
12 Responsible consumption/production
13 Climate action
14 Life below water
15 Life on land
16 Peace, justice and strong institutions
17 Partnerships for the goals
l
l
l
l
l
l
l
l
l
l
l
l
International
business
Products
Human Cities/
Community
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
l
Customers and products
Our customers are increasingly looking for products and
solutions that will make their business more sustainable.
In order to continuously improve our product offering, we
encourage customers to challenge us and work together with
us. This includes joint research and development projects. For
example AkzoNobel’s Marine Coatings business has launched
the first ever digital tool for the shipping industry that can
accurately predict the potential fuel and CO2 savings offered
by fouling control coatings. Intertrac Vision was developed in
collaboration with leading academic and commercial research
institutes and more than 30 shipowners and operators.
More specific examples can be found in the various case
studies and the Business performance section of this
Report 2015. In addition, we are in the process of improving
our methods to monitor customer engagement and
customer satisfaction.
One of our focus areas is to support legislation, standards
and initiatives that promote and support the use of safer
and more sustainable products in our industry. In 2015, we
became a partner in the Global Alliance to Eliminate Lead Paint
(GAELP) to promote the phase-out of all lead-based paints
and eliminate the risks these products cause. We will support
the work of the alliance by sharing experiences of conversion
from lead to lead-free paints, providing technical advice and by
supporting the development of legislation to phase out the use
of lead compounds from all paints. See Note 10.
AkzoNobel’s Ferrazone iron fortificant continues to make
an important contribution in the fight against iron deficiency
anemia, a major global health issue, affecting around two billion
people. It causes a loss of physical endurance due to reduced
levels of haemoglobin and tissue iron. It is linked with increased
risk of maternal mortality during pregnancy; while in infancy
and childhood it can cause signifi cant loss of cognitive abilities
and decreased resistance to infections.
The most efficient way of combating the condition in
developing countries is by fortifying staple foods, such as
flour, with a form of iron that is readily absorbed by the body.
AkzoNobel’s Ferric Sodium EDTA, Ferrazone, has been
demonstrated to be both safe and effective in reducing iron
deficiency, even in inhibitory diets lacking bioavailable iron.
The use of Ferrazone also avoids undesirable color and
flavor changes in the fortified food, as well as teeth staining.
AkzoNobel is working closely with NGOs, governments and
leading producers of so-called pre-mixes (a mix of vitamins
and minerals used to fortify food) to provide the highest quality
product and the know-how needed for successful application.
AkzoNobel was a global partner of the Forest Stewardship
Council (FSC) from 2010 to 2015, with the aim of growing
awareness of responsible forestry worldwide. This was the
first and only partnership outside the forest products chain of
custody. Over the five years, our sponsorship focused on the
Smallholder Support Program, with the associated Made with
Heart campaign and the on-product label – the Small and
Community Label Option (SCLO) – to increase the visibility of
small-scale producers in the marketplace. When consumers
buy a product carrying the Made with Heart concept and the
FSC label, they are assured that the product originates from a
community that is dedicated to protecting natural resources,
and which benefits from this both financially and socially.
Over the years, we have also developed 11 active local
partnerships between FSC and AkzoNobel in the Netherlands,
UK, Germany, Switzerland, Czech Republic, Brazil, Russia,
Sweden, Denmark, Argentina and Poland. This involved a
range of communication and training activities and, in 2013,
included the widest ever geographic coverage of the FSC
Friday event.
A spokesman for FSC said: “FSC is grateful for AkzoNobel’s
support to the FSC Smallholder Support Program. Together
with the contribution since 2011, it allowed us to set up a
program taking care of those in the FSC system, who do not
205
AkzoNobel Report 2015 | Sustainability statements
have a very strong voice and need special attention. It helped
to develop tools such as the Made with Heart marketing
campaign and the smallholder fund, a financing mechanism
for smallholders in the certification process. The inclusion of
smallholders in the FSC system is of strategic importance to
achieve the mission of our organization.”
AkzoNobel has also been involved in the set-up of a sector-
wide trade initiative to accelerate Indonesia’s progress
towards mainstreaming sustainability in the pulp and paper
industry and building lasting relationships with customers.
The Sustainable Trade Initiative on Pulp & Paper (STIPP) – a
sector-wide initiative co-founded by IDH, APP and AkzoNobel
and supported by the Indonesian Ministry of Forestry and the
Indonesia Pulp & Paper Association – was launched in June
2014. STIPP aims to de-couple deforestation from the pulp
and paper supply chain by initiating sector-wide solutions to
the sustainability challenges, including peat land practices,
High Carbon Stock (HCS) standards, clean manufacturing,
yield intensification, community engagement and social conflict
management. Significant support to the development of a
“green provincial plan” for South Sumatra has been started,
with STIPP supporting in the Pulp & Paper and Peatland
Protection initiatives.
In addition, AkzoNobel is sharing expertise on “clean”
manufacturing, supporting improved industry practices on
resource and energy efficiency and waste management.
This allows us to build close relationships with this important
customer. The first project with APP is scheduled to
begin in 2016.
Suppliers and sourcing
We continue to engage with Together for Sustainability
(TfS), the chemical sector initiative to create more
sustainable supply chains. Founded by the Chief
Procurement Officers of six European companies, the
initiative now has 16 partners across three continents and
is making good progress towards building the industry’s
standard for sustainable supply chains. The TfS program
uses high quality third party sustainability assessments and
audits to measure the supplier’s sustainability performance
against a pre-defined set of industry best practice criteria,
and shares that single assessment across the partners.
It also provides a platform for monitoring improvement
actions. For more information, see Note 7.
Engaging employees
During 2015, we continued to engage employees from
around the world on the theme of sustainability through
our Planet Possible activities. For more information,
see Note 6.
Energy and climate
Our aim is to achieve cost-effective energy sources and
maximize sustainable impact while being prepared for
future developments. For our energy-intensive production
processes, we are actively engaging in diversifying the
energy mix to lower risks and enhancing our sustainability
performance by reducing our carbon footprint and
increasing the use of renewable energy.
Information on some new energy partnership, for example
with Eneco, and bio-based raw materials partnerships are
included in the case studies, the Business performance
section and Note 5 of this section. In addition, we
engaged in a number of consortia on innovations in
bio-based chemistry.
We co-chair the WBCSD Chemicals Sector Reaching
Full Potential working group. Following work to develop a
consensus approach to aspects of lifecycle assessment,
the focus in 2015 was on partnerships to accelerate
uptake of more sustainable products. AkzoNobel led
the Energy Efficiency in Buildings Benelux Laboratory to
contribute to the EU energy efficiency goals of 20 percent
in 2020 and 27-30 percent in 2030. The team convened
a wide range of building stakeholders to support the
development/implementation of ambitious, practical,
retrofitting solutions for large-scale residential buildings,
schools and public and private office buildings.
Developing good practice
As part of our efforts for continuous improvement and the
development of good practice, we participate in a range
of activities that offer the opportunity to learn from and
share and engage with a broad group of stakeholders.
We are incorporating natural capital thinking to ensure
our business is sustainable as it grows. During 2015,
we tested the outcome of some of these activities in the
extended four-dimensional profit and loss (4D P&L) pilot,
as described in the case study in this section.
We continue to use our membership of the International
Union for Conservation of Nature’s (IUCN) business
engagement network to increase awareness and
inspiration for AkzoNobel employees. Leaders for Nature,
in place since 2006, is the IUCN NL business engagement
network of 20 multinationals and major Dutch enterprises
working together on greening the economy. The main
biodiversity focus for our own operations is on climate
change mitigation (through the adoption of a carbon
mitigation policy) and pollution control (monitoring air,
water and soil emissions). We have also incorporated an
assessment element in the 4D P&L pilot.
Our product portfolio includes solutions that deliver both
environmental and social benefits to our customers
and wider society. While processes for measuring
environmental benefit are well advanced, social impact
measurement is less well developed. Therefore, we
contributed to the Roundtable for Social Metrics and the
WBCSD social metrics working group, working together
with leaders in the industry to develop ways of quantifying
the social challenges we are facing. We are testing the
outcome of some of this work in our 4D P&L pilot.
To help us in further developing integrated reporting and
transparency, AkzoNobel was one of the pilot companies
for the International Integrated Reporting Council program
to create a forward-looking company reporting framework,
and provided company input to the working group.
206
Sustainability statements | AkzoNobel Report 2015
Sustainability rating agencies
RobecoSAM
(Dow Jones Sustainability Index)
We were industry group leader for the fourth consecutive year,
and have been in the top three for the last ten years.
CDP
Sustainalytics
Oekom
Vigeo
We have participated in the CDP assessments since 2007 and
achieved a 100 percent disclosure score in 2015.
Sustainalytics has covered us in their rating since 2004.
For the fourth year in a row, we’re ranked among the industry
leaders.
Oekom research has analyzed us since 2001.
We have been awarded Oekom Prime status since 2012.
We currently rank in the top five chemical companies.
Vigeo has rated us since 1999. In 2015, we were among their
leader group in ESG performance, resulting in inclusion in all their
ethical indices.
We continue as a member of the International Integrated
Reporting Council business network, made up of
companies committed to making the integrated reporting
framework a practical reality. Our Report 2014 gained
recognition from the Ethical Corporation in the UK, won
a European Excellence Award and was awarded the
Transparency Benchmark Crystal Prize by the Dutch
Ministry of Economic Affairs.
Shareholders, analysts and indices
We continuously developed our engagement with
shareholders and investors on sustainability aspects by
taking part in conferences and meetings during the year,
as well as answering questions in telephone briefings and
questionnaires. In addition, in May 2015, we organized
our second Social Responsible Investor (SRI) conference
call. Sustainability aspects of business are also included in
many analyst and general shareholder presentations.
Investors make use of sustainability rating agencies.
An overview of the agencies and their ratings can be found
in the following table:
For an overview of our listing on sustainable stock
indices, turn to AkzoNobel on the capital markets in the
Governance and compliance section.
207
AkzoNobel Report 2015 | Sustainability statements Using four dimensions
to generate more value
The four-dimensional
profit and loss (4D P&L)
methodology represents
value creation in multiple
dimensions. This is
a totally new way of
looking at an economy,
where the impact of a
company on society at
large can be assessed.
In an effort to gain a more detailed insight into how our profit and loss is generated,
we launched a 4D P&L accounting pilot study during 2014 at our Pulp and
Performance Chemicals business in Brazil.
The aim was to gain a deeper understanding across the value chain of our
environmental, human, social and financial impact. We reasoned that the more we
knew about these four dimensions – including their monetary value – the more we
would be able to identify possible improvements and, ultimately, increase business
value. The study also shows that it’s possible to shape the future by looking at
society and the economy with a multi-dimensional perspective.
Based on the findings of the pilot, together with other assessments, we agreed
and implemented specific actions during 2015 designed to reduce the negative
aspects and build on the positive factors. For example, the business increased
its use of renewable resources and is implementing continuous energy and
material efficiency improvements in its own operations. Additional community
programs have also been launched – with those offering more value to society
being prioritized – while additional talent development and training programs for
employees have been introduced.
In addition to the insights for our own operations, we have been using this
data with customers to improve their energy and resource efficiency, as well
as motivating our suppliers to map their sustainability performance. We had
the opportunity to share knowledge and experiences gained from the pilot with
customers and other stakeholders on many occasions.
In order to build on this progress, we launched phase two in 2015. This involved
widening the scope to include our Pulp and Performance Chemicals sites
producing pulp bleaching chemicals in the US and Sweden. The methodologies
for the assessment of financial capital (including all financial contributions, not just
conventional economic profit) and natural (environmental) capital were refined. For
social capital, we moved to a semi-quantitative, risk-based method, including a
wide range of topics, from worker safety to community engagement. For human
capital, we developed our monetization method, based on inflation-corrected
future salary growth of employees. To summarize, the methodologies behind the
208
Sustainability statements | AkzoNobel Report 2015 It’s possible to
shape the future by
looking at society and
the economy with
a multi-dimensional
perspective
AkzoNobel Report 2015 | Sustainability statements
209
AkzoNobel Report 2015 | Sustainability statements Zooming in on paper.
Eucalyptus wood is the key raw material for pulp production.
Financial capital and natural capital
Financial capital (positive)
Natural capital (negative)
Human capital
Human capital (positive)
+
+
-
-
Chemicals/
salt
+
+
+
-
-
-
Energy
+
+
+
-
Own
operations
+
+
-
-
-
Downstream
+
+
+
-
-
-
Total
+
+
+
+
+
+
+
+
Chemicals/
salt
Energy
Own
operations
Downstream
Total
study are now more robust, based on open source methods, and
can be applied to all parts of the value chain.
The results of phase two of the pilot (outlined in the chart above)
show the highest impact to be on financial capital, positively
creating value through a combination of salaries, taxes and interest
payments, as well as the traditionally explored company profit. There
is also a substantial negative natural capital along the value chain,
mainly resulting from the use of fossil fuels as an energy source.
As outlined in the charts above, the human capital – based on
generic industry data – is mainly influenced by salary development.
This is positive in a lot of cases, but not in all regions and sectors.
Nearly all the social capital indicators that were assessed resulted in
a very low to medium risk, which indicates a low overall social risk.
For our own operations, social risk can be reduced by developing a
more formal procedure for engaging with local communities. Some
other high risks, related to freedom of association and the right to
collective bargaining, were identified in our value chain. Since this is
based on generic regional industry data, we will review whether this
is also relevant for our specific value chains.
The 4D P&L methodology was also applied to a consumer product
relevant for our business – a book. The exercise was carried
out to increase awareness among value chain partners of the
possible financial, environmental, social and human issues. It also
210
Sustainability statements | AkzoNobel Report 2015 Pulp is the key raw material for paper production.
Our Chemical Island in Jupiá, Brazil, which is located on the site of a customer.
Social capital (risk in each part of the life cycle)
Very high
High
Medium
Low
Very low
No data
Value chain of a typical book (indicative in monetary value)
Financial capital (positive)
Natural capital (negative)
Chemicals/
salt
Energy
Own
operations
Downstream
Total
Paper
production
Printing, writing
and marketing
Sales and
distribution
Transport
from shop
Total
demonstrates how to operationalize the 4D P&L in a full product
value chain. Moreover, we wanted to put the business-specific results
of bleaching chemicals production into a context and show the
contribution of AkzoNobel to a consumer product. With the company
providing bleaching chemicals, it was assumed the book would be
produced in Europe on 50 percent virgin paper from Brazil and
50 percent recycled paper, with 100,000 copies sold at €20 each.
Part of the 4D results (outlined in the chart Value chain of a typical
book) indicate total positive financial capital, mainly in labor intensive
steps such as writing, marketing and selling and negative natural
capital, mainly in material intensive steps such as paper production
and transport.
The 4D P&L methodology represents value creation in multiple
dimensions. This is a new way of looking at an economy, where the
role of a company in society at large can be assessed. The results
add new sustainability perspectives to traditional risk/opportunity
processes used in business decision-making. Thanks to this more
extensive assessment, we can continue to engage with value
chain partners and tackle specific actions that help us to reduce the
negatives and build on the positives.
211
AkzoNobel Report 2015 | Sustainability statements Value chain management
Our sustainability objective is to create more value from
fewer resources – right across the value chain – by
making more effective use of natural resources in our own
operations and through our products, and by engaging
employees, suppliers and customers in developing
solutions. We have maintained our performance
on eco-premium solutions and are now seeing an
improvement in our cradle-to-grave carbon footprint
performance – leading to an increase in our Resource
Efficiency Index.
Key performance indicators – value chain
Sustainable business
Resource Efficiency Index (2012 baseline)
Eco-premium solutions with downstream benefit
(% of revenue)
Eco-premium solutions total (% of revenue)
VOC in product (% reduction from 2009)
Resource efficiency
Carbon footprint cradle-to-grave per ton of product sales
(% reduction from 2012)
Carbon footprint cradle-to-gate per ton of product sales
(% reduction from 2009)
Carbon footprint own operations (million tons of CO2(e))
Renewable energy own operations (%)
Renewable raw materials (% of organic)
Supplier management
Critical PR1 spend covered by supplier management
framework (% of spend)
PR1 suppliers signed Business Partner Code of Conduct
(% of spend)
NPR2 suppliers signed Business Partner Code of Conduct
(% of spend)
The programs summarized in the following sections are
designed to create value, right across the chain:
• Value for our business by focusing on our end-user
segments – delivering growth and profitability
• Value for our customers by providing products with
excellent functionality that generate resource/energy
benefits ahead of competitive products
• Value for the environment through more effective use of
natural resources and a significant reduction in specific
greenhouse gas emissions across the value chain
• Value for society through the positive impact of our
products in our end-user segments
2012
2013
2014
2015
Ambition
2015
Ambition
2020
100
17
22
10
0
1
4.7
33
13
69
97
80
98
18
24
7
2
4
3.9
31
13
80
96
83
96
19
24
5
-4
0
3.9
34
13
83
98
80
113
19
24
n/a
3
8
3.8
38
11
87
98
81
–
–
30
–
–
10
<4.6
–
–
88
98
80
–
–
20
–
–
25-30
–
<4.6
45
–
–
–
–
–
There are three aspects for the delivery of this value chain
strategy, which are summarized over the following pages:
• Sustainable business
• Resource efficiency
• Capable, engaged people
Lifecycle assessment
Lifecycle thinking is the basis for all our sustainability
work. Our standard assessment method is eco-efficiency
analysis (EEA), based on a combination of lifecycle
assessments and lifecycle costing. Assessment work is
carried out by business and company level specialists
and is based on ISO 14040-44 and a company lifecycle
assessment database.
Lifecycle assessment has been included in a range of
processes for many years. As part of the current strategy,
the company has developed a number of common
processes – either at company or Business Area level –
which include lifecycle thinking.
Innovation process
The new Innovation process for product and process
developments covers an assessment of market segments
and strategic alignment, including sustainability.
AkzoNobel’s eco-premium solutions concept requires
the assessment of sustainability aspects along the value
chain. It encourages the development of more innovative,
sustainable products. We continuously aim to reduce the
environmental footprint of our product value chains.
Carbon footprint assessment
We measure the carbon footprint of all our key value
chains (472 in 2015) using a full cradle-to-grave, or
screening, lifecycle assessment. This is the basis of our
carbon footprint key performance indicator.
Suppliers on SSV program since 2007
373
392
432
455
1 Product related (raw materials and packaging).
2 Non-product related.
212
Sustainability statements | AkzoNobel Report 2015 Footprint (PEF) pilots. This was done for a number of
AkzoNobel Pulp and Performance Chemicals value chains
in three countries including their respective suppliers
and customers. We have concluded that a number
of sites operate in broad regions that are considered
biodiversity hotspots. For these product lines, specific
recommendations have been made in order to manage the
related possible biodiversity risks.
Commercial excellence processes
Including sustainability in marketing propositions is an
essential aspect of our Planet Possible agenda.
We are developing environmental product declarations
(EPDs) for some products as part of our marketing activity.
Investment decisions
All our major investment proposals (more than €5 million)
require a sustainability evaluation alongside the financial
case. This includes assessments at different stages in the
project development. At the point of application for capital,
the requirements include an eco-efficiency assessment,
as well as a full review of health and safety, process and
product safety, natural resource/raw material requirements
and environmental impacts. The proposals are reviewed
by subject matter experts, who give input to the
Executive Committee, to provide a strong basis for the
investment decision.
Other value chain aspects
While we focus on carbon footprint as a proxy for raw
material and energy efficiency, our lifecycle assessment
considers a range of impacts. In 2015, this included:
Four-dimensional profit and loss (4D P&L)
We have applied methodologies for assessment of
profit and loss accounting along the value chain, taking
environmental, financial, human and social aspects
into account. The 4D P&L covers the full value chain,
consistent with our Planet Possible agenda. The 4D P&L
method has been applied to some of our chlorate value
chains in Brazil, the US and Sweden (see case study).
Bio-diversity
As a part of the 4D P&L accounting project, we are
including a biodiversity assessment by analyzing hot spots,
based on methods used in three recognized assessment
processes: Environmental Priority Strategies, the
WBCSD global water tool and the Product Environmental
4
Note 4: Sustainable business
Resource Efficiency Index
The adoption of a Resource Efficiency Index as a key
financial indicator results from the conviction that global
population growth and increasing resource constraints will
drive new business models in the materials and energy
intensive industry sectors. In the chemicals industry,
sustained business success will require product and
process innovations that generate much more added value
from each unit of raw materials and energy used across
the value chain – be it with our suppliers, in our own
operations or with the users of our products.
The Resource Efficiency Index is defined as gross margin
divided by cradle-to-grave carbon footprint – reported
as an index. We selected gross margin as an indicator of
added value as it is comparatively stable and captures the
effects of efficiency improvements. Carbon footprint is a
good proxy for resource efficiency across our value chains.
We are initially monitoring the Resource Efficiency Index
and expect it to be a long-term indicator for AkzoNobel.
Although margin variability and currency fluctuations may
affect performance in any given year, the long-term trend
Resource Efficiency Index
gross margin/CO2(e) indexed
90
95
94
100
98
96
113
2009
2010
2011
2012
2013
2014
2015
Resource Efficiency Index is gross margin divided by cradle-to-grave carbon footprint,
expressed as an index. The index is set at 100 for 2012, since this is the baseline
year for our strategic sustainability objectives.
REI 2009-2011 is indicative and has been approximated. Cradle-to-grave carbon
data for 2009-2011 is based on:
• Cradle-to-gate carbon data as measured and reported
• Gate-to-grave carbon data has been extrapolated based on 2012 data, adjusted
for product volumes in 2009-2011
213
AkzoNobel Report 2015 | Sustainability statements must be upwards. A review of our performance over the
past seven years reveals a variable trend. We have seen
increases from factors such as:
• Toxicity
• Health and well-being
• Improvements in energy efficiency
• Increased renewable and low carbon energy supply
• The ongoing switch towards waterborne coatings
• Margin improvements as a result of higher value added
products
However, alongside these positive factors we have seen
tighter margins, together with expansion in markets that
are slower in adopting low VOC coatings and have a high
proportion of high carbon energy supplies. The increase
this year is a combination of improved carbon footprint
performance and increased margins, partly due to
currency variations.
Eco-premium solutions
We want to continue to lead by example in terms of
sustainability. It is common knowledge that we live in a
world with finite resources. We therefore have a strategy
of resource efficiency to create more value from fewer
resources, and to find opportunities where there don’t
appear to be any. We minimize the environmental and
social impact/footprint of the products we sell and the
processes we use to manufacture them.
Eco-premium solutions (EPS) are products and processes
that offer an improvement in sustainability, delivering either
environmental or social benefits. They are measured via
a quantitative analysis or a qualitative assessment of
performance in seven categories:
• Energy efficiency
• Use of natural resources/raw materials
• Land use
• Emissions and waste
• Risks (e.g. accidents)
When assessed across the entire value chain against
currently available solutions in the market, the
eco-premium solution must be significantly better in at
least one of the above criteria, and not significantly worse
in any. We aim to make comparisons with products and
services that are readily available and appealing to the
wider general public, as opposed to being of interest to
only a very specific group.
Year-on-year progress will be impacted not only by our
own improvements, but also by competitor activity and
legislation changes. For example, the introduction of new
products into the market whose performance is equal to
our current range of eco-premium solutions will redefine
the standards that we will have to surpass to acquire EPS
status.
In 2012, we added another element to our eco-premium
solutions: eco-premium solutions with downstream
benefits. This is a measure of those eco-premium solutions
(products and services) that deliver the sustainability
benefits in the downstream value chain – directly to our
customers or consumers – as a semi-finished product, as
a final product, or as a reusable/recyclable material in the
end-of-life phase.
Recent examples of eco-premium solutions with
downstream benefits include:
• AquaSilk: A waterborne coating for the Chinese
furniture market with exceptional film transparency and
hardness. It is one of the first products to meet the
relatively new demand for waterborne products in China
• Armohib CI-5150: A high-end film-forming corrosion
inhibitor fulfilling the highest level of environmental
criteria within the oilfield chemicals sector globally.
Corrosion is a serious issue in the production and
transportation of oil and gas which, without protective
measures taken, could lead to serious consequences
for health, safety and environment, not to mention the
economic losses. Armohib CI-5150 is ten to 100 times
less aquatoxic than the two globally most used
competitive chemistry classes
• Bolikel XP: A novel, highly efficient micronutrient for
a full, healthy color of crop. It is fully biodegradable
and water soluble, making this product suitable for
sustainable soil applications (fertigation)
• Dulux Easycare: Interior paint with extended lifetime.
Superior in terms of scratch, knock resistance and
washability. Introduced in Poland in March 2015 with
excellent sales results
• Dulux Powerflexx: Unique Powerflexx technology and
stay-clean properties mean that buildings are protected
from peeling or flaking in any weather conditions and
stay clean for longer. The Keep Cool technology of this
external coating can reduce exterior temperatures by
as much as 5ºC, keeping homes cooler and reducing
energy use for cooling in warmer climates
• Sikkens Cetol BLX-Pro Top: A waterborne woodcare
product with stay-clean properties. These extend
the lifetime. Compared with the regular recipe, this
product has a lower carbon footprint. It is sold mainly
in Germany and France, and is being introduced in
Belgium, Spain and Italy
• Interpon A2000 Dual Trim: A powder coating applied
to the roof rails of cars, in the automotive chassis
market, where liquid or anodizing coatings are still the
standard
• Kayabrid: A coupling agent between polar fillers
and non-polar polymer chains, allowing commodity
plastics such as polypropylene to be processed into
high performance composites. Lower loadings of
coupling agent are needed to achieve the same/higher
mechanical properties. The carbon footprint is low due
to the use of bio-based fibers
• Sikkens Autoclear UV/Lesonal UV Clear: A new
UV clearcoat to meet the needs of fast track/stationary
repair. The bodyshop’s energy costs and footprint are
lowered, while productivity is improved by shorter drying
times compared with ambient curing products
214
Sustainability statements | AkzoNobel Report 2015 Revenue from all eco-premium solutions totaled
€3.5 billion, or 24 percent of total revenue. In 2015,
revenue from eco-premium products and services with
downstream benefits totaled €2.9 billion, or 19 percent of
total revenue, of which 9 percent relates to EPS with social
benefits: health and well-being, risks and toxicity.
Eco-premium solutions with downstream benefits
in % of revenue
Ambition
18
17
19
19
20
Eco-premium solutions in % of revenue
Ambition
21
22
22
18
24
24
24
30
2009
2010
2011
2012
2013
2014
2015
2015
Eco-premium solutions are products and processes that offer an improvement in
sustainability in (part of) the total value chain.
Eco-premium solutions per Business Area
in % of revenue
Decorative Paints
Performance Coatings
Specialty Chemicals
2012
2013
2014
2015
26
14
25
35
13
26
33
15
27
33
15
25
2012
2013
2014
2015
2020
Eco-premium solutions with downstream benefits are products and processes that
offer an improvement in sustainability in the downstream value chain.
VOC in products
Eco-premium solutions with downstream benefits
per Business Area
in % of revenue
Decorative Paints
Performance Coatings
Specialty Chemicals
2012
2013
2014
2015
22
13
16
27
13
16
27
15
17
28
15
17
Our 2009 total EPS target of 30 percent of sales revenue
by 2015 was not achieved, mainly because of a changed
focus towards customer benefits in our current strategy
and targets. This change is reflected in the results for EPS
with downstream benefits, for which the 2020 ambition
has almost been achieved. We maintain our focus on
continuously improving this challenging metric with a
variable baseline.
Our businesses continue to introduce new and
reformulated products with significantly reduced (or
preferably virtually zero) volatile organic compound (VOC)
content. As a result of this multi-year program, our product
portfolio is undergoing a transformation towards a range of
products that are lower in VOC content. Since 2009, this
has been established as an important part of our target
to minimize the potential social and environmental impact
from the materials in our products.
Both Decorative Paints and Performance Coatings are
contributing to this continued reduction of VOC content.
The company’s overall paints and coatings product
portfolio showed a decrease of 5 percent in average VOC
content in 20141, compared with the baseline position
of 2009. Due to divestments of businesses with very low
VOC products, the like-for-like reduction for AkzoNobel
over this period was 19 percent.
1 The annual metrics for VOC in products are assessed in the second quarter of the
year, which is why the figures above reflect the year 2014 instead of 2015.
Drivers for change towards reduced VOC content come
from a combination of technological improvements and
changing customer and market demands – particularly
with respect to the use of waterborne products. We are
active in supporting these changes in emerging markets,
where we are beginning to see changes in the form of
VOC legislation. For example, the recent introduction of
VOC tax regulation in China is helping the industrial wood
coatings market move to our new waterborne technology.
Our Performance Coatings business continues to achieve
a reduction of VOC content in its product portfolio, despite
the technical challenges involved in balancing formulation
cost and product performance. Although we continue to
make technological progress, we remain acutely aware
that it is cost/performance that will ultimately define the
pace of market uptake. In the marine and protective
coatings market, we have reduced VOC by launching
several new high solids products. This contributed to an
average VOC reduction within Performance Coatings in
2014 of 2 percent, compared with 2012. This represents
a further reduction of VOC content in our product portfolio
compared with the previous year’s performance.
Our Decorative Paints products also contributed
significantly to VOC reduction through the continuous
introduction of high quality, low VOC solutions. Sales
of waterborne and zero-emission paints are steadily
increasing, an effect which we expect to continue in the
coming years. Due to a change in product mix caused by
divestments in 2014, average VOC content in Decorative
Paints actually increased by 5 percent compared with
2012. However, when taking into account the impact
of the divestments of the low VOC businesses in North
America in 2013, and the Building Adhesives business in
2014, the average VOC content in 2014 was reduced by
14 percent compared with 2012.
For 2015, we forecast a continuation of these trends,
with a further reduction in average VOC content for our
Performance Coatings and Decorative Paints portfolio.
215
AkzoNobel Report 2015 | Sustainability statements
The circular
economy
The circular economy is increasingly being
talked about as a possible alternative to today’s
unsustainable and linear (take-make-dispose)
consumption patterns.
Its potential is such that AkzoNobel has embraced the concepts of the circular
economy in its Planet Possible agenda.
Business leaders around the globe are also paying more attention to the circular
economy and consider it to be an important way of increasing growth and
profitability in line with sustainable development.
Many of these leaders gathered in Paris in December 2015 at the sustainable
innovation forum (SIF15), which took place alongside the historic COP21 climate
summit. The event provided an opportunity for them to discuss how companies can
best make the transition to more sustainable business and production practices.
AkzoNobel takes great interest in the circular economy and strongly endorses the
concept as the necessary route towards a sustainable society. The philosophy
behind it is perhaps best described by the Ellen MacArthur Foundation, who have
clearly set out its three key principles:
1 Preserve natural capital by controlling finite stocks and balancing renewable
resource flows – for example replacing fossil fuels with renewable energy.
2 Optimize resource yields by circulating products, components and
materials in use at the highest utility, at all times, in both technical and biological
cycles – for example sharing or looping products and extending product lifetimes.
3 Increase system effectiveness by revealing and designing out negative
externalities, such as water, air, soil and noise pollution; climate change;
congestion and negative health effects.
216 Sustainability statements | AkzoNobel Report 2015
Linear economy
Resource
extraction
Production Distribution Consumption Waste
Circular economy
Prod
u
c
tio
n
D
i
s
t
r
i
b
u
tio
n Cons
umpt
e c t o r
ecyclin g s
R
e
l
c
y
c
e
r
/
r
i
a
p
e
/r
e
ion Reus
We are moving away from unsustainable
and linear (take, make, dispose)
consumption patterns to a circular
economy.
Sustainability statements | AkzoNobel Report 2015
Our Planet
Possible agenda
is in line with
circular economy
thinking
AkzoNobel Report 2015 | Sustainability statements
217
AkzoNobel Report 2015 | Sustainability statements Our Chemical Island sites are integrated with pulp mills and primarily run on renewable excess energy.
Consumer paint recycling.
Our own Planet Possible agenda is focused on creating more value from fewer
resources, very much in line with circular economy thinking. There are many
examples of where circular thinking is already in practice in our activities. Our
bio-based raw material strategy, targets and performance, our renewable energy
purchasing objectives and performance and elements of our priority substance
management program are included in the Notes to the Sustainability statements.
Renewable resources
The increased use of renewable energy and bio-based raw materials is actually
circular thinking at a planetary level. The carbon atoms (as CO2) are absorbed when
trees, plants etc. are growing. The same amount of CO2 is released when fibers are
incinerated or biodegraded.
Our Chemical Island concept is an example of circular thinking. We set up chemical
facilities at our customers’ pulp mills. These factories make use of excess renewable
energy from the pulp mill and we provide the mill with the chemicals it needs. Our
Pulp and Performance Chemicals business is part of a potentially fully renewable
value chain based on abundant salt, renewable energy and renewable fibers.
Circulating products, components and materials
We also make use of other people’s waste. In Delfzijl, the Netherlands, for example,
we purchase heat created by the incineration of waste. Since it is household waste,
most of it has a renewable origin.
On the flip side, other people make use of our waste. In the UK, ReColour was
launched last year as a viable alternative to throwing away unwanted household
paint, building on our long-standing partnership with Community RePaint. We are
enabling social enterprises to remanufacture this unwanted paint for social and
community use, helping community groups and charities to create colorful living
spaces using recycled products.
In order to find more opportunities for waste reuse we are participating in the United
States Materials Marketplace, set up by the US Business Council for Sustainable
Development (US BCSD) and the WBCSD.
AkzoNobel also strives for more durable coatings. All our outdoor paints and
coatings are continuously being developed to increase the lifetime of the paints, as
218 Sustainability statements | AkzoNobel Report 2015
Sustainability statements | AkzoNobel Report 2015
Steam from waste is delivered to our plants in pipelines.
An asphalt warm mix additive reducing climate and potential health impacts.
well as the lifetime of the materials they are protecting. By lasting longer, the overall
amount of resources required over the lifetime of a building can be reduced.
Designing out negative externalities
Many of our products and solutions lead to less energy use for our customers.
For example, Rediset is a surfactant and additive for asphalt which results in less
energy use during asphalt paving. Another example is the Weathershield products
developed by our Decorative Paints business, which keep buildings cooler by
reflecting sunlight. This means less electricity is needed for air conditioning.
There’s also Intersleek, an antifouling paint which makes ships’ hulls smoother,
resulting in less drag, which means less fuel is needed and there are fewer
emissions. We also have various examples of new industrial coatings that can be
cured with UV light instead of thermal heat, saving energy for our customers.
In addition, we have a number of products that can help improve air quality, both
inside and outside of buildings. Products like Dulux Guardian in China help absorb
air pollutants such as formaldehyde inside buildings, while Sikkens Alpha Aeroxane
can neutralize nitrous oxides that can cause smog in cities. We are also actively
promoting low VOC (particularly water-based) coatings across our business
to help reduce the amount of solvents emitted from our products. In addition,
the AkzoNobel operational eco-efficiency program aims at less energy use and
emissions from our plants.
Embedding circular thinking in AkzoNobel
AkzoNobel not only pursues business activities of a circular nature, but also
quantifies its efficiency in generating value across the full value chain. This is done
by means of cradle-to-grave carbon targets and the Resource Efficiency Index,
a unique indicator expressed as gross margin divided by cradle-to-grave carbon
footprint, expressed as an index.
The implementation of circular thinking is embedded in AkzoNobel’s business
activities and is a key principle of our Planet Possible sustainability agenda – doing
more with less.
AkzoNobel Report 2015 | Sustainability statements
219
AkzoNobel Report 2015 | Sustainability statements 5
Note 5: Resource efficiency
Carbon footprint cradle-to-grave
In our 2020 sustainability objectives, carbon footprint has
a very important role – not only for its measure of climate
impact and protection, but also because we are using it as
a proxy for how efficiently we are using raw materials and
energy in our products.
Our target is to reduce our cradle-to-grave carbon
footprint by 25 to 30 percent per ton of sales between
2012 and 2020, including the impact from VOC emissions.
We will achieve this through innovative products/solutions,
technology and energy management, and by creating
more value from fewer resources. Collaboration with
suppliers and customers is crucial for our success.
Our assessment this year indicates a total footprint of
around 25 million tons of CO2(e) which is 7 percent lower
than 2014. CO2(e) per ton of sold product is 3 percent
lower than 2012. The cradle-to-grave assessment shows
that around 40 percent is from raw materials extraction
and processing (Scope 3 upstream), 15 percent from
our own direct and indirect emissions from energy
consumption (Scope 1 and 2), and 45 percent from the
use and end-of-life phase (Scope 3 downstream).
We have made some good improvements in 2015
although our 2020 cradle-to-grave ambitions will still
be very challenging. Our cradle-to-gate performance
is variable, mainly due to product and energy mix, but
the trend is moving in right direction and performance is
approaching the original 10% target. In 2015, new power
contracts for production sites, for example in Russia
and Brazil, together with significant energy efficiency
improvements in energy intensive sites (chlorate and
chlor-alkali) have reduced Scope 2 emissions. Increased
production at our Chemical Islands (using renewable
power), higher sales of paints with lower carbon footprint
in Asia and the divestment of our Paper Chemicals
business (relatively high carbon footprint) have reduced the
value chain footprint significantly. However, some of our
Cradle-to-grave carbon footprint
in million tons of CO2(e) and % reduction per ton of sales
Scope 3 downstream
Scope 1 & 2
Scope 3 upstream
% reduction CO2(e) per ton of sales
Target
0
27.5
- 4
2
26.5
26.9
3
24.6
improvements have been outweighed by a deterioration of
power mix in Germany.
Scope 2 emissions are calculated using the market-based
method (GHG Protocol). We have assessed all Scope 3
categories according to the GHG Protocol Scope 3 standard
(see Scope 3 emissions on our corporate website).
More information on our assessment method for carbon
footprint cradle-to-grave can be found in Note 2.
25-30
Management plans
2012
2013
2014
2015
2020
The carbon footprint of the six main greenhouse gases is measured from cradle-to-grave
based on the international Greenhouse Gas (GHG) Protocol and Lifecycle Assessment
ISO 14040-44. See Assessment method on our corporate website.
Cradle-to-grave carbon footprint
Total in million tons CO2(e) and reduction per ton of sales
2012
2013
2014
2015
Decorative Paints
Total
% reduction per ton of sales
Performance Coatings
5.0
0
4.2
3
Total
13.0
12.9
% reduction per ton of sales
0
0
Specialty Chemicals
Total
% reduction per ton of sales
AkzoNobel
Scope 3 upstream
Scope 1 & 2* (see note below)
Scope 3 downstream
Total
% reduction per ton of sales
9.5
0
11.0
4.4
12.1
27.5
0
9.4
2
10.5
4.1
11.9
26.5
2
3.9
0
13.6
-2
9.4
-2
10.7
4.0
12.2
26.9
-4
3.6
4
12.3
-2
8.6
6
9.7
3.8
11.1
24.6
3
*Scope 1 and 2 includes emissions from our facilities and our own transport,
including VOCs.
Our Executive Committee and Sustainability Council
have initiated a detailed review and follow-up of our
plans to achieve this 2020 target. All Business Areas
have improved the process to forecast carbon footprint
reductions and have been challenged to show how to
reach this stretched target by specific improvement
opportunities and programs along the value chain. This is
now part of our regular Operational Review Meetings and
aggregated at AkzoNobel level. Research activities around
new raw materials have been initiated and Procurement is
working with suppliers on how they can contribute to more
value from fewer resources along our value chain. We also
need to make certain that we are spending capital in a way
which optimizes the improvement across our businesses
and the company as a whole.
The following illustration highlights the impact of our main
initiatives in different areas of our value chain:
• Raw materials which are more energy and material
efficient for our customers
• Improved energy efficiency and fuel mix for our energy
intensive operations
• Improvements in formulation to reduce product footprint
The following sections discuss improvement activities for
raw materials, our operations and in the product solutions
we deliver to customers.
220
Sustainability statements | AkzoNobel Report 2015
AkzoNobel carbon footprint in million tons CO2(e)
10
4
8
3
Raw materials
Own operations
Customer operations
End-user
End-of-life
Material strategies
for key raw materials
(See Raw material
strategies)
Energy strategy
including renewable
energy
(See Renewable energy)
New developments to reduce
energy use during product application
(See Specialty Chemcals in
Business performance section)
Joint activities
with suppliers
(See Supplier
improvement plans)
Operations management
Operational eco-efficiency
(See Operations management
and Environment pages)
Paints containing less solvents
(See VOC in product)
Renewable raw
materials result
in less fossil carbon
in our products
(See Bio-based
raw materials)
Reformulations using lower footprint raw materials and new products with customer benefits (See Eco-premium solutions)
Case study examples with lower climate impact (See Planet Possible case studies)
Raw materials
Raw materials contribute around 40 percent to our cradle-
to-grave carbon footprint.
Raw material strategies
The procurement strategy for the next few years is to
move further beyond availability-price-synergy towards
cross-functional sourcing, integration and value chain
orientation. Buying on price will move towards total cost of
ownership, while selected supplier relationships will move
towards cooperation and partnering. We see this as a way
to leverage the size and scope of our global business, our
position with suppliers and to drive competitive advantage.
A cross-functional approach with our key suppliers is
now set as the standard in our updated key supplier
management process. This enables us to structure the
cooperation regarding joint sustainability and innovation
topics with our key suppliers.
During 2015, we continued the development and
implementation of our raw material strategies, while also
capturing opportunities and mitigating risks in volatile
markets. Sourcing strategy implementation included
elements such as material resource planning, capacity
and supply cover, supplier selection and sourcing plans
per region, “make” versus “buy” and renewable materials.
They are also an instrumental tool in reducing the footprint
of our global value chains. This process also ensures
that we have taken into account interdependencies with
a forward-looking perspective, including sustainability.
In order to further improve our raw material strategies,
we have institutionalized a standard sourcing strategy
development approach and linked this to a capability
improvement program. More than 150 procurement
professionals across the globe have been trained and we
will continue to develop these capabilities.
Complexity reduction
Raw material slates have been developed for all key areas
of spend. These slates define the core list of preferred
materials/suppliers as the basis for our future formulations.
Health and sustainability aspects, such as product safety
and environmental concerns, have been among the key
criteria applied. The objective is to migrate our materials/
suppliers over time onto these core materials, making
our value chains less complex and more sustainable. We
have achieved an annual reduction of 3-4 percent on the
number of raw materials over the past two years.
The slates form the basis of our standard raw material
management processes, which were introduced this year.
Teams of procurement and technical experts are now in
place to maintain the slates on a continuous basis and
identify opportunities to further improve our value chains –
lower cost, improved sustainability and reduced risk.
Supplier improvement plans
In 2015, we continued to work with key suppliers to
develop carbon footprint improvement plans across the
whole value chain through operational improvements,
material substitution and/or specification optimization.
Clear action plans and commitments are in place to
reduce their carbon footprint on a year-on-year basis.
Bio-based raw materials
Bio-based raw materials continue to play an important role
in our sustainability agenda. A considerable share of the
company’s environmental footprint is embodied in the raw
materials we buy. Bio-based materials can, in most cases,
offer an option to reduce this.
221
AkzoNobel Report 2015 | Sustainability statements While many of our materials are already bio-based, we
notice that several new materials are being developed
and are starting to reach the market. In order to lead the
deployment of these materials in our markets, we have
been setting up and developing partnerships across our
supply chain. Our strategy focuses on cost-competitive,
high-impact materials. In addition, we carefully consider
feedstocks to ensure that bio-based materials are
sustainably sourced and managed. This approach will
support the emergence of a new bio-based industry,
while at the same time enabling AkzoNobel to tap into
alternative feedstock sources so that we can offer more
sustainable products and reduce our cradle-to-grave
carbon footprint.
In 2015, we made progress with our existing partnerships
and announced additional collaborations involving a
number of our key raw materials:
• Waste-derived chemicals: We are working with
Canadian company Enerkem, various site owners and
other value chain partners to build a strong consortium
exploring the feasibility of (and building business cases
for) waste-to-chemicals facilities in Europe. Such a
facility would be a major step towards the circular
13%*
economy and would close the loop by converting waste
back into useful products
• Sugar beet-derived chemicals: AkzoNobel is working
with SuikerUnie, Rabobank, Deloitte, the Investment
and Development Agency for the Northern Netherlands
(NOM), Groningen Seaports and the Province of
Groningen, to investigate the possibility of producing
chemicals from beet-derived sugar feedstock. We are
now carrying out technical due diligence and building
business cases for a feedstock and product-flexible
bio-refinery
• Algae-derived oils: Our work with biotech company
Solazyme has progressed and should lead to a multi-
year supply agreement targeting annual supply of up
to 10,000 tons of renewable Tailored™ algal oils. The
target product is designed to have improved functional
and environmental performance, as well as a lower
overall cost to AkzoNobel
• Bio-based epichlorohydrin: In partnership with
Solvay, EY and epoxy resin producers, we are
working to track and encourage the use of bio-based
epichlorohydrin in our value chain, aiming to reach
20 percent of AkzoNobel’s global indirect use by 2016
• Bio-based solvents: We are involved in ongoing
discussions with several companies aiming to produce
novel solvents and are working towards launch as soon
as these facilities are in production
• Photanol partnership: Our partnership with Photanol
was named Bio-Based Chemical Collaboration of the
Year at the 2015 World Bio Markets Bio Business
Awards. Held annually, the awards program recognizes
business excellence and innovation in the bio-based
industry. The prize was awarded for our ongoing work
focused on creating sustainable technology which
mimics the way plants use photosynthesis. Combining
AkzoNobel’s processing technology expertise and
Photanol’s existing proprietary technology, the aim is
to produce “green” chemical building blocks that will
eventually replace some of the raw materials AkzoNobel
currently obtains from fossil-based production
These partnerships have the potential to make a
major impact with regard to improving the long-term
sustainability of our supply chain. In 2015, 11 percent
of all our organic raw materials came from bio-based
(renewable) sources (2014: 13 percent). This is 5 percent
(2014: 7 percent) of the total volume of raw materials
purchased, i.e. including other raw materials such as salt,
minerals and clays.
This decrease in bio-based materials was mainly the result
of divestments in our Specialty Chemicals businesses, with
some smaller contribution due to product mix changes.
Total volume of raw materials in % per source
Total energy in % by source
46%*
A
C
B
* 11 percent of organic
raw materials are from
renewable sources.
A Renewable energy
B Natural gas
C Coal
D Nuclear
E Other fossil fuels
38
32
16
12
2
E
D
C
A
B
A Renewable raw materials (bio-based)
B Fossil-derived materials (petrochemicals)
C Inorganic materials (e.g. salt, minerals, clays)
5
41
54
Renewable energy
In % of total electricity,
heat and energy use
Renewable electricity (%)
Renewable heat (%)
Renewable energy (%)
2013
2014
2015
36
12
31
39
14
34
44
16
38
Ambition
2020
–
–
45
222
Sustainability statements | AkzoNobel Report 2015
Own operations
Renewable energy
The energy we use on our sites contributes about
15 percent to our cradle-to-grave carbon footprint.
Renewable energy is therefore an important aspect of
the improvements required to achieve our 2020 strategic
carbon footprint target.
Our Renewable Energy Supply Strategy has three
focus areas: protecting our current renewable share,
participating in cost-effective, large energy ventures
and exploring commercially feasible on-site renewable
energy generation.
The diagram on the previous page details our energy mix
and renewable energy use. During the past year, we have
taken several steps to increase the share of renewables in
our energy supplies and to decrease our carbon footprint.
The highlights include:
• AkzoNobel, Eneco and Groningen Seaports joined
forces to invest in sustainable steam generation in
Delfzijl, the Netherlands. We have signed a 12-year
agreement with Dutch energy provider Eneco to
purchase steam generated from reclaimed wood.
The partnership will help to reduce AkzoNobel’s CO2
emissions by more than 100,000 tons a year
• Production records have been set at all three of the
Nordic VindIn wind power parks in which AkzoNobel
participates. Very favorable wind conditions in 2014/15
produced good output. Another three to five wind parks
are in the pre-project phase, with the best prospects
likely to materialize in Finland
• The new AkzoNobel Center in Amsterdam is being
supplied with 100 percent green energy, provided by
solar panels, an installation for geothermal energy and
Dutch wind power. Thirteen other AkzoNobel locations
in the Netherlands will also be supplied with wind
energy. The contract will result in a reduction of 130,000
tons of CO2 during its lifetime
Due to these initiatives, the proportion of renewable
energy in our operations increased to 38 percent (2014:
34 percent).
Operations management
AkzoNobel has a strong drive to embed continuous
improvement in supply chain management and
manufacturing. A company-wide approach has been
defined named ALPS (AkzoNobel Leading Performance
System). Standardized processes, metrics and training
programs are part of ALPS. Deployment in all three
Business Areas to all manufacturing sites in AkzoNobel will
continue in the next few years.
The program is supported by the AkzoNobel Academy,
offering a continuous improvement curriculum, as well as
functional training programs. Safety, customer service,
eco-efficiency and cost productivity continue to improve as
a result of the program.
Full details of our operational eco-efficiency program are
included in Notes 15-20 of this section.
Logistics, distribution and car lease
As part of our performance improvement program, we
have started to manage warehousing and logistics at a
regional AkzoNobel level. This will result in a reduction of
warehouses and combined transport solutions. It will also
have a positive effect on our footprint.
We are involved with Smartway in the US and Green
Freight Europe in the EU, focusing on CO2 reduction.
The carbon emission ambition for our own passenger car
fleet was 130 g/km. Since Volkswagen is one of our lease
car suppliers, we are not able to provide verifiable data
for 2015. We have arranged a meeting with Volkswagen
and our lease car partner to agree remedial actions
and plan how to reach our new ambition of 115 g/km by
the end of 2016.
Customer product solutions
Our sustainability agenda emphasizes resource
effectiveness and solutions for our customers, which in
turn help them to be more energy and resource effective.
We aim to continue developing more sustainable solutions
and stay ahead of the competition.
The headline metric we have used since 2009 relates
to eco-premium solutions. This measures products or
solutions that have a significant benefit over mainstream
products in the market in defined environmental and
social sustainability aspects (e.g. GHG emissions), when
assessed across the total value chain (see Note 4). This
metric is challenging and is used as a driver for more
sustainable innovations. A comparison with mainstream
is now being recognized as good practice at many
companies and organizations (ref. WBCSD Addressing the
Avoided Emissions Challenge).
Many of our products enable GHG emissions to be
avoided (e.g. water-based paint, coatings with new curing
technologies and chemicals used in LED lighting). In total,
13 percent of our 2015 revenue was from these leading
eco-premium solutions that avoid GHG emissions for
our customers, compared with the mainstream solution.
Some examples of solutions are UV radiation cured
coatings, warm mix additives in asphalt and surfactants
manufactured using renewable raw materials (rather than
petroleum based).
In our Marine Coatings business, leadership in fouling
control that supports our customers in reducing their fuel
requirements is fundamental. We have now received our
first carbon credits for our industry-leading Intersleek foul
release coatings and have launched a high performance
coastal fouling control solution for the severe fouling
challenges of vessels trading in tropical coastal waters,
providing energy savings and an extended operating life.
Other examples are protective coatings requiring fewer
coats and that dry faster – resulting in lower energy
223
AkzoNobel Report 2015 | Sustainability statements 6
Note 6: Capable, engaged people
Suppliers and sourcing
A fundamental requirement of our strategy is to work
together with our suppliers in order to create a sustainable
supply base and deliver customer benefits, as well as
improving resource efficiency. This means that we have
to collaborate effectively. We have supplier management
programs in place that support both performance
improvement and opportunities for joint developments.
One specific project focuses on the introduction
of renewable raw materials in our supply chains, in
collaboration with selected partners. See also the
examples in Note 5 under Bio-based raw materials.
in Procurement and Human Resources. We continued
to drive employee engagement through our Planet
Possible sustainability agenda. A webinar was held for all
employees to understand more about our number one
position on the Dow Jones Sustainability Index.
The Business Areas also have their own programs. For
example, our Decorative Paints business has progressed
with its two-year engagement plan, where the focus is
on the key global priorities for driving our sustainability
ambitions. Employees are also actively involved at their
work locations through local Green Teams and community
activities around the world.
Further information on our engagement with suppliers and
the management processes is included in Note 7.
More information about our employee KPIs and
management processes is included in Note 12.
Capable, engaged employees
Customer engagement
Employees are routinely involved in delivering many
aspects of our sustainability agenda, such as improving
energy or resource efficiency at our sites, developing and
selling eco-premium solutions to customers, managing all
areas of safety and assessing the sustainability aspects
of investments. We want to build on all these activities to
accelerate performance against our objectives.
Awareness training to help everybody understand
their contribution is available for both current and new
employees through a company level e-learning program.
This is supported by communication through newsletters,
webinars and videos. Our learning and development
specialists are also working to embed the sustainability
agenda in all company-level programs in the
AkzoNobel Academy.
The focus for 2015 was on our leadership programs.
In addition, a number of functional-specific programs
are being developed for roll-out in 2016, for example
End–users and customers are continuously asking
for products and solutions that will meet their current
and future needs and help make their business more
sustainable. In many cases, we work closely with them
to deliver breakthrough solutions that offer downstream
sustainability benefits, while also providing economic value
to all parties in the value chain. These collaborations can
range from smart product choices and logistics solutions
to complete, long-term innovation programs, often
involving academic partners and government institutes.
We are continuing to integrate Planet Possible
conversations with customers into the learning and
development curricula for our sales and marketing
teams. The Planet Possible marketing toolkit for both
professional and consumer brands is actively used within
our Decorative Paints business. In Specialty Chemicals,
a dedicated sustainability training module and toolkit has
been developed and tested.
consumption for our customers – and vehicle refinishes
products that can bake faster or at lower temperature.
Other products that help to reduce global GHG emissions
are not captured by this leading measure. For example,
more than 80 percent of our decorative paints are water-
based or low/zero VOC (as opposed to solvent-based),
while our powder coatings reduce VOC emissions in use
(compared with solvent-based alternative solutions). These
products are only counted as an eco-premium solution
where the standard in the market is still solvent-based.
Additional low VOC products, which are not eco-premium
solutions, would add about 20 percent to this 13 percent
revenue figure.
224
Sustainability statements | AkzoNobel Report 2015 Further details about our work with customers are included
in the case studies and the Strategic performance section
of this Report 2015.
7
Note 7: Supplier management
Supplier segmentation
AkzoNobel works closely with suppliers to identify
and minimize supply chain risks in order to provide a
secure and sustainable supply to its customers.
Supplier management programs are in place to drive
continuous improvement of existing supply chains
and develop meaningful collaboration and joint
development opportunities.
We have identified two supplier segments for particular
attention, based on the potential risks and opportunities:
• Critical suppliers are those in emerging markets where
we want to build a long-term, mature supply base.
Selection may be based on risks associated with labor
conditions, environmental performance or business
integrity, or security of supply of important materials
• Key suppliers are selected because of their importance
to the business – spend or dependency – as well
as the potential for partnership, joint innovation and
collaboration on long-term sustainability initiatives
In order to improve the alignment between our initiatives
for all supplier segments, we have formalized our
sustainable supply framework, as reflected below.
Our Supplier sustainability framework is based on
AkzoNobel’s core principles and company values. We
Supplier sustainability framework
Vision: Sustainable supply
Mission: Measurable development and delivery
Process 1:
Supplier
Support Visits
Process 2:
Together for
Sustainability
Process 3:
Key Supplier
Management
Values: Business Partner Code of Conduct
demand the highest ethics and integrity in all supplier
relationships. The company’s new Business Partner Code
of Conduct explains what we stand for as a company,
what we value and how we run our business. It brings our
core principles of safety, integrity and sustainability to life,
and shows what they mean in practice.
Three formal processes are in place to help AkzoNobel
ensure compliance, manage risks and promote supplier
development. Our Supplier Support Visits and Key
Supplier Management programs focus on two distinctly
different supplier segments: critical suppliers in emerging
markets and globally strategic (key) suppliers. Together for
Sustainability (TfS), applies to all supplier segments. TfS
provides standardized, third party assessments and
audits into our routine supplier management process
to identify and minimize risks and promote continuous
improvement.These various elements enable AkzoNobel to
measure supplier development and delivery against
the company’s goals.
Our critical product related (PR) spend is actively managed
by our supplier framework processes. This KPI provides
a meaningful measure of how well AkzoNobel is building
the sustainability, capability and capacity of its suppliers in
critical emerging markets around the world.
We have defined critical spend as all PR spend (raw
materials and packaging) from emerging markets. Spend
is considered to be covered by this metric if at least one of
the following conditions is met:
• The supplier is part of our Key Supplier Management
process
• The supplier is part of our Supplier Support Visits
program and has been followed up in compliance with
program guidelines
• The supplier’s sustainability performance has been
assessed via AkzoNobel’s third party supplier
assessment and/or audit program (TfS)
225
AkzoNobel Report 2015 | Sustainability statements Key performance indicators – supplier management
2012
2013
2014
2015
Ambition
2015
Ambition
2016
Ambition
2017
Critical PR1 spend covered by supplier management
framework (% of spend)
Product related suppliers signed Partner CoC2 (% of spend)
NPR3 suppliers signed Partner CoC2 (% of spend)
69
97
80
80
96
83
Suppliers on SSV program since 20074
373
392
Third party online sustainability assessments (TfS)5
Third party on-site sustainability audits (TfS)5
–
–
–
–
83
98
80
432
539
20
87
98
81
455
724
65
88
98
80
–
600
40
90
98
85
–
700
60
90
98
85
–
800
80
1 PR – Product related (raw materials and packaging).
2 Partner CoC – Business Partner Code of Conduct.
3 NPR – Non-product related.
4 SSV program targets are included in the Critical PR spend coverage KPI.
5 Includes TfS shared assessments/audits.
Together for Sustainability (TfS)
Further acceleration of this program in 2015 has impacted
all supplier segments, including product related and
non-product related suppliers, resulting in more than
50 percent of our total spend being assessed. TfS is an
industry initiative made up of 16 leading global chemical
companies and continues to expand. It aims to improve
sustainability practices within the global supply chains
of the chemical industry, building on established global
principles such as the United Nations Global Compact
and the Responsible Care® Global Charter. With TfS, we
aim to implement effective, leading edge practices across
the industry. We are implementing standardized global
sustainability assessments and on-site audits to monitor
and improve sustainability practices in our supply chains.
• The supplier has a signed the Business Partner Code
of Conduct, delivers less than €5 million from
emerging markets and is not classified as a critical
supplier (and therefore not part of the Supplier Support
Visits program)
non-product related (NPR) spend. Both critical suppliers
and key suppliers have to confirm their compliance with
environmental, social and governance factors. Our aim
for 2016 is to increase the coverage of our NPR suppliers to
85 percent.
Global implementation of TfS provides the following
benefits:
• Confirms compliance with our Business Partner Code of
Conduct across a selected global supplier portfolio
• Supplements our existing SSV program by ensuring
As a result of these continued efforts, we raised our
critical PR spend coverage again from 83 percent in 2014
to 87 percent in 2015. Even though we made a good
improvement, we missed our challenging target by a small
margin. We will increase our critical spend coverage in
2016 by closely monitoring our SSV visits, setting clear
targets with our businesses and increasing the number of
third party assessments (TfS).
The Supplier sustainability framework has been put in
place to support continuous improvement of suppliers, to
prioritize improvement activities across our supply base
and to accelerate delivery of our corporate sustainability
goals. Each of the elements in the sustainable supply
framework is further explained below.
Business Partner Code of Conduct
The Business Partner Code of Conduct covers 98 percent
of the product related (PR) spend and 81 percent of the
Supplier Support Visits
The Supplier Support Visits (SSV) program is designed
to develop long-term local suppliers in emerging markets
by raising their capability and performance. Introduced
in 2007, the SSV program is an important supplier
management tool. The supportive visits focus on critical
suppliers and are carried out by teams from Procurement
and Health, Safety and Environment (HSE). Formal
follow-up visits by these teams are conducted to verify
implementation of agreed plans and overall progress. In
order to ensure continued development of sustainable
supply chains in emerging markets, selected approved
SSV suppliers continue their sustainability journey by
entering AkzoNobel’s third party assessment and audit
programs. Awareness of, and compliance with, corporate
social responsibility is measured with continued support
from local, cross-functional AkzoNobel teams.
226
continued development of critical suppliers in
emerging markets
• Strengthens our risk identification and mitigation
processes
• Further integrates auditable corrective action planning
into the supplier development process
• Provides third party verification of AkzoNobel activities
against industry best practices
The results of our TfS assessments, which use the
EcoVadis platform, allow us to identify common areas
for improvement across our supply base and focus
improvement activities. Improvement areas include the
introduction of a formal reporting system on our
supplier’s sustainable procurement performance and
business ethics issues.
Sustainability statements | AkzoNobel Report 2015 • Prioritization: Analyzing our raw material carbon
footprint gave us a clear direction regarding which
suppliers to contact about particular raw materials
• Supplier engagement: Suppliers completed a
questionnaire that we designed to give us an estimate
on carbon footprint reduction potential. The results
of the questionnaire were than discussed in a series
of follow-up meetings to agree on internal reduction
targets and improvement plans
This process is creating insight into our suppliers’
sustainability programs which we didn’t have previously
and is helping to create real partnerships to identify and
maximize shared benefits.
Through this collaboration with our suppliers, we have a
list of innovation projects in place and first commitments
on year-on-year improvement targets that will result in
carbon footprint reduction, starting in 2016.
The diagram below shows the 724 suppliers assessed
between 2013 and 2015 with risk levels set by AkzoNobel
based on the scores given by EcoVadis. If suppliers
achieve a score of less than 25 out of 100, they are
classified as “high risk”.
We request high and medium risk suppliers to work
on corrective actions with a clear priority on the main
areas for improvements as mentioned above. Out of the
357 suppliers that were re-assessed, 255 improved
their scores.
Overview of risk levels
Total of 724 suppliers
High
Medium
In control
Low
Environment Labor practices
& human rights
Fair business
practices
Sustainable
procurement
All
As part of the TfS membership criteria, AkzoNobel verifies
the quality of its own corporate supplier management
activities against industry best practice. The company
was granted a Gold recognition level in 2014 by EcoVadis,
putting us among the best performing companies
assessed by EcoVadis globally in our industry category.
In our 2015 re-assessment, we were able to defend our
position as best performing company in our industry
category by further improving our scores.
Key Supplier Management
As part of our ongoing operational effectiveness program,
our Key Supplier Management process helps focus
our internal resources on 35 suppliers we have defined
as strategic to AkzoNobel, both now and in the future.
These suppliers are essential to supporting us in realizing
our strategic objectives. With many of these key suppliers,
we also have a formal key supplier agreement in place,
underpinning the aims of the Key Supplier Management
process. Sustainability objectives are now included
in new key supplier agreements. The current focus is
carbon footprint improvement, renewable materials and
innovation opportunities.
Measurable development and delivery
In 2015, we trialed a Supplier Sustainability Balanced
Scorecard (SSBC) designed to measure the current level of
sustainability awareness and maturity of our key suppliers
and suppliers important to our sustainability performance
(see also Performance improvement and innovation). Clear
and quantifiable key performance indicators are contained
in this process to help drive continuous improvement
of all suppliers and delivery of sustainability benefits to
AkzoNobel in the area of resource efficiency. The SSBC
consists of six stages of maturity and is divided into
two sections: “Compliance and risk management” and
“Advanced contribution”. Following trials with a few key
suppliers, it will be further implemented in 2016.
Performance improvement
and innovation
Our Key Supplier Management program has already
moved our supplier relationship beyond risk management
to opportunities for partnership in performance
improvement and innovation.
During 2015, we identified a wider group of suppliers
who have a significant impact on our sustainability
resource efficiency objectives. We have now embarked
on a structured program to identify opportunities to drive
sustainability value and carbon footprint reduction.
227
AkzoNobel Report 2015 | Sustainability statements Safety
Key performance indicators – safety
People
Total reportable injury rate employees/
supervised contractors (per million hours)
Behavior-based safety program implemented
(% FTEs)
Life-Saving Rules implemented (% of sites)
Process
Regulatory actions (Level 4)
Significant loss of containment (Level D)
Product
Priority substances with management plan (%)
REACH compliance third phase (%)
Management
Safety incidents (Level 3)
Management and reassurance audits
1 Phase 2 starting in 2016
2012
2013
2014
2015
Ambition
2015
Ambition
2016
Ambition
2020
2.4
50
–
0
0
42
–
3
61
2.3
68
100
0
1
62
–
0
56
1.8
84
100
0
0
82
15
1
63
1.6
96
100
0
0
100
23
0
57
<2.0
100
100
0
0
100
25
0
–
1.4
100
100
0
0
331
50
0
–
<1.0
100
100
0
0
1001
100
0
–
Our Safety Common Platform established company-
wide improvement processes in people, process and
product safety, supported by continuous improvement
and capability building. The Safety Common Platform sets
out milestones to achieve a world class level of safety
excellence by 2020. We aim to differentiate ourselves
by our thoroughness in embedding best practice
safety processes in all our operations, using common
approaches and systems:
• A common approach to behavior-based safety (BBS)
has been implemented at all our manufacturing sites in
recent years. During 2015, we further extended BBS
to all non-production work locations and groups –
including offices, stores, warehouses, laboratories and
remote workers. In order to continuously improve the
BBS maturity of sites, further key performance metrics
are being developed
• Company drivers participate in our globally launched
Safe Driving program. Depending on their annual
mileage, some registered company drivers additionally
need to complete a set of e-learning trainings and a
practical defensive driving training
• Our process safety management (PSM) framework sets
out minimum process safety management standards
to be implemented at all manufacturing sites. The
program continues to progress for completion by the
end of 2018. In addition to the 46 sites that started
PSM implementation last year, 82 more sites joined the
program in 2015. To embed the PSM framework in our
organization, we have introduced standard processes
for hazard analysis, a framework for PSM capability
building and PSM leading and lagging indicators
• With the objective of continuous improvement, a
program to refresh and reinforce our common set of
Life-Saving Rules (LSRs) has been initiated, with a
228
focus on incident prevention. Breaches of these rules
that result in injuries, or are intentional or repeated,
resulted in the maximum disciplinary sanction allowed
under local legislation in 23 cases. The processes for
preventing and responding to LSR incidents have been
updated in the LSR Directive, Rules and Procedures.
We have also launched refresher communication to key
stakeholders and will continue in 2016 with additional
employee and management training
• Our company-wide rule on product stewardship requires
all AkzoNobel businesses to implement an effective and
auditable product stewardship management process.
Businesses are required to address the key elements
of product stewardship, following the principles
of Responsible Care® and Coatings Care®. In 2015,
we published a Product Stewardship procedure
which provides guidance for all AkzoNobel businesses
on implementation of the eight key elements of
product stewardship
• Our product stewardship and product safety processes
are underpinned with a requirement for continuous
improvement. In 2015, we piloted our Product
Stewardship Continuous Improvement Tool (PSCIT)
across eight businesses. Using this tool, the businesses
are able to assess their level of maturity and
plan their next steps to achieving a leading level in
product stewardship
• Through our HSE Faculty, various groups of line
managers and specialists have received refresher
training in the company’s expectations and the
required competencies for safety leadership. The
newly-developed Advanced Safety Leadership (Hearts
& Minds) program provides site managers with the
opportunity to benchmark internally, receive coaching
from experienced peers and share best practices
worldwide. This continuous focus on line management
competence, capability and engagement at every
level contributed to the further reduction of more than
16 percent in the number of injuries
Sustainability statements | AkzoNobel Report 2015 8
Note 8: People safety
Our main performance indicators for people safety are
the total reportable injury rate (TRR) and the lost time
injury rate. We will continue focusing on continuous
improvement through our people safety programs in order
to achieve the 2020 target of a TRR of less than 1.0 for
employees and supervised contractors.
The behavior-based safety program (BBS), which actively
engages all manufacturing personnel in identifying and
addressing at-risk behavior, has been tailored to the needs
of our non-manufacturing personnel and was rolled out in
2014 and 2015 across all locations and groups.
• The overall downward trend in reportable injuries
coincides with both the implementation of our
Life-Saving Rules at all our facilities and across all
workgroups, and the global roll-out of the people,
process and product safety programs that are part of
the Safety Common Platform
• Implementation was complemented by a strong focus
on compliance and operational discipline, performance
monitoring and enforcement of rules when necessary
• There were no employee or contractor fatalities during
the year
• The TRR of independent contractors slightly decreased
to 2.8 (2014: 2.9)
• The overall TRR for employees and supervised
contractors decreased to 1.6 (2014: 1.8) which is below
the 2015 TRR ambition of 2.0
Independent contractors total reportable
injuries frequency rate
Employee and supervised contractors total
reportable injuries frequency rate
Ambition
2.4
2.3
1.8
1.6
<2.0
<1.0
4.2
3.5
2.9
2.8
2012
2013
2014
2015
Employee and supervised contractors lost
time injuries frequency rate
2012
2013
2014
2015
2015
2020
The Total Reportable Rate (TRR) is the number of injuries, including fatalities,
resulting in a lost time case, restricted work or requiring medical treatment by
a competent medical practitioner per million hours worked. In line with OSHA
guidelines, supervised contractors (SC) are reported with employees since day-to-day
management is by AkzoNobel. Independent contractors are managed by their own
companies. Since 2011, we have been working towards the objective of an employee
and supervised contractors TRR of 2.0 in 2015.
Ambition
1.3
1.1
0.9
<0.9
0.7
Total reportable injury rate per Business Area
2012
2013
2014
2015
2015
Decorative Paints
Performance Coatings
Specialty Chemicals
2013
2014
2015
1.9
2.8
2.2
1.6
1.8
2.4
1.2
1.8
1.9
The Lost Time Injury (LTI) rate is the number of injuries resulting in a lost time case
per million hours worked. In line with OSHA guidelines, supervised contractors
(SC) are reported with employees since day-to-day management is by AkzoNobel.
Independent contractors are managed by their own companies.
Behavior-based safety (BBS)
As the reduction in TRR coincided with the implementation
of the BBS process across sites, and to ensure that the
impact of the process is sustained, the following BBS
initiatives were rolled out during 2015:
• Formal review of the BBS process was completed at all
manufacturing sites (100 percent reviewed)
• Each BBS review resulted in at least three improvement
projects in the site’s safety improvement plan to ensure
continuous improvement of the BBS process
• The BBS process was customized for various types of
non-manufacturing personnel and rolled out to all of
these groups during 2014-2015. In total 96 percent of
all personnel have now been included in the process
Behavior-based safety
Behavior-based safety reviews
(% manufacturing sites)
Behavior-based safety program
implemented (% FTEs)
2012
2013
2014
2015
100
100
50
68
84
96
During 2016, the non-manufacturing locations and groups
will be included in the yearly BBS review cycle.
Learning from incidents
Embedding the use of our company-wide Incident
Reporting System (IRS) has enabled us to identify and
learn from incidents and near-miss trends. The IRS
enabled prompt learning from incidents to be shared
locally, regionally or company-wide as appropriate. The
IRS, an interactive database, enables:
• Anyone in the company to promptly report any incident
(including near misses)
• The progress of investigations and resultant actions to
be monitored through to completion
• During 2015 >9,500 incidents (including near misses)
were reported in the IRS (2014: < 5,000)
229
AkzoNobel Report 2015 | Sustainability statements We raised awareness of safe driving through our risk-
based Safe Driving program.
Safe Driving program
Safe Driving set of e-learnings based on
driver risk profile >10,000 km annually (# of
employees)
Defensive driving training
>20,000 km annually (# of employees)
Ambition
2015
2015
5,788
5,843
2,176
1,613
• In 2015, we launched the risk-based Safe Driving
e-learning training, which is tailored to individual driver
needs and is based on an interactive computer-based
assessment. In total, 99 percent of the target group
completed this training in 2015 (5,788)
• Practical, on the road defensive driving training started
in mid-2015 and was successfully completed by 2,176
company drivers. During 2016, the remaining (1,000)
company drivers in this category will be trained
Employee health
As well as ensuring a safe working environment, healthy
working conditions and managing illness-related
absenteeism, we also foster employee health and
well-being. This is achieved, for example, through the
promotion and use of the Wellness Checkpoint, our health
risk appraisal tool.
Employee health
Total illness absence rate
Occupational illness rate
2012
2.0
0.23
2013
2.1
0.14
2014
2.1
0.24
2015
2.1
0.14
Wellness Checkpoint use
>11,300
>13,700
>15,000
>16,200
Total illness absence rate (TIAR) is the number of lost employee working hours,
whether work-related or non work-related, per reporting period due to all illnesses
and injuries as a percentage of the scheduled working hours per reporting period.
Occupational illness frequency rate (OIFR) is the total number of reportable
occupational illness cases for the reporting period per 1,000,000 hours worked. This
parameter is reportable for employees and supervised contractors.
• The total illness absence rate (TIAR) remained stable at
2.1 percent (2014: 2.1 percent). We continue to monitor
this indicator for the whole company, aiming to stay at a
level of around 1.9 percent
• The occupational illness frequency rate (OIFR) for
employees and supervised contractors has decreased
to 0.14 illnesses per million hours worked (2014: 0.24).
As the absolute numbers of occupational illnesses
are low, small variations in numbers can cause large
fluctuations in the OIFR
• Our health risk appraisal tool, the Wellness Checkpoint,
is appreciated and used by an increasing number of
employees and their families. By the end of 2015,
16,209 people had joined the program since its launch
in 2008. During 2015 a further 4 percent of employees
joined (2014: 15,555)
Distribution and
motor vehicle incidents
Distribution and motor vehicle incidents continue to
be a risk to the safety of employees, contractors
and the general public. Most incidents occur on the road
and in countries where enforcement of traffic regulations
is still developing.
Distribution incidents
Road
Sea
Rail
Air
Off-site pipeline
Total
2012
44
2013
44
2014
43
2015
44
2
0
0
0
46
2
2
0
0
48
3
6
0
0
52
2
2
0
1
49
Distribution incidents occur during the off-site (in-transit) transport and handling of
raw materials, products, samples, intermediates and wastes owned by AkzoNobel,
including loading and unloading activities at ports, airports, external warehouses and
storage terminals, but excluding incidents which occur once materials are stored at
external warehouses and storage terminals.
Motor vehicle incidents
2012
2013
2014
2015
Incidents with injury
Fatalities – employees
28
1
19
0
20
0
18
0
• The number of distribution incidents decreased to 49
in 2015 (2014: 52). The majority of the distribution
incidents that occurred are on the road, 90 percent of
the total (2014: 83 percent)
• There was also a slight increase in distribution incidents
involving the transportation of our products by third
party contractors. These were mainly in countries where
the road infrastructure and traffic enforcement are
still developing
• The number of motor vehicle incidents which resulted in
injury decreased slightly to 18 (2014: 20)
230
Sustainability statements | AkzoNobel Report 2015
9
Note 9: Process safety
Process safety management
Process safety management (PSM) is an integral part
of our overall safety strategy. In addition to helping
manufacturing sites meet their legal requirements, PSM is
an essential first step to operational excellence.
Our PSM framework sets out minimum process safety
management standards at all sites and provides a
structured way to assess and manage risks to eliminate
injuries and incidents related to hazardous substances
and processes. Implementation of the framework is
phased. Phase A sites are the most safety critical sites,
prioritized based on their residual risk, taking into account
their inherent safety hazards and current levels of process
safety performance.
Process Safety Management program
planning
Implemented PSM training and scanning
Implemented PSM Plan
• A framework for PSM capability building is being
developed to help embed PSM and ensure process
safety competence at all our sites
• PSM leading and lagging indicators have been
developed and aligned with international best practices
to enable effective measurement and monitoring
of continuous improvement in PSM. These will be
implemented in 2016
Loss of containment
AkzoNobel uses “loss of containment’’ as a main indicator
of process safety performance at its manufacturing sites.
• The number of losses of containment classified as Level
D remained at zero in 2015 (2014: zero)
Loss of containment incidents
Phase A
Phase B
Phase C
2014
2015
2016
2017
2018
• In 2015, Phase A sites (46) implemented part of their
improvement plans according to schedule
• The Phase B sites (82) started the program in 2015,
developing their improvement plans for implementation
over the next two years
• The remaining 72 sites (Phase C) will carry out the PSM
gap analysis in 2016 to develop their improvement plans
for implementation by 2018
• PSM is being implemented by line management with the
support of PSM experts at all manufacturing sites
• Standard processes for hazard analysis were introduced
globally in 2015
Levels
D
C
B
A
0
(2014: 0)
Significant
2
(2014: 9)
Not contained at site
269
(2014: 292)
Not readily controlled but contained at site
1,737
(2014: 1,112)
Readily controlled and contained at site
Loss of containment is defined as an unplanned release of material, product, raw
material or energy to the environment (including those resulting from human error).
Losses of containment are divided into four categories, dependent on severity, from
small on-site spill (Level A) to a significant escape (Level D).
• The number of losses of containment classified as Level
C decreased to 2 (2014: 9). These spills were reported
to the authorities and fully investigated, while immediate
action was taken to prevent reoccurrence
• The number of reported Level A minor spills and leaks,
which are readily controlled on site, increased by
56 percent to 1,737, illustrating the desire to report,
investigate and learn from these process safety near
misses. The IRS has proved to be an easy tool to
use at site level to manage all incidents, including these
minor spills
231
AkzoNobel Report 2015 | Sustainability statements 10
Note 10: Product stewardship
Product stewardship
Our product safety process is a key building block in the
AkzoNobel safety strategy. This process protects people
and the environment from unsafe exposure to hazardous
materials and goes beyond the traditional approach
of reactive compliance with rules and regulations.
This enables us to take a leading position in Product
stewardship by providing our customers with safer and
more sustainable products that meet or exceed their
expectations, while promoting the development and
introduction of eco-premium solutions in our markets.
During 2015, we focused on the strategic priorities in our
product safety process:
Only when use of a priority substance can be managed
safely can it be used in AkzoNobel products and
processes.
The process is supported by a mandatory company rule,
which lists priority substances that are either prohibited
or restricted in AkzoNobel products and/or processes.
Priority substances
% reviewed and managed
Ambition
100
100
82
62
42
Priority substance management
2012
2013
2014
2015
2015
Our company-wide priority substance process takes a
systematic approach to the identification, review and
management of hazardous substances that we use in our
products and chemical processes. Taking this proactive
approach promotes the use of safer and sustainable
products and means we often take action to manage
harmful substances in advance of legislation, future-
proofing our products against changes in regulations.
The process identifies hazardous substances for review
by scoring them on the basis of their human and
environmental hazards and where societal concern
exists over their use. Substances with higher scores
are designated as priority substances and are subject
to review by our experts. Where a safer and effective
alternative exists (which is economically feasible),
priority substances are substituted with less hazardous
materials. In cases where substitution is not possible, a
full risk assessment is carried out on the substance
using state-of-the-art techniques from the EU
REACH regulations.
A priority substance is reviewed and managed when it has been reviewed under the
AkzoNobel priority substance process and is listed as prohibited or restricted in the
AkzoNobel company-wide rule on product stewardship.
• Review and management of 204 priority substances
used in AkzoNobel have been completed, meeting our
ambition for 2015
• Of the priority substances reviewed in the program, 56
have been phased out and 148 restricted to uses where
the risk can be managed to an acceptable level
• Examples of priority substances that were reviewed and
restricted in 2015 are methyl ethyl ketoxime (MEKO) and
triisopropyl borate. These substances must not exceed
maximum levels in AkzoNobel products and strict risk
management measures must be followed when they are
used
• We presented our priority substances program to
stakeholders including customers, non-governmental
organizations and investor associations and received
positive feedback on our approach
The priority substance methodology is now embedded
into key business processes and in our company raw
232
material databases, so safer materials can be sourced in
AkzoNobel. We are now developing the second phase
of the priority substance program, which will update
the scoring methodology and take into account new
information and concerns on hazardous substances.
In 2015, AkzoNobel received the Responsible Care®
Product Stewardship Award from the European
Chemicals Industry Association (Cefic) for its priority
substances program. In addition, we were awarded a
Product Safety award from the American Chemistry
Council (ACC) and a merit award for Responsible
Care® from the Association of International Chemical
Manufacturers (AICM) in China.
Regulatory compliance
In addition to complying with current regulations that affect
our products and processes, we carefully monitor changes
and prepare ourselves for new regulations that will
impact on our businesses. Our company-wide regulatory
information system (RIS) ensures up-to-the minute
information relating to product safety legislation is available
to all regulatory affairs professionals within AkzoNobel.
During 2015, our primary activities included:
Substance management regulations
Our REACH teams are now busy preparing information
required for successful registration of our substances that
are under the scope of the third phase of the EU REACH
regulations. All applications for registration must be
submitted by June 2018 and we are preparing carefully to
achieve the objective.
Sustainability statements | AkzoNobel Report 2015 paints and eliminate the risks these products cause.
AkzoNobel fully supports the objectives of the alliance,
and will share experiences of conversion from lead to
lead-free paints, providing technical advice. Through the
alliance we will support by engaging governments to
support the development of legislation to phase out the
use of lead compounds from all paints
• For our work in developing and introducing our
bio-based and biodegradable chelate Dissolvine GL,
the United States Environmental Protection Agency
(US-EPA) recognized AkzoNobel as a leader in
furthering safer chemistry and products by awarding
us with the 2015 Safer Choice Partner of the Year
Award in the innovation category. A US-based NGO,
the Environmental Defense Fund (EDF), published this
case as an illustrative example of development and
successful introduction of safer chemistry into the
market in their blog
• We led a consortium of manufacturers that challenged
a requirement issued by the European regulatory
authorities to carry out extensive animal testing on one
of our products. The Board of Appeal ruled that the
tests were unnecessary, as safety of the substance can
be shown using existing data, preventing unnecessary
testing on significant numbers of animals
• In China, through our participation in the Association
of International Chemical Manufacturers (AICM), China
National Coatings Industry Association (CNCIA) and the
China Petroleum and Chemical Industry Forum (CPCIF),
we provided input for discussions on the introduction of
a coatings consumption tax
Product safety and regulatory affairs
capability building
We continue to build a community of Product Safety and
Regulatory Affairs (PSRA) professionals within AkzoNobel.
In 2015, we focused on developing the different learning
activities within Level 1 and Level 2 of the curriculum,
which includes training and e-learning for dangerous
goods, priority substance management, the US Toxic
Substances Control Act, Korean and Taiwan Reach and
environmental risk assessment.
PSRA capability development
in % of target group
Level 1 PSRA program
2013
40
2014
79
Ambition
2015
90
2015
91
• All targeted employees in the Level 1 PSRA group for
2015 have completed the Level 1 program
• In 2016, we will continue to design and deliver further
Level 2 training courses and will introduce Level 3
(advanced) training for our PSRA community. The
courses will be set up according to the competency
framework which maps out the skills needed to
progress within the PSRA function in AkzoNobel
In 2015, new substance management regulations for
South Korea and Taiwan came into force. To support our
businesses in their compliance programs, we provided
training for our product safety professionals on compliance
with both regulations through the AkzoNobel Academy.
EU REACH third phase
Ambition
in %
Progress towards
EU REACH third phase
2015
2015
2016
2017
2018
23
25
50
75
100
Classification and labeling of AkzoNobel products
During 2015, we successfully implemented the Global
Harmonized System (GHS) for labeling of chemical
substances and products, in line with legislative deadlines.
In our Specialty Chemicals business, a single software
system for the generation of text used in safety data
sheets and labels is now fully operational. An electronic
awareness training module (e-learning) is also available for
employees through the AkzoNobel Academy to ensure
changes in labels and datasheets are understood.
Advocacy
We continue to be active in industry bodies, public
forums, with customers and other key stakeholders to
discuss product safety at local, regional and global level.
Participating in this way gives us an opportunity to engage
regulators and other stakeholders before new rules are
finalized. Our aim is to support legislation, standards and
initiatives that promote and support the use of safer and
more sustainable products in our industry.
For example, in 2015:
• We became a partner in the Global Alliance to
Eliminate Lead Paint (GAELP) – a voluntary alliance of
governments, non-governmental organizations and
industry, brought together under the auspices of the
United Nations Environment Program (UNEP) and the
World Health Organization (WHO). The objective of the
alliance is to promote the phase-out of all lead-based
233
AkzoNobel Report 2015 | Sustainability statements 11
Note 11: HSE management processes
Management systems
Operational excellence at our sites is supported by risk-
based management systems that follow Responsible
Care® and Coatings Care® principles. Our HSE rules and
procedures are set up and updated in accordance with
international standards such as ISO-14001, RC-14001,
OHSAS-18001 and PAS 55 (public standard for process
safety). Many sites and businesses also have external
certifications for their management systems, which are
subject to internal and external audit.
The greater focus on leadership in the revised ISO-14001:
2015 fits well with the focus on leadership in both our HSE
and process safety management systems.
External certification
in % of manufacturing sites
2012
2013
2014
2015
ISO-14001/RC-14001
OHSAS-18001/RC-18001
75
42
78
51
79
53
80
54
Maturity framework
We have a common maturity framework for measuring
HSE management progress at our manufacturing sites
through self-assessment and audit. The HSE maturity
framework is being used to drive continuous improvement.
In total, 97 percent of all sites achieved the target for 2015
of an average maturity level of six, this is an improvement
of 14 percent (2014: 83 percent).
Self-assessment questionnaire (SAQ)
The SAQ, which covers all elements of the HSE
management system, continues to be the company-wide
HSE improvement planning tool. To maintain relevance
to major programs rolled out during recent years (e.g. the
PSM framework), the SAQ was thoroughly revised during
2014. Since January 2015, this revised version has been
used by sites to self-assess the maturity of their processes
and procedures against the updated requirements. The
revision of the SAQ has resulted in the average HSE
maturity level staying constant at 6.9 (2014: 6.9). This
was an expected outcome due to the new requirements
included in the revised tool.
Self-assessment questionnaire (SAQ)
in %
2012
2013
2014
2015
Sites at or above average
SAQ of 6
83
97
Average SAQ score
6.2
6.5
6.9
6.9
HSE audit
The HSE audit process combines the SAQ continuous
improvement tool with a periodic audit conducted by HSE
subject matter experts from the business and managed by
the global Internal audit function.
All sites carry out an annual self-assessment against our
corporate HSE rules and procedures, and applicable
business requirements, by filling in the SAQ. As well as
providing input for the corporate HSE audits, the results
are used locally to prepare site improvement plans.
Together, the corporate HSE rules and auditing create the
assurance framework.
For most sites, the audit frequency is every five years.
For sites with a high hazard rating this frequency is every
three years.
Management audits number of audits
61
56
63
57
2012
2013
2014
2015
234
As in 2014, audits at multi-sites, where more than one
business is represented, were completed by one (larger)
audit team. During 2015, 57 corporate HSE audits were
completed (2014: 63); of which two were site closure
audits (2014: three) and eight were reassurance audits
(2014: five) of previously audited sites with high
risk findings.
Follow up on actions from corporate HSE audits is an
important part of the corporate HSE audit protocol.
Follow-up of non-compliances and high risks is
supervised by the Internal audit function via the execution
of reassurance audits. All reassurance audits in 2015
received the final conclusion “acceptable”.
Our HSE management system requires each site to
develop a site safety improvement plan (SIP) annually. In
parallel with the SAQ revision, a template was developed
for SIPs which will be used as the standard during 2016.
These SIPs are intended to raise the level of HSE
performance by ensuring the actions required to address
the identified gaps in the SAQ and audits are completed,
as well as keeping the site focused on delivering their HSE
continuous improvement activities.
Learnings from HSE audits indicate that business
management need to strengthen the process for
completing HSE audit findings by assessing the quality
of the SIPs and regularly reviewing progress, keeping
site teams focused on delivery of the required actions. A
project has been started to improve the governance of the
follow-up of HSE audit findings during 2016.
Sustainability statements | AkzoNobel Report 2015
on accelerated HSE improvement through enhanced
engagement.
• Since 2012, more than 1,200 critical leaders have been
trained in the HSE critical leaders workshop (target
2015: 1,000)
• In 2015, 40 percent of site managers were trained in
four different sessions in Asia, the Americas and EMEA.
The blended learning approach includes direct dialog
with our most senior leaders on safety performance and
improvement plans, virtual classrooms and two face-to-
face events
• In 2016, the second level within the HSE professionals
curriculum will be further developed with additional
content, including risk assessment training
HSE capability development
in % of target group
2013
2014
2015
Ambition
2015
Ambition
2016
HSE critical leaders
workshop
Site managers
participated in Hearts
& Minds
62
90
100
100
100
–
–
40
33
66
Safety incidents
Regulatory actions
Safety incidents are those that result in severe
consequences, requiring an independent investigation.
We classify safety incidents based on the severity of the
outcome (Level 1 to Level 3). Level 3 safety incidents
receive the immediate attention of the Executive Committee.
We have defined four categories of regulatory actions, from
self-reported issues (Level 1), to a formal notice of a criminal
prosecution or penalty greater than €100,000 (Level 4).
The Level 4 regulatory actions are recognized as material
for AkzoNobel.
To ensure timely and thorough investigations of our most
serious incidents, we maintain a global pool of trained
investigators (who also have HSE or operational roles in the
organization). The investigation results in actions to prevent
a recurrence, with the lessons learned shared company-
wide. Progress and compliance with the requirements is
monitored and shared with the Executive Committee and
line management on a monthly basis.
• The total number of safety incidents in 2015 decreased
slightly to 12 (2014: 15) all of which were at the lowest
Level 1 (local impact only)
• There were no Level 2 or Level 3 safety incidents during
2015 (2014: 2)
• The Level 1 incidents included inadequate isolation of
machinery (four), slips, trips and falls (two) and the use
of forklift trucks (three)
Safety incidents (Level 3)
3
1
0
0
0
2012
2013
2014
2015
Ambition
2015
Regulatory actions
Regulatory actions (Level 4)
0
0
0
0
2012
2013
2014
2015
Regulatory action (Level 4): A formal notice of a criminal prosecution or (conditional)
penalty greater than €100,000. These are reported to indicate to management the
potential for reputational damage and the effect on our license to operate.
As in previous years, we did not receive any Level 4
prosecutions or penalties, which suggests that our people,
process and product safety programs, near-miss reporting
and investigation, stewardship and behavior-based
safety programs continue to have an effect on reducing
the number of serious injuries and significant losses
of containment.
HSE capability building
The Integrated Supply Chain competency framework,
proficiency levels and job profiles define the capability
requirements for managers with critical HSE responsibilities
and HSE professionals. The core development programs,
delivered through the Supply Chain, Research and
Development Faculty, use a blended learning approach for
line managers, HSE professionals, senior leaders and front
line leaders with critical HSE functions in manufacturing and
non-manufacturing units.
Level 3 safety incidents: incidents involving loss of life, more than five severe injuries,
environmental, assets or business damage totaling more than €25 million, or
extensive reputational damage.
These incidents reinforce our need for a continued focus on
behavior-based safety and our Life-Saving Rules.
In 2015, the HSE Faculty’s offering was expanded with
a new program for site managers – Advanced Safety
Leadership: the Hearts & Minds program. This is a follow-
up to the HSE critical leadership workshop and focuses
235
AkzoNobel Report 2015 | Sustainability statements Employees and community
Our people are critical to the success of our company. We
won’t achieve our vision of leading performance in all the
markets in which we operate without an engaged, diverse
and capable workforce.
An engaged workforce who live our core principles and
values is what underpins the delivery of our strategic
objectives and makes AkzoNobel a great place to work.
We want our people to truly reflect and represent the
many and varied cultures of the markets we serve and
the different locations where we do business. We believe
it’s also important that our management teams reflect the
diversity of our overall workforce. We know that inclusive
and diverse teams better understand customer demands
and make our organization stronger and more innovative.
Having the right people in the right jobs helps us to build
a stronger business. We work hard to find and retain
talent and provide continuous learning and development
opportunities. Our objective is to create a high performing
culture where employees can contribute to the best of
their ability.
Key performance indicators – employees
2012
2013
2014
2015
Ambition
2015
Ambition
2020
People data
Employees at year-end (FTE)
55,272
49,561
47,207
45,568
–
–
Employee engagement
Employee engagement (ViewPoint score
(1-5 scale))
Diversity and inclusion
% of females in total workforce
% of employees from high growth markets
% of female executives
% of executives from high growth markets
% of female executive potentials
% of executive potentials from high growth markets
Talent management
% cross-BU moves of leadership talents
% internal promotion into executive level
% retention of total workforce
% retention of leadership talent
% retention of leadership talent – under-
represented groups (women and high growth
market employees)
Learning and development
ViewPoint score on Learning and growth (Q12)
(1-5 scale)
3.80
3.88
3.97
4.03
>4.00
>4.20
24
40
15
13
27
31
5
70
88
96
97
24
47
16
14
28
34
7
75
89
92
92
24
48
17
16
24*
30*
13**
68
87
93**
89**
24
49
19
16
25*
31*
11**
58
87
93**
92**
–
–
20
20
30
30
10
80
–
95
95
–
–
25
22
30
30
15
80
–
95
95
3.85
3.93
3.99
4.05
>4.00
>4.20
* The definition of potentials changed in 2014 to better reflect our talent pool.
** In line with the new definition of potentials, the definition of leadership talent also changed in 2014 to better reflect our talent pool.
Core principles and values
Core
principles:
Safety
Integrity
Sustainability
Customer focused
We build successful partnerships
with our customers
Deliver on commitments
We do what we say we will do
Passion for excellence
We strive to be the best
in everything we do, every day
Winning together
We develop, share and use our
personal strengths to win as a team
236
Sustainability statements | AkzoNobel Report 2015 12
Note 12: Our people
Building an engaged workforce
We strive to measure and increase employee engagement.
Every year, we give employees the opportunity to share
their feedback through our annual engagement survey.
It provides us with information about what’s going well
and where we can improve our working environment. Our
employees and managers have a shared responsibility to
discuss the results and develop and implement actions for
further improvements.
In 2015, we exceeded our ambition of a 4.00 engagement
score for the first time since we started the survey in 2010.
Since then, we have seen a step change in our leaders’
engagement and now have five times as many teams at
top engagement levels.
Compared with other companies that started at a similar
level five years ago, we are among the top improvers in
terms of our engagement scores. We are pleased
with our level of improvement, but we recognize that to
become a leader in this area, we need to continue
building the capabilities of our people managers and our
feedback culture.
ViewPoint score employee engagement
(1 – 5 scale)
Ambition
3.56
3.74
3.80
3.88
3.97
4.03
>4.00
>4.20
2010
2011
2012
2013
2014
2015
2015
2020
Creating inclusive and diverse teams
We are committed to reflecting the diversity of our overall
workforce in all our management layers. At the end of 2015,
24 percent of positions in AkzoNobel were held by women
and 49 percent by employees from high growth markets.
Our 2020 ambition is to have at least the same gender
representation at senior management level in the
organization, with a specific focus on increasing female
representation in commercial and business roles.
Alongside our gender ambition, we want our executive
population to be a better reflection of the regions where
we do business. We are in the process of updating our
strategy and measures to reflect these ambitions.
Over the last five years, the representation of women in
executive positions in our organization has grown steadily
to 19 percent at the end of 2015 (2009: 10 percent).
Our Women in Leadership program helped to support
this growth in 2015. It aims to support women to fulfill
their potential as leaders by recognizing their strengths,
exploring their authentic leadership style and identifying
strategies to increase their impact.
However, the percentage of female executive potentials
has not reached our ambition level of 30 percent. This is
primarily due to the improvements made in 2014 to
the definition of growth potential, although we did still see
a small increase from 24 percent in 2014 to 25 percent
in 2015.
The representation of executives from high growth
markets has remained steady over the last two years, at
16 percent. The economic slowdown in some of our key
growth markets impacted the growth in the number of
executive roles in these regions and meant that we did
not achieve our 2015 ambitions. However, the continued
higher diversity of our hires and promotions into executive
level (2015: 20 percent from high growth markets) will
improve the number in the future.
In contrast, the number of executive potentials from high
growth markets grew to 31 percent at the end of 2015,
exceeding our ambition of 30 percent and securing a
future pipeline of diverse talent.
Female executives in %
Ambition
12
13
25
19
20
15
16
17
2010
2011
2012
2013
2014
2015
2015
2020
High growth market executives in %
Ambition
12
13
13
16
16
14
20
22
2010
2011
2012
2013
2014
2015
2015
2020
Identifying and retaining talent
Building a strong internal talent pipeline – based on
potential, skills and knowledge – is one of our key
priorities in terms of meeting the changing demands of our
businesses and the markets in which we operate. With
this in mind, we continued our Fast Track Management
Program in 2015 and recruited new leadership talent,
mainly in our high growth markets.
By the end of 2015, we had also conducted a major
review of our internal talent to verify the strength of our
internal pipeline and skills base. We assessed that in
order to achieve our business goals, we needed to rapidly
increase our knowledge and skills in certain areas. As a
result we made a conscious decision to hire externally
to accelerate our progress. This meant that in 2015,
external hires into executive positions were above 20
percent. Our ambition over multiple years continues to be
to fill 80 percent of our executive positions with internal
promotions. The new external hires have been tasked
237
AkzoNobel Report 2015 | Sustainability statements with putting together strong teams to ensure the future
development of internal talent pipelines.
In 2015, we saw multiple proof points of our increased
attractiveness in the labor market. We broke into the
top 20 favorite employers in the Intermediair Favorite
Employer Survey in the Netherlands. In Brazil, we were
the top ranked chemical company in the list of most loved
companies in Brazil published by Love Mondays. In the
UK, we ranked number two in the Scientific and R&D
industry sector of Job Crowd’s Top 100 Companies for
Graduates to work for. In Sweden, AkzoNobel was the
number one employer for chemical engineers according to
the Universum Student Ranking, while in China, we were
presented with the 2015 Best Recruitment and Retention
Company award.
The continued reorganization of the company offered
opportunities to promote and retain potential leaders and
transfer knowledge across our businesses. This resulted in
11 percent of potential and current leaders moving across
the organization in 2015 (2014: 13 percent). Additional
development opportunities inside the company meant that
our retention rate for leadership talent remained at a similar
level to 2014 (93 percent), despite improved external
labor market conditions. We saw an improvement in our
retention in under-represented groups (from 89 percent in
2014 to 92 percent in 2015).
Our total turnover remained stable at 13 percent, which
reflects both the impact of our restructuring efforts and the
overall improvements in the external labor markets in some
of our key countries, including the US.
238
Providing learning and
development opportunities
ViewPoint score on Learning and growth
(Q12) (1 – 5 scale)
Ambition
3.80
3.85
3.93
3.99
4.05
>4.00
>4.20
2011
2012
2013
2014
2015
2015
2020
We are committed to supporting professional and
personal development for all our employees. We do all
we can to develop existing talent, nurture new skills and
help employees progress within AkzoNobel. By holding
regular conversations, employees and managers can
identify future development opportunities and ensure that
individual skill sets are expanded, enabling our people to
continuously grow.
The AkzoNobel Academy is our global virtual hub for
learning and development and gives all employees
access to learning programs and content based on best
practices from across our organization. The Academy
offers blended learning opportunities to suit individual
needs. It was expanded in 2015 to include more than 100
open enrolment programs in eight languages, allowing
employees to access learning on demand. It will continue
to grow further in 2016.
Our commitment to developing our employees is reflected
in our annual engagement survey, with a learning and
growth opportunity score of 4.05 (2015 target: 4.00).
Specific attention was paid to the development of our
people managers. Their skills and behavior are key to the
creation and development of diverse teams, with a strong
customer focus and excellent performance. To support
this, we introduced our People Manager Program in 2015.
This is a blended learning program with multiple modules,
clustered around specific topic areas and offering timely
support to people managers.
To support both individual employees and their managers
in the development of their teams, we have trained 100
internal coaches. They provide development sessions
to identify and leverage the strengths of individuals and
teams, coaching them to do what they do best every day,
both in and outside of work.
Sustainability statements | AkzoNobel Report 2015 13
Note 13: Restructuring
14
Note 14: Community
In 2015, we continued to restructure our business to
implement our company strategy so that we can meet the
needs of our customers in years to come. We are aware
of the impact this has on the employees involved and, as
a responsible employer, we are committed to supporting
our employees during such reorganizations. We do this in
compliance with legal requirements and, where applicable,
in consultation with employee representative bodies.
We strive to ensure clear and ongoing communications,
transparent selection processes and, in many cases,
support the transition from work to work, which can
include training and out-placement.
During 2015, our workforce decreased due to ongoing
restructuring and divestments. We also added to the
headcount, mainly through new hires in high growth
markets. For details of how our workforce changed, see
Note 4 of the Consolidated financial statements.
Wherever possible, we announce our restructuring plans
between 12 and 26 months in advance. This allows for
better planning in the transition from work-to-work. In most
countries, we use the services of an external company
to support employees in finding their next position.
Exceptions to this are in Italy, based on an agreement with
the Italian government, and the Netherlands, where we
operate an in-house mobility office to support employees.
As a global company, we fully understand our role and
responsibilities when it comes to society and contributing
to the communities in which we operate. All our community
activities are guided by our Human Cities initiative. It also
provides direction for our partnerships and helps us make
informed decisions about sponsorship agreements.
Whenever possible, we try to make a positive difference to
the world around us. We engage with people and partner
with various organizations to help bring the AkzoNobel
brand to life, while also supporting deserving and
sustainable projects and causes, using our products when
appropriate.
A big success story is our global “Let’s Colour” program,
which inspires people to revitalize their local communities
with our paint products. Run by our Decorative Paints
business, the initiative also encourages the active
participation of our employees around the world.
Another vital part of our partnership approach is the
development of young people, highlighted by our work
with the Plan organization, which includes the AkzoNobel
Education Fund. Meanwhile, our global sponsorship
program is currently focused on key partnerships with the
Johan Cruyff Foundation, the Rijksmuseum and the
Van Gogh Museum in the Netherlands, and the Extreme
Sailing Series.
Our products
When possible, we endeavor to assist society through our
products. Ferrazone, for example, is helping to improve
well-being in many communities, particularly in developing
countries. Used to fortify food, it is widely regarded as being
the most effective way to treat iron deficiency anemia.
Another example is our partnership with the Forest
Stewardship Counsil (FSC) in relation to our woodcare
products. See Note 3 in this section for more details.
“Let’s Colour” program
“Let’s Colour” is our employee-led community program,
which is based on our belief in the transformative power
of color. We donate paint and organize projects for
community groups, charities and individuals who have the
desire and determination to make a difference through
color. By revamping grey and unappealing spaces into
bright and colorful environments, our goal is to bring
happiness to the lives of people everywhere.
As part of AkzoNobel’s Human Cities initiative, the “Let’s
Colour” program highlights the important role color can
play in making cities more vibrant, inspiring and human.
In August, for example, 450 volunteers took part in one
of the biggest “Let’s Colour” events ever staged by the
company’s Decorative Paints business. Around 20,000
liters of Coral (AkzoNobel’s paint brand in Brazil) was used
to transform more than 300 buildings in Rio de Janeiro’s
famous Santa Marta favela.
Education is also a key component of the “Let’s Colour”
program. This is achieved through paint apprenticeships,
which combine our desire to bring color to communities
– via schools, hospitals and other public places –
with a commitment to train local people (often from
disadvantaged backgrounds) in the skills of painting
and decorating.
During 2015, we donated more than 115,000 liters of
paint, worth an estimated €0.5 million. Approximately
1,000 AkzoNobel employees were involved, volunteering
more than 8,000 hours of their time to various
“Let’s Colour” projects across the globe. We also trained
4,250 people in painting and estimate that we positively
impacted the lives of around five million people in
2015 alone.
239
AkzoNobel Report 2015 | Sustainability statements Moved by the plight of refugees, various teams in Germany
and the Netherlands decided to give extra support by
organizing educational visits, cultural outings and reading
sessions to enhance language knowledge and skills for
migrant children and adults. Many similar and successful
joint initiatives took place all over the world.
To celebrate the Community Program’s tenth anniversary,
the ten best projects from 2015 will be selected and
recognized in early 2016.
Community Program
Our Community Program encourages sites and individuals
to take part in projects where our products, and the
skills and knowledge of employees, can benefit the wider
community on a sustainable basis. In the past ten
years, the initiative has been firmly embedded in our
worldwide organization.
Projects have included employee involvement in the
redecoration of schools, community centers, shelters
and daycare centers for the homeless. Other projects
have focused on vocational training for the reintegration
of unemployed youngsters, women and the disabled, as
well as enhancing HSE awareness among children and
boosting their interest in chemistry and science. All of these
community activities are taking place in various parts of the
world and contribute to creating more human cities.
Cumulative Community Program involvement
Cumulative data, since 2005
Projects (number)
Volunteers (number)
Support (€ million)
13.0
14.0
9,000
11,000
15.0
13,500
16.0
16,400
1,931
2,108
2,260
2,385
2012
2013
2014
2015
Approximately 16,400 volunteers from around 55 countries
have worked on 2,385 projects since the launch of the
program in 2005. It was another successful year in 2015,
with more people having benefited. Community Program
projects are increasingly being organized as a team building
activity, which contributes to employee engagement, team
spirit and our company value of Winning together.
The Community Program also provides opportunities for
employees to develop their capabilities and discover hidden
talents. In training programs and international conferences,
community activities are increasingly becoming part of the
agenda, which in turn increases the participants’ awareness
of local circumstances.
During 2015, 125 new projects were initiated. Some
examples are briefly described below.
In Brazil, employees from Pulp and Performance Chemicals
in Jundiaí again teamed up with their Surface and Polymer
Chemistry colleagues from Itupeva. They helped transform a
former poultry stable into a community center for homeless
and female (former) drug addicts. In China, 60 employees
from Powder Coatings and Specialty Chemicals sites in
Boxing and Tianjin joined their Decorative Paints colleagues
from Langfang to repaint Ruicong Training & Special School
and organize activities for its deaf children.
2015 projects by region
A Europe
B Asia
C Latin America
D North America
E Other regions
75
22
14
11
3
C
B
E
D
A
240
Sustainability statements | AkzoNobel Report 2015
Education Fund
Other partnerships
What would a city be without the people who live there?
AkzoNobel is proud to be associated with a variety of
organizations and initiatives in ways that truly make a
positive difference. These partnerships allow us to bring
the AkzoNobel brand to life and create value for our
stakeholders. One of our flagship partnerships is with
the Plan organization in the Netherlands – a member of
the Plan International network – a collaboration which
marked its 20th anniversary in 2014. The cooperation was
established to help children in developing countries fulfil
their potential by improving the quality of their education.
It has since evolved to also support the employability of
young people via vocational training programs designed
to set them on a proper career path. Over the years,
tens of thousands of young people have benefited from
dozens of projects in countries such as Bolivia, Brazil,
China, Ecuador, India, the Philippines and Vietnam. During
2015, we worked together with Plan Nederland and our
Coral decorative paints brand to support a project which
involved training deprived young people in Natal, Brazil,
to benefit from life skills training and vocational training to
become painters.
Our work with the Cruyff Foundation is designed to
support projects that make sport more accessible to
children around the world. As one of their top partners and
preferred paint supplier, we help the Foundation to create
and maintain facilities in neighborhoods where children
lack the possibility to play sports in a safe environment.
During 2015, seven new Cruyff Courts were built using our
products, including one in Argentina, one in India and two
in the Netherlands.
Also during 2015, the Van Gogh Museum opened its new
entrance hall, which features a number of AkzoNobel
products. Brought together by our Sikkens Decorative
Paints colleagues, the Autobase Plus, Car Refinishes
Benelux team worked closely with Interpon powder
coatings to reproduce specific colors requested by the
entrance hall’s architect. We also continued our support
of the museum’s Restoration Studio by helping to
digitally restore Van Gogh’s famous Field of Irises. We are
employing the same technology and techniques regularly
used by our Vehicle Refinishes business to calculate color
recipes and accurately match different car colors. The
work will help to reveal what the renowned masterpiece
would have looked like when the artist first painted it
over 125 years ago. The project should be finished by
mid-2016.
One of our more recent partnerships is with the Extreme
Sailing Series – a global racing circuit which attracts larger
audiences as the action takes place closer to shore. The
Extreme 40 catamarans that participate use our Awlgrip
yacht coatings, which offer a number of important benefits,
including superior performance and aesthetics. Now
in its second year, close to 100 customers from all our
businesses attended events which were staged around
the world at host cities including Istanbul, St. Petersburg,
Sydney and Muscat.
241
AkzoNobel Report 2015 | Sustainability statements Why we value
employee engagement
Employee engagement
might sound like a fancy
term, but it’s vital to any
successful organization.
The more engaged
your employees, the
more motivated and
productive they are
likely to be. This has a
whole series of knock-
on effects in terms of
culture, behavior, safety
and – ultimately – the
performance of your
business.
Happy and productive employees are essential for success. Get
it wrong and you may be faced with low morale, poor levels of
motivation and higher levels of absence. There’s also a risk that
relationships with customers could be affected. Now, more than
ever, companies are powered by their people.
At AkzoNobel, we take a pro-active approach to employee
engagement which is designed to measure, analyze and improve
the connection with our people around the world. Fundamental
to this process is our annual ViewPoint survey. It gives all 46,000
employees an opportunity to share their opinions and offers a
complete picture of what’s happening throughout the company.
Conducted in association with Gallup, the independent survey
provides valuable metrics that enable us to identify best practices
and pinpoint areas that require attention. One of the key findings
we’ve noticed is that our overall engagement score has risen
for the last five years in a row. It’s no coincidence that our safety
performance also improved during this period, underlining the fact
that engagement drives safety. This was evidenced in the 2015
survey by the fact that our most engaged businesses reported fewer
injuries and lower absence.
The results also show that our engagement journey continues to
gather momentum, with the experience of working at AkzoNobel
having been fundamentally transformed since we started conducting
the survey in 2010. We still have work to do – highlighted by the
different pace of progress within the company – and we have identified
clear areas for improvement, with relevant action plans in place.
But having introduced a new set of values and behaviors in 2014 –
which were very positively received – we are now targeting “leading”
levels of employee engagement. This will involve offering more career
opportunities, encouraging talent development, listening to feedback
and providing the right environment for people to perform at their best.
242
Sustainability statements | AkzoNobel Report 2015
Sustainability statements | AkzoNobel Report 2015 AkzoNobel Report 2015 | Sustainability statements
243
AkzoNobel Report 2015 | Sustainability statements Environment
Key performance indicators – environment
Operational eco-efficiency footprint measure
(% reduction from 2009)
Greenhouse gas emissions per ton of production
(own operations, in kg)
Sustainable fresh water management
(% of manufacturing sites)
15
Note 15: Energy
Energy use
2012
13
257
83
2013
24
222
85
2014
24
224
89
2015
23
221
93
Ambition
2015
Ambition
2017
30
245
100
40
–
–
Energy is important for all our operations, especially some
of our Specialty Chemicals businesses, because they use
energy as a major raw material for their products. Energy
efficiency and carbon efficient energy use are therefore
important metrics for our operations.
This section outlines environmental impacts from our
own operations and related improvements. The key
performance indicators are mentioned in the table above.
Many of these improvements are driven through our
operational eco-efficiency (OEE) program.
Operational eco-efficiency
program
The focus of the OEE agenda is to increase raw material
efficiency, reduce energy consumption and decrease both
emissions and the production of waste. Improvements
include many small site contributions such as upgrading
existing processes, rationalization of the manufacturing
footprint and application of best available technology for
new investments.
We measure progress on a quarterly basis using the
eco-efficiency footprint measure, a company indicator
which combines energy, water, waste and air emissions,
as well as cost elements. Weighting factors for each
parameter are used to calculate the absolute footprint.
This number is used in combination with production
volume to calculate the relative footprint improvement.
OEE footprint improvement
(% reduction from 2009)
Ambition
11
13
40
30
24
24
23
2011
2012
2013
2014
2015
2015
2017
The OEE footprint is calculated from the weighted average of nine footprint
parameters and production volume.
lower compared with last year for the first time since we
started monitoring performance
Energy use in 1000 TJ
Energy use
GJ per ton of production
5.7
106
5.6
99
5.7
98
5.6
95
2012
2013
2014
2015
Energy use [TJ] is the sum of fuels, electricity, steam, hot water and other utilities
(expressed as fuel equivalents)
• Our target of a relative footprint improvement of 30
Energy use per Business Area
percent by 2015 (compared with 2009) was not met.
Additional programs are being put in place to accelerate
progress towards our 40 percent target
Our OEE performance and trends (the footprint and
its related parameters) are transparent for the whole of
AkzoNobel via the EcoXchange platform. This platform
also provides access to know-how, best practices
and showcases on eco-efficiency related topics relevant
for all locations.
in 1000 TJ
Decorative Paints
Performance Coatings
Specialty Chemicals
2013
2.0
5.0
92.0
2014
1.8
4.6
92.0
2015
1.8
4.5
89.2
• Energy use per ton of production reduced to 5.6 GJ/
ton. Absolute energy use was down 3 percent to
95,000 TJ, both in line with a change in product mix
and volume changes
• In 2015, 38 percent of our sites improved their relative
footprint with regards to energy use versus 2014
• The total cost of energy in our production was about
€0.7 billion
• More details about the energy sources can be found in
Note 5 of this section and on our website
• Between 2009 and 2015, we achieved a relative
footprint improvement of 23 percent
• Many of the businesses showed an eco-efficiency
footprint improvement, but due to product mix changes
and the consolidation of a joint venture, the final result is
In order to focus even more attention on this improvement
program, OEE improvement projects are being integrated
in the main supply chain improvement monitoring tool, the
AkzoNobel tracker. This will now integrate/quantify all site
improvement activities.
244
Sustainability statements | AkzoNobel Report 2015
We use energy scans to increase awareness and identify
savings opportunities in all our businesses. During 2015,
this resulted in many energy improvement projects,
for example:
• In Adria, Italy, a set of old chillers was replaced by
modern, high efficiency units, saving 2.3 TJ of energy
and resulting in an annual saving of around €100,000
• The conversion of our new chlorine plant in Frankfurt,
Germany, was completed. The new membrane
electrolysis technology means the process is now 20
percent more energy efficient, with expected annual
savings of more than €5 million
• Optimization of the use of hydrogen in boilers to
generate steam in Rotterdam, the Netherlands, resulted
in a reduction of the use of natural gas of over €100,000
• Optimization of our furnaces in LeMoyne, Alabama, in
the US resulted in 15 percent natural gas savings and a
reduction of 2,700 metric tons of CO2, delivering savings
of around €150,000
• In Ambes, France, a contract was concluded to use
our waste hydrogen in fuel cells to generate carbon-
free electricity
16
Note 16: Greenhouse gases
17
Note 17: Local air quality
Greenhouse gas (GHG) emissions from our facilities are
primarily related to the fuel and power we use. This section
reflects the performance of all our own operations covering
the gate-to-gate scope. More details on our Carbon Policy
and cradle-to-grave reporting can be found in Note 5 in
this section.
Greenhouse gas emissions in million tons
Direct CO2(e) Mt
Indirect CO2(e) Mt
kg CO2(e) per ton of production
257
3.2
222
224
221
2.8
2.8
1.5
1.1
1.1
2.3
1.5
2012
2013
2014
2015
Air monitoring around our operations is focused on volatile
organic compounds (VOC) and NOx and SOx emissions.
We monitor particulates at site level as required.
Volatile organic compounds
(VOC)
All our businesses will continue to manage VOC emissions
from operations, in line with national or supranational
(European Commission) legal requirements.
The VOC reduction focus for our paints and coatings
businesses concentrates on low/zero VOC product
design, going beyond controlling VOC emissions from
our operations. Reducing VOC emissions from our sites
remains part of the scope of our OEE program, while
our Research, Development and Innovation groups are
working on projects to reduce the solvent content of our
products – VOC in product (see Note 4 in this section).
Total greenhouse gas emissions made up of direct emissions from processes and
combustion at our facilities and indirect emissions from purchased energy.
Volatile organic compounds in kilotons
Volatile organic compounds
kg per ton of production
Greenhouse gas emissions per Business Area
in million tons
Decorative Paints
Performance Coatings
Specialty Chemicals
2013
2014
2015
0.1
0.3
3.5
0.1
0.3
3.5
0.1
0.2
3.4
0.19
3.6
0.17
0.18
0.18
3.1
3.1
3.0
• Total greenhouse gas emissions per ton of production
decreased by 2 percent to 221 kg/ton CO2(e). Absolute
GHG emissions reduced to 3.8 million tons of CO2(e).
These were both caused by a change in product mix
and production volumes of main energy consumers
• A detailed breakdown of our greenhouse gas emissions
is available on our website
2012
2013
2014
2015
We measure halogenated and non-halogenated organic compounds
discharged to air.
• VOC emissions per ton of production remained stable at
0.18 kg/ton. Total VOC emissions decreased 1 percent
to 3.0 kilotons (2014: 3.1 kilotons)
245
AkzoNobel Report 2015 | Sustainability statements
18
Note 18: Raw materials efficiency
NOx and SOx
Ozone depleting substances
Material efficiency
NOx and SOx emissions may have a significant impact
on local air quality because of their potential contribution
to acidification.
NOx and SOx emissions
in kilotons
NOx
NOx kg/ton
SOx
SOx kg/ton
2012
2013
2014
2015
1.9
0.10
7.6
0.41
1.3
0.08
4.6
0.26
1.3
0.08
3.7
0.22
1.7
0.10
3.8
0.22
Emissions may form acid rain that can lead to acidification. The gases are emissions
from manufacturing and combustion of fuel that we burn. The total quantity of NOx/
SOx emissions from manufacturing processes discharged directly to air (e.g. after
any abatement process) and the quantity of NOx/SOx emissions calculated from the
use of fuels.
• The consolidation of the Delesto joint venture combined
heat and power plant (CHP) into AkzoNobel resulted in
an extra emission of 0.5 kilotons of NOx, although a low
NOx burner was installed, reducing the emissions by
0.07 kilotons
• Due to the consolidation of the Delesto joint venture,
total emissions increased to 1.7 kilotons. NOx emissions
per ton from our sites increased to 0.10 kg/ton
of production
• The start-up of the incinerator in Mons, Belgium, with
a low NOx furnace resulted in a reduction of over
0.1 kilotons a year
• SOx emissions (from process emissions and energy)
were stable at 0.22 kg/ton of production. Absolute
emissions were up 3 percent to 3.8 kilotons
• Our three sulfur derivatives plants in Germany, the
US and Argentina contributed 97 percent of the
SOx emissions. Due to a product mix effect, we
were not able to convert SO2 to a product, resulting
in the increase
246
• Emissions of ozone depleting substances are at a very
low level, 0.6 tons (2014: 1.8 tons). They are mainly due
to Freon22 from maintenance in older air conditioning
and cooling units, which are replaced when appropriate.
We are maximizing our conversion of raw materials into
final product by solving the root cause of the losses.
This will not only reduce the waste, but will also, for
example, decrease COD and the carbon related to our raw
materials upstream.
A variety of projects was initiated:
• At Decorative Paints, a material efficiency program was
started, focusing on a better conversion of raw materials
into final product
• Performance Coatings started a global material
efficiency program for all businesses focusing on yield
improvement in production. A wide variety of smaller
projects has resulted in savings of more than €10 million
and this will continue in 2016. Examples of this type
of project are a powder fines recycling system for a
continuously operating powder coatings production line,
Raw material flow in kilotons
16
By-product
Customer
operations
Raw
material
input
Own
operations
17,200
Product
155
Waste
79
75
Reusable
Non-reusable
Sustainability statements | AkzoNobel Report 2015 reducing the size of a pump, piping and a filter-housing
used for filling and using compressed air to empty mills
for liquid coatings
• Specialty Chemicals started a program to identify
opportunities on material efficiency. Seven sites were
selected and held workshops, when opportunities
were identified to increase the material efficiency, with a
potential saving of more than €1 million
Waste
Effective waste management helps to increase raw
material efficiency in our manufacturing operations, while
reducing both our environmental footprint and costs.
We have moved our focus from managing/reducing total
waste to eliminating waste by increasing material efficiency.
We are still moving towards eliminating hazardous waste
to landfill. The exception is asbestos waste – mainly from
demolishing old equipment and buildings – where the
preferred current safe disposal route is properly designed
landfill facilities.
• Total waste per ton of production generated and leaving
our sites was up by 5 percent to 9.0 kg/ton. The total
waste volume increased to 155 kilotons, an increase of
4 percent
• Incidental activities at some sites led to a one-off waste
increase of 6 kilotons
• Hazardous waste per ton of production decreased by
1 percent to 3.3 kg/ton
• Although waste went up, many projects are in place to
reduce waste. One of these involves the conversion of
one of our Rotterdam waste streams (a filter aid) into a
product which can now be sold to the paper industry,
where it can be used without modification
Total waste per Business Area
in kilotons
Decorative Paints
Performance Coatings
Specialty Chemicals
2013
2014
2015
39
54
64
35
55
59
34
54
66
Total waste in kilotons
Hazardous waste in kilotons
Reusable
Non-reusable
Total kg per ton of production
Reusable
Non-reuseable not landfill
Non-reuseable to landfill
Total kg per ton of production
11.0
118
9.0
9.0
8.6
96
85
65
77
72
79
75
2012
2013
2014
2015
3.8
51
3.5
44
3.4
3.3
37
36
18
2.7
2012
15
1.9
2013
20
2014
1.7
20
2015
2.0
Waste means any substance or object arising from our routine operations which we
discard or intend to discard, or we are required to discard.
Hazardous waste is waste that is classified and regulated as such according to the
national, state or local legislation in place.
247
AkzoNobel Report 2015 | Sustainability statements
19
Note 19: Water
Fresh water availability
Water flow in million m3
Sustainable water supply is essential to life – and to
the sustainability of our business. We rely on water
for raw materials production, product formulation and
manufacturing, as well as power generation, cooling,
cleaning, transporting and for the effective use of some
products. Around 89 percent of our fresh water intake is
from surface water and 89 percent of our intake is used for
cooling and is only slightly heated before being returned
to the original source. We continue to reduce the chemical
oxygen demand (COD) of our effluent to surface water.
We monitor our progress using a fresh water risk
assessment tool, which is completed at least bi-annually
by each manufacturing site. The tool assigns risk levels
to water sources, supply reliability, efficiency, quality of
discharges, compliance and social competitive factors.
Sustainable fresh water management assessment was
carried out in 2013. In total, 93 percent of our sites (2014:
89 percent) have sustainable fresh water management
in place, as measured by the AkzoNobel fresh water
management risk assessment tool, with a target of 100
percent for 2015. The short fall from the target is due to
sites that cannot become sustainable due to their location
in a water scarce area. They continue to monitor the local
situation and seek improvement options. We will continue
with the sustainable fresh water management program
beyond 2015.
248
27
4
243
Product
Other
Potable water
Groundwater
11
19
244
Own
operations
Surface water
Sustainability statements | AkzoNobel Report 2015 20
Note 20: Soil and groundwater remediation
Sustainable fresh water management
in % of manufacturing sites
Water emissions
Ambition
83
85
89
93
100
2012
2013
2014
2015
2015
Sustainable water management is defined as a low risk score in all categories in the
AkzoNobel sustainable fresh water assessment tool: water sources, supply reliability,
efficiency, quality of discharges, compliance and social competitive factors.
• Fresh water use per ton of production increased to
16.0 m³/ton (2014: 15.2 m³/ton)
• Total fresh water use was 274 million m³, an increase
of 4 percent (2014: 263 million m³). An increase of over
10 million m3 was due to the startup of the new chlorine
plant in Frankfurt, Germany
Fresh water use in million m3
Fresh water consumption
m3 per ton of production
15.3
283
14.9
265
15.2
263
16.0
274
2012
2013
2014
2015
Fresh water use is the sum of the intake of groundwater, surface water and
potable water.
In total, 89 percent of the COD is generated at ten
production locations, with the remainder being generated
by numerous sites. These ten locations are the primary
focus for improvement actions.
Chemical oxygen demand (COD) in kilotons
Chemical oxygen demand
kg per ton of production
0.09
1.6
0.08
0.08
0.08
1.4
1.4
1.4
2012
2013
2014
2015
COD is the amount of oxygen required for the chemical oxidation of substances in the
waste water effluent that is discharged into surface waters.
• The COD load to surface water per ton of production
remained stable at 0.08 kg/ton
• The total COD load to surface water was stable at
1.4 kilotons
• A new treatment plant is being built in Maua, Brazil, and
will reduce COD further by 150 tons per year
• A project has been started to reduce the COD of one of
the major contributors by addressing the root cause of
the COD
Soil and groundwater
remediation
There are costs associated with the assessment
and remediation of historical soil and groundwater
contamination. We periodically review historic
contamination at our sites, taking remedial action
when required, and have procedures to prevent
new contamination.
A dedicated group of legal and environmental experts
assesses, manages and resolves environmental liabilities.
In 2015, the Corporate Directives were extended to
include a new directive designed to ensure the appropriate
and effective management of closed sites to maintain
value, avoid future liabilities and control risks to people and
the environment.
In line with IFRS accounting rules, we make provisions for
environmental remediation costs when it is probable that
liability will materialize and the cost can be reasonably
estimated. We have set aside €305 million, which we
believe is sufficient for the sites where we have ownership
or responsibility (See Note 19 of the Consolidated
financial statements).
Mandatory annual environmental liability reviews are
conducted to review risks, monitor progress in
resolving our liabilities and assessing changes in
company exposure.
249
AkzoNobel Report 2015 | Sustainability statements
Independent assurance report
To the readers of the AkzoNobel
Report 2015
Our conclusion
We have reviewed (limited assurance) the information in
the Sustainability statements (pages 195 to 249) and in the
Compliance and integrity management section (pages 124
to 129) (hereafter “The Sustainability Reporting”), which are
part of the Report 2015 (“The Report”) of Akzo Nobel N.V.
(further “the company”).
Based on our review, nothing has come to our attention to
indicate that The Sustainability Reporting is not presented,
in all material respects, in accordance with the reporting
criteria as described in Note 2: Reporting principles.
Furthermore, we have audited (reasonable assurance)
Note 1: Managing our sustainability agenda (pages 197 to
200) of the Sustainability statements. In our opinion, the
information in Note 1: Managing our sustainability agenda
is presented, in all material respects, in accordance
with the reporting criteria as described in Note 2:
Reporting principles.
Our report on consistency
We report, to the extent we can assess, that the
information on sustainability in the rest of The Report is
consistent with The Sustainability Reporting.
Basis for our conclusion and opinion
We conducted our engagement in accordance with the
Dutch Standard 3810N: Assurance engagements relating
to sustainability reports, which is a specified standard
that is based on the International Standard on Assurance
Engagements (ISAE) 3000: Assurance Engagements other
than Audits or Reviews of Historical Financial Information.
Our responsibilities under Standard 3810N and
procedures performed have been further specified in the
paragraph titled Our responsibility for the assurance of The
Sustainability Reporting.
250
We are independent of Akzo Nobel N.V. in accordance
with the “Verordening inzake de onafhankelijkheid van
accountants bij assurance-opdrachten” (ViO) and other
relevant independence requirements in the Netherlands.
Furthermore, we have complied with the “Verordening
gedrags- en beroepsregels accountants” (VGBA). We
believe that the assurance evidence we have obtained
is sufficient and appropriate to provide a basis for our
conclusion and opinion.
Key assurance matters
Key assurance matters are those matters that, in our
professional judgment, were of most significance in our
assurance of The Sustainability Reporting. We have
communicated the key assurance matters to the company.
The key assurance matters are not a comprehensive
reflection of all matters discussed.
These assurance matters were addressed in the context of
our assurance of The Sustainability Reporting as a whole
and in forming our conclusion thereon, and we do not
provide a separate conclusion on these matters.
Managing the sustainability agenda
The Note in relation to Managing our sustainability
agenda explains the status of the level of integration of
sustainability in the company’s management processes.
This information in the Sustainability statements
demonstrates the underlying organizational embedding
of the performance reported. In light of its resulting
materiality, we have identified this Note therefore as a Key
Assurance Matter.
We have held interviews and discussions with relevant
staff about the Note as presented and reviewed evidence
for the text claims relating to embedding sustainability
within the organization to assess whether the information
as provided in Note 1: Managing our sustainability agenda
shows a clear and balanced picture of the current status of
integration of sustainability in management processes.
Responsibilities of the Board of Management for
The Sustainability Reporting
The Board of Management is responsible for the
preparation and fair presentation of The Sustainability
Reporting in scope as included above under “Basis for
our conclusion and opinion” in accordance with the
Sustainability Reporting Guidelines G4 of the Global
Reporting Initiative supported by internally developed
guidelines as described in Note 2: Reporting principles.
It is important to view The Sustainability Reporting
in the context of these criteria. We believe these
criteria are suitable in view of the purpose of our
assurance engagement.
As part of this, the Board of Management is responsible
for such internal control as it determines is necessary to
enable the preparation of The Sustainability Reporting that
is free from material misstatement, whether due to fraud
or error.
Our responsibility for the assurance of The
Sustainability Reporting
Our objective is to plan and perform the assurance
assignment in a manner that allows us to obtain sufficient
and appropriate assurance evidence for our conclusion
regarding The Sustainability Reporting and our opinion
regarding the information in Note 1: Managing our
sustainability agenda.
Procedures performed for the review of The Sustainability
Reporting are aimed at determining the plausibility of
information and are less extensive than those for a
reasonable level of assurance.
Our audit of the information in Note 1: Managing our
sustainability agenda has been performed with a high, but
not absolute, level of assurance, which means we may not
have detected all errors and fraud.
Sustainability statements | AkzoNobel Report 2015 During the assurance process we discussed the necessary
changes of The Sustainability Reporting and reviewed
the final version of The Report to ensure that it reflects
our findings.
Amsterdam, February 9, 2015
KPMG Sustainability,
Part of KPMG Advisory N.V.
W.J. Bartels RA, Partner
Our review procedures on The Sustainability Reporting
included, among others:
• A risk analysis, including a media search, to identify
relevant sustainability issues for the company in the
reporting period
• Reviewing the suitability of the internal reporting criteria
including conversion factors used
• Evaluating the design and implementation of the
systems and processes for the collection, processing
and control of the information in scope for the review,
including the consolidation of the data
• Interviewing management at corporate and business
level responsible for the sustainability and compliance
and integrity policies, implementation, management,
internal controls, monitoring and reporting
• Interviewing relevant staff at corporate and business
level responsible for providing the information and
consolidating the data for The Sustainability Reporting
• Evaluating internal and external documentation, based
on sampling, to determine whether the information
in The Sustainability Reporting is supported by
sufficient evidence
• Joining an internal audit of Health, Safety and
Environment Management at the Industrial Chemicals
site in Rotterdam, the Netherlands
• Reviewing the relevant work of the Internal
Audit function
Our additional audit procedures on the information in
Note 1: Managing our sustainability agenda included
among others:
• Testing the relevant work of the Internal Audit function
in respect of the information in Note 1: Managing our
sustainability agenda
• Interviews with relevant staff at corporate level
responsible for providing the information for Note 1:
Managing our sustainability agenda
251
AkzoNobel Report 2015 | Sustainability statements Sustainability performance summary
Economic/Governance/Social
Area
Product
Eco-premium solutions with downstream benefits
Eco-premium solutions
Business integrity
% of revenue
% of revenue
Code of Conduct alleged complaints handled by the Compliance Committee
number
Code of Conduct trained1
Health and Safety
Fatalities employees
Total reportable injury rate employees/supervised contractors
Lost time injury rate employees/supervised contractors
Occupational illness rate employees
Total illness absence rate employees
Fatalities contractors (supervised plus independent)
Total reportable injury rate independent contractors
Behavior-based safety program implemented
Distribution incidents
Motor vehicle incidents with injury
Employees
Employee numbers (FTE)
Female executives
Executives from high growth markets
Employee engagement index
Community Program investment
Reliable operations
Management audits plus reassurance audits
Safety incidents (Level 3)
Safety incidents (Level 1, 2, 3)
Significant loss of containment (Level D)
Regulatory actions (Level 4)
Sourcing
Critical PR2 spend covered by supplier management framework
Product related suppliers signed Business Partner Code of Conduct
NPR3 suppliers signed Business Partner Code of Conduct
Suppliers on SSV program since 20074
Renewable raw materials
% of employees
number
/million hours
/million hours
/million hours
%
number
/million hours
% of employees
number
number
number
%
%
1-5 scale
in € millions
number
number
number
number
number
% of spend
% of spend
% of spend
number
% organic RM
2011
2012
2013
2014
2015
Ambition
2015
Ambition
2020
–
22
24
95
2
3.1
1.3
0.26
2.0
1
3.5
–
80
29
17
22
24
96
2
2.4
1.1
0.23
2.0
0
4.2
50
46
28
18
24
9
95
0
2.3
1.3
0.14
2.1
0
3.5
68
48
19
19
24
11
90
0
1.8
0.9
0.24
2.1
0
2.9
84
52
20
19
24
10
661
0
1.6
0.7
0.14
2.1
0
2.8
96
49
18
57,240
55,272
49,561
47,207
45,568
13
13
3.74
1.5
66
8
36
2
0
–
95
77
304
–
15
13
3.80
1.5
61
3
23
0
0
69
97
80
373
13
16
14
3.88
1.0
56
0
14
1
0
80
96
83
392
13
17
16
3.97
1.0
63
1
15
0
0
83
98
80
432
13
19
16
4.03
1.0
57
0
12
0
0
87
98
81
455
11
–
30
–
–
0
<2.0
1.3
–
1.9
0
–
100
–
–
–
20
20
20
–
–
–
0
<1.0
–
–
–
0
–
100
–
–
–
25
22
>4.00
>4.20
–
–
0
–
0
0
88
98
80
–
–
–
–
0
–
0
0
–
–
–
–
–
1 Code of Conduct online training was updated in 2015, training invitations were sent in Q4, mandatory
completion is due by mid-2016.
2 PR – Product related (raw materials and packaging).
3 NPR – Non-product related.
4 SSV program targets are included in the Critical PR spend coverage KPI.
252
Sustainability statements | AkzoNobel Report 2015 Environmental
Area
Raw material efficiency
Total waste
per ton of production
Total non-reusable waste
per ton of production
Hazardous waste total
per ton of production
Hazardous waste non-reusable
per ton of production
Hazardous waste to landfill
per ton of production
Maintain natural resources/fresh air
Fresh water use
per ton of production
COD emissions
per ton of production
Manufacturing sites with sustainable fresh water
VOC emissions
per ton of production
NOx emissions
per ton of production
SOx emissions
per ton of production
Direct CO2(e) emissions (Scope 1)
per ton of production
Indirect CO2(e) emissions (Scope 2)
per ton of production
Total energy consumption
per ton of production
Value chain
Total CO2(e) emissions (cradle-to-grave) 1
reduction per ton of product 1 (from 2012)
Total CO2(e) emissions (cradle-to-gate)
reduction per ton of product (from 2009)
1 Reported from 2012. Includes impact from VOC emissions.
2011
2012
2013
2014
2015
Ambition
2015
Ambition
2020
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
million m3
m3/ton
kiloton
kg/ton
%
kiloton
kg/ton
kiloton
kg/ton
kiloton
kg/ton
million tons
kg/ton
million tons
kg/ton
1000TJ
GJ/ton
million tons
%
million tons
%
217
11.6
96
5.1
71
3.8
26
1.4
3.0
0.16
291
15.6
1.8
0.10
74
3.6
0.19
2.0
0.11
7.7
0.41
1.6
85
3.2
171
107
5.7
–
–
16.1
3
203
11.0
85
4.6
71
3.8
20
1.1
2.7
0.15
283
15.3
1.6
0.09
83
3.6
0.19
1.9
0.10
7.6
0.41
1.5
82
3.2
175
106
5.7
27.5
0
15.4
1
161
9.0
65
3.6
62
3.5
17
1.0
1.9
0.11
265
14.9
1.4
0.08
85
3.1
0.17
1.3
0.08
4.6
0.26
1.1
64
2.8
158
99
5.6
26.5
2
14.6
4
149
8.6
72
4.1
58
3.4
22
1.2
1.7
0.10
263
15.2
1.4
0.08
89
3.1
0.18
1.3
0.08
3.7
0.22
1.1
63
2.8
161
98
5.7
26.9
-4
14.7
0
155
9.0
75
4.4
57
3.3
22
1.3
2.0
0.12
274
16.0
1.4
0.08
93
3.0
0.18
1.7
0.10
3.8
0.22
1.5
87
2.3
133
95
5.6
24.6
3
13.5
8
–
-10%
–
–
–
–
–
–
–
–
–
–
–
–
100
–
0.19
–
–
–
–
–
-10%
–
-10%
–
–
–
–
–
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25–30
–
–
253
AkzoNobel Report 2015 | Sustainability statements Index
AkzoNobel at a glance
cover flap
Earnings per share
140
Product stewardship
Audit Committee
Auditor’s report
110
186
Eco-premium solutions
48, 214
Profit allocation
Emissions
220, 222
Property, plant and equipment
Automotive and Specialty Coatings
82
Employees
51, 224
Provisions
34
Pulp and Performance Chemicals
100
255
177
208
94
89
Raw materials
Regional statistics
Remuneration
Remuneration Committee
Report of the Supervisory Board
Resource Efficiency Index
256
Return on investment
6, 46
Return on sales
20
94
83
32
Risk management
Safety
Segment information
Shareholders’ equity
158
Specialty Chemicals
29, 89
Stakeholder engagement
232
189
160
164, 170
95
50, 55, 246
193
130, 174
112
106
51, 213, 220
30, 44
44
52
228
146
163
86
204
Board of Management
Borrowings
Business Area statistics
Business performance
Carbon footprint
100
End-user segments
171
192
Executive Committee
Financial calendar
61
Financial instruments
220
Four-dimensional profit and loss (4D P&L)
Cash, cash flow and net debt
47, 144, 165
Functional Chemicals
CEO statement
Circular economy
Code of Conduct
Commercial excellence
Community Program
Company financial statements
Compliance
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Consolidated statement of comprehensive income
Consolidated statement of income
Contingent liabilities and commitments
8
Functional excellence
216
126
Glossary
How we create value
89, 213
Human Cities initiative
240
181
Industrial Chemicals
Industrial and Powder Coatings
119, 125
Innovation
143
144
145
142
142
173
Intangible assets
Integrated supply chain
Internal controls
Invested capital
“Let’s Colour”
Marine and Protective Coatings
Continuous improvement
32
Net debt
Core principles and values
124, 126, 236
Nomination Committee
Corporate governance
Cradle-to-grave carbon footprint
Decorative Paints
Divestments
Dividend proposal
254
52, 102, 111, 122
Strategic targets
4, 5, 44, 45
48
Strategy
239
Supervisory Board
82
Surface Chemistry
47, 171
Sustainability statements
113
Sustainability framework
47, 153
Talent management
9, 49
Ten-year financial summary
164
Waste
74
26
103
95
195
198
89, 237
190
50, 247
114
220
62
47
Operating income
Outlook
Pensions
Performance Coatings
48, 189
Planet Possible
30, 31, 196, 204
Financial calendar
2016
April 19
April 20
April 22
Report for Q1 2016
Annual General
Meeting of
shareholders
Ex-dividend date of
2015 final dividend
April 25
April 26 - May 11
May 13
May 19
Record date of 2015
final dividend
Election period cash or
stock final dividend
Determination of
exchange ratio
Payment date of cash
dividend and delivery
of new shares
July 19
October 19
Report for Q2 2016
Report for Q3 2016
2017
February 15
Report for the
full-year 2016 and
the fourth quarter
255
Glossary
Adjusted earnings per share
Basic earnings per share from continuing operations
excluding incidentals in operating income, amortization
of intangible assets and tax on these adjustments.
Community Program
AkzoNobel’s global Community Program encourages and
gives financial support for employees to get involved, hands-
on, in their local communities.
Emerging Europe
Central and Eastern Europe (excluding Austria), Baltic States
and Turkey.
AGM
Annual General Meeting of shareholders.
ALPS
AkzoNobel Leading Performance System.
BBS
Behavior-based safety. A global program run at all
AkzoNobel locations.
Business Partner Code of Conduct
Explains what we stand for as a company, what we value
and how we run our business. It brings our core principles
of Safety, Integrity and Sustainability to life and shows what
they mean in practice.
Carbon footprint
The carbon footprint of a product or organization is the total
amount of greenhouse gas (GHG) emissions caused during
a defined period, or across the total or part of a product
lifecycle. It is expressed in terms of the amount of carbon
dioxide equivalents CO2(e) emitted.
Circular economy
An economic system that is restorative and regenerative
by design, and which aims to keep products, components,
and materials at their highest utility and value at all times,
distinguishing between technical and biological cycles.
Code of Conduct
Our Code of Conduct defines our core principles and how
we work. It incorporates fundamental principles on issues
such as business integrity, labor relations, health, safety,
environment and security and community involvement.
Comprehensive income
The change in equity during a period resulting from
transactions and other events, other than those changes
resulting from transactions with shareholders in their
capacity as shareholders.
Earnings per share
Net income attributable to shareholders divided by the
weighted average number of common shares outstanding
during the year.
EBITDA
Operating income before depreciation, amortization and
incidental items.
Eco-efficiency
Eco-efficiency means doing more with less; creating goods
and services while using fewer resources and creating less
waste and pollution.
Eco-premium solutions (EPS)
A measure of the eco-efficiency of our products. An
eco-premium solution is significantly better than competing
offers in the market in at least one eco-efficiency criterion
(toxicity, energy use, use of natural resources/raw materials,
emissions and waste, land use, risks, health and well-being),
and not significantly worse in any other criteria.
Eco-premium solutions with downstream benefits
Provide tangible material or energy efficiency benefits for our
customers, compared with competitive products.
EMEA
Europe, Middle East and Africa.
Emissions and waste
We report emissions to air, land and water for those
substances which may have an impact on people or the
environment: CO2, NOx and SOx, VOCs, chemical oxygen
demand, hazardous and non-hazardous waste. Definitions
are in the Sustainability statements section.
Four-dimensional profit and loss (4D P&L)
The four-dimensional profit and loss (4D P&L) methodology
represents value creation in multiple dimensions. This is a
totally new way of looking at an economy, where the impact
of a company on society at large can be assessed.
GHG
Greenhouse gases, including CO2, CO, CH4, N2O and HFCs,
which have a global warming impact. We also include the
impact of VOCs in our targets.
GBS
Global Business Services, which covers functional
support activities such as Human Resources, Finance and
Information Management, as well as non-product
related Procurement.
HSE
Health, safety and environment.
Invested capital
Total assets (excluding cash and cash equivalents,
investments in associates, the receivable from pension funds
in an asset position, assets held for sale) less current
income tax payable, deferred tax liabilities and trade and
other payables.
256
Key value chain (KVC)
Used to map the carbon footprint of our businesses. Key
value chains are product groupings with similar footprint
characteristics, which are representative of the majority of
total business revenue/production.
Operational cash flow
We use operational cash flow to monitor cash generation. It
is defined as operating income excluding depreciation and
amortization, adjusted for the change in operating working
capital and capital expenditures.
LCA
Lifecycle assessments are the basis of our value chain
sustainability programs. Eco-efficiency analysis (EEA) is our
standard assessment method.
Operational eco-efficiency
Refers to the eco-efficiency of our manufacturing operations.
Our aim is to improve operational eco-efficiency by reducing
the resources used and emissions/waste from our sites
during the manufacture of our products.
Lost time injury (LTI) rate
The number of lost time injuries per million hours worked.
Full definitions are in the Sustainability statements.
OTIF
On-time in-full, referring to customer service.
Loss of containment
A loss of containment is an unplanned release of material,
product, raw material or energy to the environment
(including those resulting from human error). Loss of
containment incidents are divided into four categories,
dependent on severity, from small, on-site spill up to
Level D – a significant escape.
P&D Dialog
The Performance and Development Dialog is AkzoNobel’s
global performance and appraisal system for employees.
RD&I
Research, Development and Innovation.
Safety incident
We have defined three levels of safety incidents. The highest
category – Level 3 – involves any loss of life; more than five
severe injuries; environmental, asset or business damage
totaling more than €25 million; inability to maintain business;
or serious reputational damage to AkzoNobel stakeholders.
Shareholders’ equity per share
Akzo Nobel N.V. shareholders’ equity divided by the number
of common shares outstanding at year-end.
Supplier sustainability framework
Business Partner Code of Conduct, Supplier Support Visits,
Key Supplier Management and Together for Sustainability are
all elements of our supplier sustainability framework.
RobecoSAM assessment
Assesses the sustainability performance of companies
selected for the Dow Jones Sustainability Index (DJSI).
The DJSI tracks the performance of the global sustainability
leaders. The index comprises the top 10 percent in each
industry for the 2,500 largest companies.
Mature markets
Mature markets are comprised of Western Europe, the US,
Canada, Japan and Oceania.
Regulatory action
We have defined three categories of regulatory action,
from self-reported issues (Level 1) to formal legal
notifications with fines above €10,000 (Level 3).
Total reportable rate of injuries (TRR)
The number of injuries per million hours worked. Full
definitions are in the Sustainability statements.
Natural resource use
We do not report specific natural resource use, except
water. We do report our use of energy and waste from
our operations, and indicate the main raw materials used
in our products.
Net debt
Defined as long-term borrowings plus short-term
borrowings less cash and cash equivalents.
Operating income
Operating income is defined in accordance with IFRS
and includes the relevant incidental items.
REI
Resource Efficiency Index is gross margin divided by cradle-
to-grave carbon footprint. The index measures value created
from use of raw materials and energy.
ROI (return on investment)
This is a key profitability measure and is calculated as opera-
ting income as a percentage of average invested capital.
TSR (total shareholder return)
Used to compare the performance of different companies’
stocks and shares over time. It combines share price
appreciation and dividends paid to show the total return
to the shareholder. The relative TSR position reflects the
market perception of overall performance relative to a
reference group.
ROS (return on sales)
This is a key profitability measure and is calculated as
operating income as a percentage of revenue.
VOC
Volatile organic compounds.
257
Integrated Report 2015
AkzoNobel’s annual financial report has been combined with
the sustainability report into one Report 2015. The Report
2015 includes elements of the reporting guidelines issued
by the International Integrated Reporting Council (IIRC).
The sustainability sections, however, in no way form part of
the company’s annual report as the company is required to
publish pursuant to Dutch law.
Brands and trademarks
In this Report 2015, reference is made to brands and
trademarks owned by, or licensed to, AkzoNobel.
Unauthorized use of these is strictly prohibited.
Disclaimer
In this Report 2015, great care has been taken in drawing
up the properties and qualifications of the product features.
No rights can be derived from these descriptions. The reader
is advised to consult the available product specifications
themselves. These are available through the relevant
business units. In this publication the terms “AkzoNobel” and
“the company” refer to Akzo Nobel N.V. and its consolidated
companies in general. The company is a holding company
registered in the Netherlands. Business activities are
conducted by operating subsidiaries throughout the world.
The terms “we”, “our” and “us” are used to describe the
company; where they are used in the chapter “Business
performance”, they refer to the business concerned.
Safe harbor statement
This Report 2015 contains statements which address such
key issues as AkzoNobel’s growth strategy, future financial
results, market positions, product development, products
in the pipeline and product approvals. Such statements
should be carefully considered and it should be understood
that many factors could cause forecasted and actual results
to differ from these statements. These factors include, but
are not limited to, price fluctuations, currency fluctuations,
developments in raw material and personnel costs,
pensions, physical and environmental risks, legal issues,
and legislative, fiscal and other regulatory measures.
Stated competitive positions are based on management
estimates supported by information provided by specialized
external agencies.
258
We welcome feedback on our Report
2015. You can contact us as follows:
Akzo Nobel N.V.
Christian Neefestraat 2
P.O. Box 75730
1070 AS Amsterdam, the Netherlands
T +31 88 969 7555
www.akzonobel.com
AkzoNobel Media Relations
T +31 88 969 7833
E media.relations@akzonobel.com
AkzoNobel Investor Relations
T +31 88 969 7856
E investor.relations@akzonobel.com
Editor
David Lichtneker
Art Director
Claire Jean Engelmann
Design and artwork
Annette Toeter
Photography
Simone van Es
Olivier Hess
Printing
Tesink B.V.
Online report
nexxar gmbh
259
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Printed withBio ink & varnish© Drukkerij Tesink©We printCO2 neutrally© Drukkerij TesinkCO2neutral COPPER ORANGE
Color of the Year 2015
www.akzonobel.com/colorfutures/2015
www.akzonobel.com
AkzoNobel creates everyday essentials to make
people’s lives more liveable and inspiring. As a
leading global paints and coatings company
and a major producer of specialty chemicals,
we supply essential ingredients, essential
protection and essential color to industries and
consumers worldwide. Backed by a pioneering
heritage, our innovative products and
sustainable technologies are designed to meet
the growing demands of our fast-changing
planet, while making life easier. Headquartered
in Amsterdam, the Netherlands, we have
approximately 45,000 people in around 80
countries, while our portfolio includes well-
known brands such as Dulux, Sikkens,
International, Interpon and Eka. Consistently
ranked as a leader in sustainability, we are
dedicated to energizing cities and communities
while creating a protected, colorful world where
life is improved by what we do.
© 2016 Akzo Nobel N.V. All rights reserved.
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